ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following section of this Annual Report on Form 10-K 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 this Annual Report on Form 10-K. You should carefully review all of these factor

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s, as well as the comprehensive discussion of forward-looking statements on page 2 of this Annual Report on Form 10-K.

Business Overview

We are a clinical-stage specialty pharmaceutical company developing and commercializing products for the treatment of ophthalmic diseases. We were formed as a Delaware corporation on December 26, 2004, under the name of EyeGate Pharmaceuticals, Inc., and changed our name to Kiora Pharmaceuticals, Inc. effective November 8, 2021. We were originally incorporated in 1998 under the name of Optis France S.A. in Paris, France. At that time, the name of the French corporation was changed to EyeGate Pharma S.A.S. and became a subsidiary of EyeGate Pharmaceuticals, Inc. EyeGate Pharma S.A.S. was dissolved effective December 30, 2020. We have four wholly-owned subsidiaries: Jade Therapeutics, Inc., Kiora Pharmaceuticals, GmbH (formerly known as Panoptes Pharma GmbH), Bayon Therapeutics, Inc., and Kiora Pharmaceuticals Pty Ltd (formerly known as Bayon Therapeutics Pty Ltd).

Our lead product is KIO-301 with an initial focus on patients with later stages of vision loss due to retinitis pigmentosa (RP, 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 designed to restore the eyes’ ability to perceive and interpret light in visually impaired patients through selectively entering 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. We initiated a Phase 1b clinical trial in third quarter of 2022 and dosed the first patient in November 2022. On March 17, 2022, we were granted orphan drug designation by the FDA for the API in KIO-301. KIO-301 (formerly known as B-203) was acquired through the Bayon transaction which closed October 21, 2021.

KIO-101 focuses on patients with OPRA+. KIO-101 is a next-generation, non-steroidal, immuno-modulatory and small-molecule inhibitor of DHODH. We believe KIO-101 to be best-in-class with 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. In a 14-day good laboratory practice intravenous repeated dose toxicity study in rats, no adverse or test item related effects were observed in any of the tested parameters (mortality, clinical observations, ophthalmoscopy, body weight and food consumption, hematology and coagulation, clinical biochemistry, organ weight, pathology, and histopathology) at the highest doses tested (1.0 mg/kg). In the fourth quarter of 2021, we reported top-line safety and tolerability data from a Phase 1b proof-of-concept study evaluating KIO-101 in patients with ocular surface inflammation. As a further sign of safety, there were zero clinically significant laboratory (including liver enzymes) findings observed in both healthy patients and those with ocular surface inflammation. We expect to initiate a Phase 2 clinical trial in the first quarter of 2023. KIO-101 (formerly known as PP-001) was acquired through the acquisition of Panoptes Pharma GmbH in the fourth quarter of 2020.

We are developing KIO-201, for patients with persistent corneal epithelial defects. PCED is an orphan disease and as such, we are currently seeking orphan drug designation. KIO-201 is also being evaluated for patients recovering from surgical wounds, such as those undergoing the laser vision correction procedure, PRK. 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 are currently evaluating KIO-201 in a Phase 2 clinical trial in patients with PCEDs and released top-line data in Q1 2023. We expect to release full data in Q2 2023. We are in planning stages of a Phase 3b trial for patients recovering from PRK and plan to initiate the study before the end of 2023.

In May 2020, we were granted a loan (the “Loan”) from Silicon Valley Bank in the amount of $0.3 million pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was enacted in March 2020. The Loan could have been prepaid by us at any time prior to maturity with no prepayment penalties. Funds from the Loan were only permitted to be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020 (“Qualifying Expenses”).

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We used the entire Loan amount for Qualifying Expenses. Under the terms of the PPP, certain amounts of the Loan could be forgiven if they are used for Qualifying Expenses as described in the CARES Act. In April 2021, we were notified by the Small Business Administration (SBA) that this Loan was forgiven in full.

Throughout our history, we have not generated significant revenue. We have never been profitable, and from inception through December 31, 2022, our losses from operations have aggregated $134.5 million. Our Net Loss was approximately $13.6 million and $13.8 million for the twelve months ended December 31, 2022, and 2021, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue the development and clinical trials of and seek regulatory approval for our KIO-101, KIO-201, and KIO-301 product candidates, and any other product candidates we advance to clinical development. If we obtain regulatory approval for KIO-101, KIO-201, and KIO-301, we expect to incur significant expenses to create an infrastructure to support the commercialization of KIO-101, KIO-201, and KIO-301 including sales, marketing, and distribution functions.

The continued spread of the COVID-19 pandemic could adversely impact our clinical studies. See “Item 1A. Risk Factors” above. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, and the effectiveness of actions to contain and treat COVID-19. We cannot presently predict the scope and severity of any potential disruptions to our business, including to our ongoing and planned clinical studies. Any such shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned, which could have a material adverse impact on our business, results of operation, and financial condition. As of the date of this report, there have been no material adverse effects to our ongoing business operations from COVID-19.

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.

Financial Overview

Revenues

To date, we have recognized collaboration revenue from U.S. and foreign government grants made to Jade and Panoptes, as well as from license agreements as performance obligations toward milestones that were met. We expect to continue to incur significant operating losses as we fund research and clinical trial activities relating to our therapeutic assets, consisting of our photoswitch, DHODH, and modified HA-based products, or any other product candidate that we may develop. There can be no guarantee that the losses incurred to fund these activities will succeed in generating revenue.

Research and Development Expenses

We expense all research and development expenses as they are incurred. Research and development expenses primarily include:

•non-clinical development, pre-clinical research, and clinical trial and regulatory-related costs;

•expenses incurred under agreements with sites and consultants that conduct our clinical trials;

•expenses related to generating, filing, and maintaining intellectual property; and

•employee-related expenses, including salaries, bonuses, benefits, travel, and stock-based compensation expense.

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We expect our research and development expenses to increase for the near future as we advance KIO-101, KIO-201, KIO-301, and any other product candidate through clinical development, including the conduct of our planned clinical trials. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We are unable to estimate with any certainty the costs we will incur in the continued development of our KIO-101, KIO-201, KIO-301, and any other product candidate that we may develop. Clinical development timelines, the probability of success and development costs can differ materially from expectations.

We may never succeed in achieving marketing approval for our product candidates.

The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following:

•per patient trial costs;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the number of doses that patients receive;

•the cost of comparative agents used in trials;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring or other studies requested by regulatory agencies;

•the duration of patient follow-up; and

•the efficacy and safety profile of the product candidate.

We do not expect our product candidates to be commercially available, if at all, for the next several years.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation. Our general and administrative expenses consisted primarily of payroll expenses for our full-time employees. Other general and administrative expenses include professional fees for auditing, tax, patent costs, and legal services.

We expect that general and administrative expenses will remain consistent for the near future until commercialization of our photoswitch, DHODH, and modified HA-based products, which could lead to an increase in these expenses.

Other Income, Net

Other income, net consists primarily of warrant liability fair value changes, interest income we earn on interest-bearing accounts, and interest expense incurred on our outstanding financing arrangements.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the

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expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Business Combinations

We applied the provisions of Accounting Standards Codification (ASC) Topic 805, “Business Combinations,” in the accounting for our acquisitions of Bayon and Panoptes. It required us to recognize the assets acquired and the liabilities assumed at their acquisition date fair values, which were determined using market, income, and cost approaches, or a combination. Goodwill as of the respective acquisition date was measured as the excess of consideration transferred over the net of the acquisition date fair value of the assets acquired and the liabilities assumed. Goodwill is generally the result of expected synergies of the combined company or an assembled workforce. Indefinite-lived intangible assets acquired were in-process research and development. The fair value for these intangible assets was determined using the income approach. Under the income approach, fair value reflects the present value of the projected cash flows that are expected to be generated by the products incorporating the in-process research and development, if successful.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment annually or when a triggering event occurs that could indicate a potential impairment. The evaluation for impairment includes assessing qualitative factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets is below the carrying amount. The goodwill was related to the 2021 acquisition of Bayon and 2020 acquisition of Panoptes, which represents the excess of the purchase price over the estimated fair value of the net assets acquired. For the year ended December 31, 2021, we incurred a $4.0 million impairment loss related to goodwill. As of December 31, 2022 and 2021, goodwill was $0.

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at fair value at the acquisition date. The Company tests intangible assets for impairment as of December 31 of each year or more frequently if indicators of impairment are present. The authoritative accounting guidance provides an optional qualitative assessment for any indicators that indefinite-lived intangible assets are impaired. If it is determined that it is more likely than not that the indefinite-lived intangible assets are impaired, the fair value of the indefinite-lived intangible assets is compared with the carrying amount and impairment is recorded for any excess of the carrying amount over the fair value of the indefinite-lived intangible assets.

The Company performed an annual evaluation of it's indefinite-lived intangible assets for impairment as of August 31, 2022 with a quantitative analysis. As of December 31, 2022 the Company also performed a qualitative update analysis for impairment and based on this analysis, the fair value of these products was greater than their carrying value. The Company considered the development timelines for its program and noted no qualitative factors that would indicate potential impairment of its indefinite-lived intangible assets.

Accrued Research and Development Expenses

As part of the process of preparing the consolidated financial statements, we are required to estimate and accrue research and development expenses. This process involves the following:

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•communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost;

•estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and

•periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.

Examples of estimated research and development expenses that we accrue include:

•fees paid to contract research organizations and investigative sites in connection with clinical studies;

•fees paid to contract manufacturing organizations in connection with non-clinical development, pre-clinical research, and the production of clinical study materials; and

•professional service fees for consulting and related services.

We base our expense accruals related to non-clinical development, pre-clinical studies, and clinical trials on our estimates of the services received and efforts expended pursuant to contracts with organizations/consultants that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts may depend on many factors, such as the successful enrollment of patients, site initiation, and the completion of clinical study milestones. Our service providers invoice us as milestones are achieved and monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period.

However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.

Refunds for Research and Development

We, through our Kiora Pharmaceuticals, GmbH and Kiora Pharmaceuticals Pty Ltd. subsidiaries, are eligible to receive certain refundable tax incentives associated with our research and development expenses in Austria and Australia. These refunds are realized in the form of a cash payment when received, following the incurred research & development expenses. We record the refundable payment as a tax receivable and a reduction in expense in the period in which the research and development expenses are incurred.

Contingent Consideration

We initially value 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. Key assumptions used to estimate the fair value of contingent consideration include the probability of success, discount rate, and updated timing of payment. After the initial valuation, we will use our best estimate to measure contingent consideration at each subsequent reporting period. Gains and losses are recorded in operating expenses within the consolidated statements of operations and comprehensive loss.

Stock-Based Compensation

We have issued options to purchase our common stock and restricted stock. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service/vesting period. Determining the appropriate fair value model and calculating the fair value of stock-based payment awards require the use of highly subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility.

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We estimate the grant date fair value of stock options and the related compensation expense, using the Black-Scholes option valuation model. This option valuation model requires the input of subjective assumptions including: (1) expected life (estimated period of time outstanding) of the options granted, (2) volatility, (3) risk-free rate, and (4) dividends. In general, the assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Recent Accounting Pronouncements

Refer to Note 1. Business, Presentation and Recent Accounting Pronouncements, in the Notes to the audited consolidated financial statements of Part IV, Item 15. Exhibits, Financial Statement Schedules of this Form 10-K for detailed information regarding the status of recently issued accounting pronouncements.

Other Information

Net Operating Loss Carryforwards

As of December 31, 2022, the Company has federal and state net operating loss carryforwards of approximately $80.5 million and $52.6 million, respectively, to offset future federal and state taxable income. Federal NOL carryforwards as of December 31, 2017 totaling $46.1 million, and state NOL carryforwards as of December 31, 2022 totaling $52.6 million will expire at various dates through 2042. Federal NOL carryforwards generated during the years ended December 31, 2018 and forward totaling $34.4 million will carry forward indefinitely, but their utilization will be limited to 80% of taxable income. The Company has foreign net operating loss carryforwards of $10.7 million as of December 31, 2022, which can be carried forward indefinitely. As of December 31, 2022, the Company also has federal and state research and development tax credit carryforwards of approximately $2.5 million and $0.5 million, respectively, to offset future income taxes, which expire at various times through 2042.

Utilization of these net operating loss and tax credit carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and comparable provisions of state, local, and foreign tax laws due to changes in ownership of our company that have occurred previously or that could occur in the future. Under Section 382 of the Code and comparable provisions of state, local, and foreign tax laws, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development tax credits, to reduce its post-change income may be limited. We have not completed a study to determine whether our initial public offering, our registered direct offering, our follow-on public offerings, and other transactions that have occurred over the past three years may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change net operating loss and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to limitations, which could result in increased future tax liability to us. In addition, the TCJA enacted on December 22, 2017, limits the amount of NOLs that we are permitted to deduct in any taxable year to 80% of our taxable income in such year. The TCJA also eliminates the ability to carry back NOLs to prior years but allows NOLs generated after 2017 to be carried forward indefinitely. As such, there is a risk that due to such items, our existing NOLs could expire or be unavailable to offset future income.

Results of Operations

Comparison of Years Ended December 31, 2022 and 2021

The following table summarizes the results of our operations for the years ended December 31, 2022 and 2021:

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Year Ended December 31,

Operating Expenses:

Research and Development Expenses

Research and development expenses decreased by $1.9 million due to reduced development costs for KIO-101 and KIO-201 of approximately $1.1 million, decreased personnel costs of approximately $1.0 million and an increase in the research refundable credit of $1.0 million. These net decreases were partially offset by an increase in development costs related to KIO-301 of $1.3 million.

The following table summarizes our research and development expense by program:

Year Ended December 31,

External research and development expense by program

Unallocated research and development expense

General and Administrative Expenses

General and administrative expenses increased by $3.0 million due to increases in professional fees of $1.5 million, executive severance of $1.0 million, corporate costs of $0.3 million and travel related costs of $0.3 million.

Goodwill Impairment Loss

Goodwill impairment loss decreased by $4.0 million due to the write-off of goodwill in 2021.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration increased $1.1 million. The change in fair value of contingent consideration is primarily due to a change in the probability of success related to a new indication that was added for KIO-201 (PCED) which increased the probability of success for the Jade milestone payment. Additionally, in March 2022 KIO-301 was granted orphan drug designation which increased the probability of success rate for the Bayon milestone payment.

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Other (Expense) Income, Net

Other (expense) income increased by $1.7 million due to a change in fair value of warrant liability. The change in fair value of the warrant liability between issuance and reclassification to equity was approximately $1.4 million in expense and was primarily due to a change in our stock price..

Income Tax Benefit (Expense)

Income tax benefit (expense) decreased by $0.1 million.

Liquidity and Capital Resources

Since becoming a public company in 2015, we have financed our operations from several registered offerings and private placements of our securities, payments from license agreements, and U.S. and foreign government grants. From inception through December 31, 2022, we have raised a total of approximately $127.2 million from such sales of our equity and debt securities, both as a public company and prior to our IPO, as well as approximately $14.9 million in payments received under our license agreements and government grants and $0.3 million received pursuant to the Loan under the PPP, which was fully forgiven in April of 2021.

On January 6, 2021, we completed a private placement of 38,278 shares of common stock and warrants to purchase up to 38,278 shares of common stock to an affiliate of Armistice Capital, LLC, with a combined purchase price per share and warrant of $209.00. The total net proceeds from the private placement were approximately $8.0 million. The warrants have an exercise price of $209.00 per share, subject to adjustments as provided under the terms of the warrants, and will be exercisable on the six-month anniversary of their issuance date. The warrants are exercisable for five years from the issuance date.

On August 11, 2021, we completed a registered direct offering for 116,721 shares of common stock with a purchase price of $92.10 per share. We also completed a concurrent private placement of unregistered warrants to purchase up to an aggregate of 58,361 shares of common stock at an exercise price of $89.60 per share that are exercisable immediately upon issuance and will expire five and one-half years following the date of issuance. In addition, the Company issued to the placement agent warrants to purchase up to 5,836 shares of Common Stock at an exercise price of $115.124 per share, which expire five years following the date of issuance. The total net proceeds to us from the offering were approximately $9.8 million.

On June 18, 2022, in connection with our acquisition of Panoptes Pharma Ges.m.b.H in December 2020 (“Panoptes Acquisition”), we issued an aggregate of 10,087 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 us and the former shareholders of Panoptes.

On July 22, 2022, we 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 option granted by us to purchase stock and warrants. On July 26, 2022, the Public Offering closed, and we issued and sold (i) 592,392 shares of common stock, (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, and (iv) 30,095,697 Class B Warrants. 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 preferred share, 5,000 Class A Warrants and 5,000 Class B Warrants resulted in net proceeds to us of approximately $5.3 million net of underwriting discount and commissions of $0.4 million and expense of $0.3 million.

On November 17, 2022, we entered into warrant exercise inducement offer letters with some of the Class A warrant holders who agreed to exercise for cash, at a discounted exercise price of $4.77 per share, all of their Class A Warrants to purchase 654,609 shares of our common stock originally issued in the Public Offering in exchange for our 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 six months following its date of issuance at a price per share of common stock of $5.97 and will expire on the 18 month anniversary of their initial exercise date. We received aggregate gross proceeds of

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approximately $3.1 million from the exercise of the Class A Warrants by the selling stockholders and the sale of the Inducement Warrants.

At December 31, 2022, we had unrestricted cash and cash equivalents totaling approximately $6.0 million.

Comparison of Years Ended December 31, 2022 and 2021

The following table sets forth the primary sources and uses of cash for the years ended December 31, 2022 and 2021:

Year Ended December 31,

Net Cash Provided by (Used in) Investing Activities 6,375 (157,020)

Operating Activities

During the year ended December 31, 2022, we recorded a net loss of $13.6 million and adjusted primarily for non-cash expense for stock-based compensation in the amount of $0.5 million, an increase in the change in fair value of contingent consideration of $0.6 million, an increase in the change in fair value of warrant liability of $1.4 million and a decrease in accounts payable of $0.8 million and accrued expenses of $0.6 million, which was partially offset by an increase in tax credits receivable of $0.9 million. During the year ended December 31, 2021, we recorded a net loss of $13.8 million and adjusted primarily for goodwill impairment loss of $4.0 million, non-cash expense for stock-based compensation in the amount of $0.8 million, which was partially offset by an increase in tax credits receivable of $0.4 million, a decrease in the change in fair value of contingent consideration of $0.5 million, and a decrease in accounts payable of $0.3 million.

Investing Activities

During the year ended December 31, 2022, net cash provided by investing activities related to proceeds from the sale of equipment. During the year ended December 31, 2021, net cash used related to the acquisition of Bayon, as well as the purchase of office furniture and fixtures.

Financing Activities

During the year ended December 31, 2022, we received net proceeds of $5.4 million from the completion of a public offering, as well as net proceeds of $2.7 million from the completion of a warrant inducement transaction. During the year ended December 31, 2021, we received net proceeds of $9.8 million from the completion of a registered direct offering, as well as net proceeds of $8.0 million from the completion of a private placement.

Funding Requirements and Other Liquidity Matters

Our KIO-101, KIO-201, and KIO-301 product pipeline is still in various stages of 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 marketing approval for our KIO-101, KIO-201 or KIO-301 products, or any other products that we successfully develop;

•establish a sales and marketing infrastructure to commercialize our KIO-101, KIO-201, or KIO-301 products in the U.S., 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

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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 a common stockholder. 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, and KIO-201 products, on terms that may not be favorable to us. 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-101, KIO-201, and KIO-301 products, or any other products that we would otherwise prefer to develop and market ourselves.

Based on our cash on hand at December 31, 2022, we believe we will have sufficient cash to fund planned operations into July 2023. However, the acceleration or reduction of cash outflows by management can significantly impact the timing needed 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 we successfully completed our IPO and several subsequent registered offerings and private placements of our securities, additional capital may not be available on terms favorable to us, if at all. We do not know if our 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 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.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements at December 31, 2022.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is contained in the consolidated financial statements filed as part of this Annual Report on Form 10-K are listed under Item 15 of Part IV below. Our auditors are EisnerAmper LLP, Iselin, New Jersey, with a PCAOB ID Number 274.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such

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information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President of Finance, to allow for timely decisions regarding required disclosure.

In connection with this annual report, as required by Rules 13a-15I and 15d-15(e) under the Securities Exchange Act of 1934, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer, who is our Principal Executive Officer, and our Executive Vice President of Finance, who is our Principal Financial and Accounting Officer. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls, and a conclusion on this evaluation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design of effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.

Based upon the evaluation described above, our Chief Executive Officer and Executive Vice President of Finance have concluded that our disclosure controls and procedures that support financial reporting were not effective as of the period ending December 31, 2022 due to material weaknesses described below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making its assessment of internal control over financial reporting, management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of that evaluation, management concluded our internal control over financial reporting was not effective as of December 31, 2022.

In making this assessment, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Material weaknesses in the Company's internal control over financial reporting have been identified. Specifically, the Company did not maintain effective controls regarding:

a)information technology general controls (“ITGC”) which could result in misstatements potentially impacting all financial statement accounts and disclosures. Specifically, user access controls were not

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appropriately designed and maintained to adequately restrict network user and privileged access to the appropriate personnel. In addition, there was a lack of sufficient segregation of duties.

b)the design and maintenance of formal accounting policies and processes to analyze, account for and disclose significant and unusual transactions in accordance with U.S. generally accepted accounting principles.

c)the execution of controls with a sufficient level of precision over the completeness and accuracy of financial information used in the preparation of the Company’s financial statements.

Remediation Efforts

Subsequent to year-end the Company has implemented a new accounting system and through that process has designed role-specific permissions ensuring that there are appropriate access controls by function. Additionally, the Company has designed automated system workflows for journal entry approval, new vendor creation and modification, and procurement related approvals for PO’s and related invoices to ensure proper segregation of duties and appropriate evidence of approval.

Throughout the year we 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.

Subsequent to year-end, management is working toward a greater level of precision over the completeness and accuracy of information through the implementation of a new accounting system, as discussed above, which provides for greater automation related to previously manual tasks. Specifically, the new accounting system is being used to generate purchase orders for all material contracts and purchase commitments. The finance team is in the process of building reporting on all open contract commitments, which will be shared with management to verify the completeness and ensure accuracy of financial reporting.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above.

We plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our consolidated financial statements. Our plans currently include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

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 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.

The scope of our management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, includes all of our subsidiaries. As a smaller reporting company under under Rule 405 of the Securities Act of 1933, as amended and a non-accelerated filer, we are exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. As a result, EisnerAmper LLP, our independent

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registered public accounting firm, has not audited or issued an attestation report with respect to the effectiveness of our internal control over financial reporting as of December 31, 2022.

Changes in Internal Control over Financial Accounting and Reporting

Except for the above noted material weaknesses and the remediation activities that have since been undertaken, there were no other changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that occurred during the quarter ended December 31, 2022 that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2023 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2023 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2023 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2023 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2023 Annual Meeting of Stockholders.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements

The consolidated financial statements filed as part of this report are listed on the Index to Financial Statements on page F-1.

Financial Statement Schedules

None. Financial statement schedules have been omitted since the required information is included in our Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

Exhibits

The exhibits listed in the Exhibit Index are filed as a part of this Annual Report on Form 10-K.

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EXHIBIT INDEX

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

ExhibitNumber Description of Exhibit

23.1* Consent of Independent Registered Public Accounting Firm.

101.INS* XBRL Instance 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)

* Filed herewith.

** This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, 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 of 1933 or the Securities Exchange Act of 1934.

† Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission..

†† 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.

# Management contract or compensatory plan or arrangement.

ITEM 16. Form 10-K Summary

None.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

KIORA PHARMACEUTICALS, INC.

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-5

Notes to Consolidated Financial Statements F-10

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Kiora Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Kiora Pharmaceuticals, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.As discussed in Note 1 to the financial statements, the Company has incurred losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern.Management’s plans in regard to these matters are also described in Note 1.The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on the Company’s financial statements based on our audits.We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in

F-2

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any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

In-Process Research and Development Impairment Analysis

As of December 31, 2022, the Company had in-process research and development assets of approximately $10.6 million. As described in Note 2 to the financial statements, the Company performs its impairment test of these items annually, or whenever events or changes in circumstances indicate that the carrying value of the in-process research and development assets exceeds its fair value. The Company performed its annual impairment test of these assets in the third quarter of 2022. The Company’s impairment test involves comparing the carrying value of the in-process research and development assets to their estimated fair value. There was no impairment loss determined as a result of the Company’s annual testing.The Company’s fair value estimates require management to make significant estimates and assumptions including the timing and amounts of projected cash flows, probability of success in reaching market and discount rates.

We identified the impairment test of in-process research and development as a critical audit matter due to the significant judgments made by management in the estimates and assumptions used in developing the fair value estimates. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. We obtained an understanding and evaluated the design of controls over the Company’s impairment test of in-process research and development assets, including developing the estimate of fair value. We evaluated the current status of the Company’s active research and development programs. In addition, we utilized our valuation specialists with specialized skills and knowledge, in evaluating the reasonableness of the Company’s methodology for estimating fair value using the income approach; evaluating the discount rates used by management by comparing it to a range of discount rates developed using the modified capital asset pricing model; and evaluating the mathematical accuracy of certain calculations included in the income approach.

Valuation of Warrant Liability

For the year ended December 31, 2022, the Company recorded a change in fair value of warrant liability of $1.4 million.As described in Note 2 to the financial statements, the Company recorded a liability for warrants issued in July 2022 and recorded the change in fair value of the warrants to the statement of operations from issuance through the date the warrants were reclassified to equity in September 2022.The Company’s fair value estimates require management to make significant estimates and assumptions including the appropriateness of the model used, the term of the warrants, the volatility of the Company’s stock, and the probability of securing shareholder approval to approve the issuance of warrants and a reverse stock split to make available sufficient authorized shares, subject to an adjustment based on evidence of market data.

We identified the valuation of the liability warrants as a critical audit matter due to the significant judgements made by management in the estimates and assumptions used in developing the fair value estimates. This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

F-3

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methodology for estimating fair value; evaluating the assumptions used by Company and performing a sensitivity analysis of a range of inputs.

/s/ EisnerAmper LLP

We have served as the Company’s auditor since 2014.

EISNERAMPER LLP

Iselin, New Jersey

March 23, 2023

F-4

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KIORA PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

ASSETS

Current Assets:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Contingent Consideration, short-term 322,385 —

Non-Current Liabilities:

Non-Current Operating Lease Liabilities — 90,566

Commitments and Contingencies (Note 12)

Stockholders’ Equity:

See Accompanying Notes to the Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Year Ended December 31,

Operating Expenses:

Change in Fair Value of Contingent Consideration 582,605 (475,956)

Other (Expense) Income, Net:

Change in Fair Value of Warrant Liability (1,425,102) —

Gain on Forgiveness of Loan — 278,190

Gain on Disposal of Fixed Assets 4,211 —

Foreign Currency Loss (14,498) —

Net Loss per Common Share - Basic and Diluted $ (18.55) $ (57.12)

Weighted Average Shares Outstanding - Basic and Diluted 732,303 241,099

Other Comprehensive Loss:

Foreign Currency Translation Adjustments (96,310) (85,629)

See Accompanying Notes to the Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2022 and 2021

Shares Amount Shares Amount

Issuance of Panoptes Holdback Shares — — 10,087 100 (100) — — —

Foreign Currency Translation Adjustment — — — — — (96,310) — (96,310)

See Accompanying Notes to the Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2021 and 2020

Shares Amount Shares Amount

Conversion of Series D Preferred Stock into Common Stock (39) — 273 3 (3) — — —

Shares Issued to Bayon Shareholders at Acquisition — — 845 8 67,928 — — 67,936

Foreign Currency Translation Adjustment — — — — — (85,629) — (85,629)

See Accompanying Notes to the Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

Operating Activities

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

Depreciation and Amortization of Intangible Assets 41,609 45,296

Change in Fair Value of Contingent Consideration 582,605 (505,675)

Change in Fair Value of Warrant Liability 1,425,102 —

Paycheck Protection Program Loan Forgiveness — (278,190)

Goodwill Impairment Loss — 4,037,811

Gain on Disposal of Assets (4,211) —

Investing Activities:

Purchase of Property and Equipment — (63,865)

Acquisitions, Net of Cash Acquired — (93,155)

Proceeds on Sale of Equipment 6,375 —

Net Cash Provided by (Used in) Investing Activities 6,375 (157,020)

Financing Activities:

Proceeds from Warrant Inducement, Net of Issuance Costs 2,738,831 —

Repayment of Loan Payable — (212,282)

Effect of Exchange Rate Changes on Cash (85,037) (81,503)

Supplemental Disclosures of Noncash Operating and Financing Activities:

Conversion of Series C Preferred Stock into Common Stock $ — $ 213

Conversion of Series D Preferred Stock into Common Stock $ — $ 3

Conversion of Series E Preferred Stock into Common Stock $ 1,600 $ —

Creation of Right-of-Use Assets and Related Lease Liabilities $ 55,415 $ 313,312

Grant of Restricted Stock Awards $ 300 $ —

See Accompanying Notes to the Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

1. Business, Presentation and Recent Accounting Pronouncements

Business Overview

Kiora is a clinical-stage specialty pharmaceutical company developing and commercializing therapies for the treatment of ophthalmic diseases. On November 5, 2021, Kiora Pharmaceuticals, Inc. (formerly known as EyeGate Pharmaceuticals, Inc.) (“Kiora” or the “Company”) filed with the Secretary of State of the State of Delaware, a Certificate of Ownership and Merger, merging its wholly-owned Delaware subsidiary, Kiora Pharmaceuticals, Inc., (incorporated in October 2021) into the Company and amending the Company’s certificate of incorporation to change its name to “Kiora Pharmaceuticals, Inc.” effective November 8, 2021 (the “Name Change”).

The Company's 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. The Company initiated a Phase 1b clinical trial in the third quarter of 2022. On March 17, 2022, the Company was granted Orphan Drug Designation from the U.S. FDA for the Active Pharmaceutical Ingredient (“API”) in KIO-301. KIO-301 (formerly known as B-203) was acquired through the Bayon Therapeutics, Inc. (“Bayon”) transaction which closed October 21, 2021.

KIO-101 is a product that focuses on patients with Ocular Presentation of Rheumatoid Arthritis (“OPRA+”). KIO-101 is a next-generation, non-steroidal, immune-modulatory and small-molecule inhibitor of Dihydroorotate Dehydrogenase (“DHODH”) with what the Company believes 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. In the fourth quarter of 2021, the Company reported top-line safety and tolerability from a phase 1b proof-of-concept (“POC”) study evaluating KIO-101 in patients with ocular surface inflammation. The Company expects to initiate a Phase 2 clinical trial in the first quarter of 2023. KIO-101 (formerly known as PP-001) was acquired through the acquisition of Panoptes Pharma Ges.m.b.H “Panoptes” in the fourth quarter of 2020.

In addition, the Company is developing KIO-201, for patients with Persistent Corneal Epithelial Defects ("PCED"), which is an orphan disease and as such, the Company is currently seeing orphan drug designation. The Company is also evaluating KIO-201 in patients recovering from surgical wounds, such as those undergoing photorefractive keratectomy ("PRK") surgery for corneal wound repair after refractive surgery. 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. The Company is currently evaluating KIO-201 in a Phase 2 clinical trial in patients with PCEDs and released top-line data in Q1 2023. We expect to release full data in Q2 2023. The Company is in planning stages of a Phase 3b trial for patients recovering from the laser vision correction procedure PRK and plans to initiate the study before the end of 2023.

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

Going Concern

The accompanying 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

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

course of business. At December 31, 2022, Kiora had unrestricted Cash and Cash Equivalents of $6.0 million, and an Accumulated Deficit of $134.5 million. Kiora has incurred losses and negative cash flows since inception, and future losses are anticipated. Based on its cash on hand at December 31, 2022, the Company anticipates having sufficient cash to fund planned operations into July 2023, however, the acceleration or reduction of cash outflows by Company management can significantly impact the timing for the need to raise additional capital to complete development of its products. To continue development, Kiora will need to raise additional capital through equity financing, license agreements, and/or additional U.S. government grants. Although historically the Company has been successful at raising capital, most recently raising net proceeds of approximately $2.7 million in a warrant inducement transaction that closed on November 22, 2022, net of placement agent fees of $0.3 million and expense of $0.1 million, 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 Company’s recurring losses from operations have caused management to determine there is substantial doubt about the Company’s ability to continue as a going concern. The 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.

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.

All share and per share amounts in the accompanying financial statements and related footnotes 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.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Adoption of Accounting Standards

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This guidance removes the liability and equity separation models for convertible instruments with a cash conversion feature or beneficial conversion feature. As a result, companies will more likely account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account). In addition, the guidance simplifies the settlement assessment that issuers perform to determine whether a contract in their own equity qualifies for equity classification. Finally, the guidance requires entities to use the if-converted method to calculate earnings per share for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2022. The adoption of ASU 2020-06 did not have a material effect for the Company.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) to clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. Specifically, the ASU provides a principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity or an expense. The guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted ASU 2021-04 on January 1, 2022. The adoption of ASU 2021-04 did not have a material effect for the Company.

In November 2021, the FASB issued ASU 2021-10, which requires business entities to disclose information about certain government assistance they receive. Such disclosure requirements include the nature of the transactions and the related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item and significant terms and conditions of the transactions. ASU 2021-10 was effective for the Company January 1, 2022. The adoption of ASU 2021-10 did not have a material effect for the Company.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries, Jade Therapeutics, Inc. (“Jade”), Kiora Pharmaceuticals GmbH (“Kiora GmbH”) (formerly known as Panoptes Pharma Ges.m.b.H or “Panoptes”) (effective December 18, 2020 when the Company acquired all of the capital stock of Panoptes), Bayon Therapeutics, Inc. ("Bayon") (effective October 21, 2021 when the Company acquired all of the capital stock of Bayon), and Kiora Pharmaceuticals Pty Ltd (“Kiora Pty”) (formerly known as Bayon Therapeutics Pty Ltd), collectively referred to as “the Company”. All inter-company balances and transactions have been eliminated in consolidation. These Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The Company makes significant estimates and assumptions in recording the accruals for the Company’s clinical trial and research activities, establishing the useful lives of intangible assets and property and equipment, conducting impairment reviews of goodwill, in-process research and development (IPR&D), stock-based compensation, assumptions used to value warrants including warrant modifications and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

inducements, and contingent considerations payable. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Although the Company monitors and regularly assesses these estimates, actual results could differ significantly from these estimates. The Company records changes in estimates in the period that it becomes aware of the change.

Foreign Currency Translation

Operations of Kiora GmbH are conducted in euros which represent its functional currency. Operations of Kiora Pty are conducted in Australian dollars, which represent its functional currency. Balance sheet accounts of such subsidiaries were translated into U.S. dollars at the exchange rate in effect at the balance sheet date and income statement accounts were translated to the average rate of exchange prevailing during the period. Translation adjustments resulting from this process, are included in accumulated other comprehensive loss on the Consolidated Balance Sheets and a component of other comprehensive income (loss) on the Consolidated Statements of Operations and Comprehensive Loss.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with a maturity of 90 days or less when acquired that are not restricted as to withdrawal, to be the equivalent of cash for the purpose of balance sheet and statement of cash flows presentation. The Company invests its cash in either U.S. government or treasury money market funds with maturities of 90 days or less. At December 31, 2022 and 2021, the Company has classified $49.3 thousand and $45.0 thousand as restricted cash, respectively.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the estimated useful life of 2 to 5 years for all assets. Maintenance and repair costs are expensed as incurred. The Company reviews its property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable and recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the asset.

Impairment of Long-Lived Assets

The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of and considers whether long-lived assets held for use have been impaired whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable, or that the period of their recovery may have changed. Management makes significant estimates and assumptions regarding future sales, cost trends, productivity and market maturity in order to test for impairment. Management reports those long-lived assets to be disposed of and assets held for sale at the lower of carrying amount or fair value less cost to sell. Based on current facts, estimates and assumptions, management believes that no assets are impaired at December 31, 2022. There is no assurance that management’s estimates and assumptions will not change in future periods.

Research and Development Expenses

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Goodwill

Goodwill is the excess of the acquisition cost of a business over the fair value of the identifiable net assets acquired. In 2022, the Company had no goodwill. In 2021, this consisted of the goodwill of the Company’s subsidiaries Jade and Kiora GmbH and Bayon. Goodwill is not amortized and is tested for impairment on an annual basis in the fourth quarter of each fiscal year and whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company had no goodwill as of December 31, 2022, and accordingly did not need to perform an impairment analysis. As of December 31, 2021, the Company performed qualitative and quantitative impairment evaluations on its goodwill. As a result, goodwill as of December 31, 2021 was reduced to zero after taking an impairment loss of $4.0 million. The fair value is determined using the income approach with a reconciliation to the Company’s market capitalization. The impairment is reported on the Consolidated Statements of Operations and Comprehensive Loss.

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 it's indefinite-lived intangible assets for impairment as of August 31, 2022 with a quantitative analysis. As of December 31, 2022 the Company also performed a qualitative update analysis for impairment and based on this analysis, the fair value of these products was greater than their carrying value. The Company considered the development timelines for its program and noted no qualitative factors that would indicate potential impairment of its indefinite-lived intangible assets. At December 31, 2022 and 2021, there is $10.6 million respectively of in-process R&D as part of intangible assets and in-process R&D, net on the Consolidated Balance Sheets.

Accrued Clinical Expenses

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

Business Segment and Geographical Information

The Company identifies operating segments as components of the enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as fully integrated and operating in one business segment (research and development), and the Company operates in three geographic areas.

Income Taxes

The Company will record a deferred income tax asset and liability for the expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements and income tax returns. The Company will record a deferred income tax asset and liability based on differences

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

between the financial statement carrying, or “book”, amounts of assets and liabilities, and the tax bases of the assets and liabilities using the enacted income tax regulations in effect in the years in which the differences are expected to reverse. A valuation allowance against deferred income tax asset will be recorded if, based on the weight of available evidence, it is more likely than not that some or all of the deferred income tax assets will not be realized. As of December 31, 2022 and 2021, all of the Company’s net deferred income tax assets were subject to a full valuation allowance. As of December 31, 2022 and 2021, the Company has a net deferred tax liability of $0.7 million and $0.8 million, respectively.

The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more likely than not to be sustained by the relevant taxing authority. As of December 31, 2022, the Company had no unrecognized uncertain income tax positions.

Warrant Liability

The Company classifies warrants to purchase shares of its common stock as a liability on its Consolidated Balance Sheets when the warrant is a free-standing financial instrument that may require the Company to transfer cash consideration upon exercise and that cash transfer event would be out of the Company’s control. Such a “warrant liability” is initially recorded at fair value on date of grant using the Black-Scholes model, and it is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in the fair value of the warrant are recognized as a component of other income (expense), net in the Consolidated Statements of Operations and Comprehensive Loss. The Company will adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant or meeting the requirements to be reclassified to equity.

For warrants that do not meet the criteria of a liability warrant and are classified on the Company’s Consolidated Balance Sheets as equity instruments, the Company uses the Black-Scholes model to measure the value of the warrants at issuance and then applies the relative fair-value of the equity transaction between common stock, preferred stock and warrants. Common stock, and equity-classified warrants each are considered permanent equity.

Refunds for Research and Development

Kiora, through its Kiora GmbH and Kiora Pty Ltd. subsidiaries, is eligible to receive certain refundable tax incentives associated with its research and development expenses in Austria and Australia. These refunds are realized in the form of a cash payment when received, following the incurred research & development expenses. The Company records the refundable payment as a tax receivable and a reduction in expense in the period in which the research and development expenses are incurred. As of December 31, 2022 and 2021, the Company has a research & development tax receivable of $1.3 million and $0.5 million, respectively.

Concentration of Credit Risk and Off-Balance-Sheet Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company invests cash in accredited financial institutions and cash equivalents in widely held money market funds. Consequently, such funds are subject to minimal credit risk.

The Company has no significant off-balance-sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

Comprehensive Loss

Comprehensive loss is defined as the change in stockholders’ equity during a period from transactions and other events and circumstances from non-owner sources. The foreign currency translation adjustments are the Company’s only component of other comprehensive loss.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards granted to employees and others. The Company measures stock-based compensation cost to employees and non-employees at grant date, based on the estimated fair value of the award. Compensation cost for employee awards is recognized as expense on a straight-line basis over the employee requisite service period. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The Company recorded compensation expense for non-employee awards with graded vesting using the accelerated expense attribution method. The Company’s policy is to record forfeitures as they occur.

Net Loss per Share – Basic and Diluted

Basic and diluted net loss per share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding for the period, which, for basic net loss per share, does not include the weighted-average unvested restricted common stock that has been issued but is subject to forfeiture of 30,000 shares for year ended December 31, 2022 and 375 shares for the year ended December 31, 2021.

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 including the years ended December 31, 2022 and 2021, unvested restricted common stock and potential common stock equivalents are not included in the calculation of diluted net loss per share as their effect would be anti-dilutive.All shares of Common Stock that may potentially be issued in the future are as follows:

Year Ended December 31,

Preferred Stock 52 52

Related-Party Transactions

During the year ended December 31, 2022, the Company entered into certain related-party transactions, making payments for services to one vendor and six consultants, all of whom also are stockholders of the Company. These transactions generally are ones that involve a stockholder or option holder of the Company to whom the Company also makes payments during the year, typically as a consultant or a service provider. The Company incurred expenses of approximately $0.1 million for services to the 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. $0.1 million of this amount was included in accounts payable at December 31, 2022 and was subsequently paid.

During the year ended December 31, 2021, the Company entered into certain related-party transactions, making payments for services to one vendors, six consultants and two public universities, all of whom also are stockholders of the Company. Additionally, on January 6, 2021, the Company completed a private placement of 38,278 shares of Common Stock and warrants to purchase up to 38,278 shares of Common Stock to an affiliate of Armistice Capital, LLC, with a combined purchase price per share and warrant of $209.00. Steven J. Boyd and Keith Maher, each of whom were members of the Company’s board of directors through August 3, 2021,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

are affiliates of Armistice Capital, LLC, and Mr. Boyd held voting and investment power over such entity. The total net proceeds from the private placement were approximately $8.0 million. Lastly, on October 21, 2021, the Company acquired Bayon of which the Company’s CEO, Brian M. Strem, was a Co-Founder and Managing Director. Except for the private placement and Bayon acquisition as described previous, the transactions with related parties during the year ended December 31, 2021 are not material to the accompanying Consolidated Financial Statements.

Fair Value of Financial Instruments

Each period the Company revalues its contingent consideration obligations associated with business acquisitions to their fair value. The estimate of the fair value of contingent consideration is determined by applying probability of success, discount rate, and updated timing of the payment. The outstanding payments relate to obligation from acquisitions made by the Company. Below is the list of obligations for each relevant transaction are as of December 31, 2022 as follows:

Acquisition Milestone Achievement Condition Contingent Consideration Payable

Bayon

Successful completion of Phase 1b $ 0.5 million

Successful completion of Phase 2 $ 1.0 million

Successful completion of Phase 3 $ 4.0 million

FDA approval $ 1.7 million

Panoptes

Beginning of Phase 3 $ 4.8 million

FDA approval $ 4.8 million

Jade

FDA approval $ 2.2 million

Changes in the fair value of contingent consideration are included within “Operating Expenses” in the Company's Consolidated Statements of Operations and Comprehensive Loss. Below are the status of each transaction's contingent consideration:

Bayon: As of December 31, 2021, the Company recorded contingent consideration at fair value of $0.9 million as a result of the Bayon acquisition which closed on October 21, 2021. During the year ended December 31, 2022, the Company recorded an increase in estimated fair value of $0.3 million. As of December 31, 2022, the Company had contingent consideration at fair value of $1.1 million.

Panoptes: The Panoptes transaction closed December 18, 2020. As of December 31, 2021, the Company recorded contingent consideration of $1.6 million. During the year ended December 31, 2022, the Company recorded an increase in estimated fair value of $0.1 million. The estimated fair value of contingent consideration as of December 31, 2022 was $1.7 million.

Jade: As of December 31, 2021, the Company had a fair value of contingent consideration of $0.6 million. During the year ended December 31, 2022, the contingent consideration was increased by $0.2 million for a change in fair value. As of December 31, 2022, the Company had fair value of contingent consideration of $0.7 million.

At December 31, 2022 and 2021, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

3. Fair Value

There were no assets measured at fair value on a recurring basis and there were no liabilities valued at fair value using Level 1 or 2 inputs. The following table provides information for liabilities measured at fair value on a recurring basis using Level 3 inputs:

Contingent Consideration:

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 targets as discussed in Note 14. Acquisitions. 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 December 31, 2022 December 31, 2021

Discounted cash flow Payment discount rate 14.7% 13.1%

Bayon Probability of Success for payment 17% - 67% 12% - 72%

Panoptes Probability of Success for payment 17% - 36% 17% - 36%

Jade Probability of Success for payment 56% 47%

Significant changes in these assumptions could result in a significantly higher or lower fair value. The contingent consideration reported in the above table resulted is adjusted quarterly based upon the passage of time or the anticipated success or failure of achieving certain milestones. The changes in contingent consideration of $0.6 million as of December 31, 2022, was primarily driven by higher estimated probabilities of success and an increased discount factor and was recorded as a change in fair value of contingent consideration within the Consolidated Statements of Operations and Comprehensive Loss.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

4. Property and Equipment

Property and equipment at December 31, 2022 and 2021 consists of the following:

Total Property and Equipment, Net $ 55,177 $ 73,999

Depreciation expense was $16,596 and $20,296 for the years ended December 31, 2022 and 2021, respectively.

5. Accrued Expenses

Accrued expenses consist of the following:

December 31,

6. Debt

In May 2020, the Company received loan funds (the “Loan”) from the Paycheck Protection Program (“PPP”) of $0.3 million. In April 2021, the Company was notified by the Small Business Administration (“SBA”) that this Loan was forgiven in full.

The Company has no additional indebtedness at December 31, 2022 and 2021.

7. Intangible Assets and In-Process R&D

Intangible assets at December 31, 2022 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. Additionally, SentrX is eligible to receive milestone payments totaling up to $4.8 million, upon and subject to the achievement of certain specified development and commercial milestones. These future milestone payments to SentrX will increase the carrying value of the intangible assets. The Company’s intangible assets are amortized on a straight-line basis over the estimated useful lives. Additionally, in-process R&D as of December 31, 2022 and 2021 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

R&D process is complete, the Company will amortize the R&D asset over its remaining useful life. The Company periodically evaluates these assets for impairment.

Intangible assets and in-process R&D at December 31, 2022 and 2021 consists of the following:

Amortization expense on intangible assets was $25 thousand for each of the years ended December 31, 2022 and 2021.

Expected future amortization expense is as follows for the years ending December 31,:

Intangible Assets

8. Capital Stock

On January 6, 2021, the Company completed a private placement of 38,278 shares of Common Stock and warrants to purchase up to 38,278 shares of Common Stock to an affiliate of Armistice Capital, LLC, with a combined purchase price per share and warrant of $209.00. The total net proceeds from the private placement were approximately $8.0 million. The warrants have an exercise price of $209.00 per share, subject to adjustments as provided under the terms of the warrants and will be exercisable on the six-month anniversary of their issuance date. The warrants are exercisable for five years from the issuance date.

On July 27, 2021, a holder elected to convert 4,092 shares of Series C Preferred stock that were issued in a public offering on April 17, 2018 into 21,313 shares of Common Stock.

On August 11, 2021, the Company completed a registered direct offering priced at-the-market under Nasdaq Rules for 116,721 shares of Common Stock with a purchase price of $92.10 per share. The Company also completed a concurrent private placement of unregistered warrants to purchase up to an aggregate of 58,361 shares of Common Stock at an exercise price of $89.60 per share that are exercisable immediately upon issuance and will expire five and one-half years following the date of issuance. In addition, the Company issued to the placement agent warrants to purchase up to 5,836 shares of Common Stock at an exercise price of $115.124 per share, which expire five years following the date of issuance. The total net proceeds to the Company from the offering were approximately $9.8 million.

On September 17, 2021, holders elected to convert 39 shares of Series D Preferred stock that were issued in connection with the Panoptes acquisition into 273 shares of Common Stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

On June 18, 2022, in connection with the Company’s acquisition of Panoptes Pharma Ges.m.b.H in December 2020 (“Panoptes Acquisition”), the Company issued an aggregate of 10,087 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 (the “Public Offering”). On July 25, 2022, the underwriter fully exercised the over-allotment option granted by the Company to purchase stock and warrants (the “Option”). On July 26, 2022, the Public Offering closed, and the Company issued and sold (i) 592,392 shares of common stock (the “Common Shares”) (including 98,138 Common Shares sold pursuant to the exercise of the Option), (ii) 1,280 shares of Series E Convertible Preferred Stock (the “Preferred Shares”) 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 Option), and (iv) 30,095,697 Class B Warrants (including 3,925,525 Class B Warrants sold pursuant to the exercise of the Option) (the “Class B Warrants” and together with the Class A Warrants, the “Warrants”). 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 Common Share, Class A Warrant and Class B Warrant or $1,000 per Preferred Share, 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.

Each Warrant is exercisable at a price per share of common stock of $8.00. The Class A Warrants will expire 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 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 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 will initially be 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.

9. Warrants

At December 31, 2022 and 2021, the following warrants were outstanding:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

All of the warrant agreements provide for a cashless exercise in the event a registration statement covering the issuance of the shares of common stock underlying the warrants is not effective, whereby the number of shares to be issued upon exercise of such warrants will be reduced based on the exercise price and the market value of the shares at the time of exercise. The outstanding warrants expire from 2023 through 2027.

10. Equity Incentive Plan

In 2005, the Company approved the 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan provides for the granting of options, 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 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. As of December 31, 2022, the maximum number of shares of Common Stock that may be issued pursuant to the 2014 Plan and the ESPP was 220,733 and 284 shares, respectively.

In January 2022, the number of shares of common stock issuable under the 2014 Plan automatically increased by 583 shares pursuant to the terms of the 2014 Plan. Additionally, in September 2022, the number of shares of common stock issuable under the 2014 Plan was increased by 200,000 shares, as approved by the Company’s Stockholders. These additional shares are included in the total of 220,733 shares issuable under the 2014 Plan.

The following is a summary of stock option activity for the years ended December 31, 2022 and 2021:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

During the years ended December 31, 2022 and 2021, the Board approved the grant of options to purchase 78,641 and 8,654 shares of its Common Stock, respectively. All option grants were pursuant to the 2014 Plan. In general, options granted under the 2014 Plan vest with respect to one-third of the underlying shares on the one-year anniversary of the grant date and the remainder ratably over a 24-month period. For the years ended December 31, 2022 and 2021, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:

Risk-Free Interest Rate 2.42% 1.82%

Expected Life 5.0 years 10.0 years

Expected Average Volatility 140% 140%

Expected Dividend Yield 0% 0%

Using the Black-Scholes Option Pricing Model, the estimated weighted average fair value of an option to purchase one share of common stock granted during the years ended December 31, 2022 and 2021 was $27.08 and $145.63 respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

The following is a summary of restricted stock activity for the years ended December 31, 2022 and 2021:

During the years ended December 31, 2022 and 2021, 127 and 149 shares of restricted stock, which had not vested, were forfeited and returned to the Company, respectively. During the years ended December 31, 2022 and 2021, the Board approved the grant of 30,000 and 0 restricted shares of Common Stock, respectively. All grants of restricted shares were pursuant to the 2014 Plan. These vest with respect to one-third of the underlying shares on the one-year anniversary of the grant date and the remainder ratably over a 24-month period.

The total stock-based compensation expense for employees and non-employees is included in the accompanying Consolidated Statements of Operations and as follows:

Year Ended December 31,

The fair value of options granted for the years ended December 31, 2022 and 2021 was approximately $0.6 million and $1.2 million, respectively. As of December 31, 2022 and 2021, there was approximately $0.9 million and $1.0 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements granted, which cost is expected to be recognized over a weighted average period of 2.5 and 2.3 years, respectively. The aggregate intrinsic value of stock options outstanding at December 31, 2022 and 2021 was $0.

As of December 31, 2022, there were 101,850 shares of Common Stock available for grant under the 2014 Plan and 191 shares available under the Company’s ESPP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

11. Income Taxes

The components of loss before income taxes are as follows:

Year Ended December 31,

The components of income tax (benefit) expense are as follows:

Year Ended December 31,

Deferred Taxes:

The difference between the effective rate reflected in the provision for income taxes on loss before taxes and the amounts determined by applying the applicable statutory U.S. tax rate are analyzed below:

Year Ended December 31,

United States Federal Income Tax Rate 21.00 % 21.00 %

State Taxes, Net of Federal Benefit (2.59) 3.35

Permanent Differences (9.24) 0.72

Goodwill Impairment — (6.07)

Change in Valuation Allowance (9.53) (21.33)

Research and Development Credits 0.58 1.09

Tax Rate Differential 2.89 1.00

State Non-Income Based Tax — 0.01

Effective Tax Rate Expense 2.84 % 1.38 %

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KPRX US Equity

KPRX · 10-K · period ended 2022-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 16. Form 10-K Summary

KPRX US Equity☆

KPRX · 10-K · period ended 2022-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 16. Form 10-K Summary

KPRX US Equity