10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 12, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
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(State or other jurisdiction of |
(I.R.S. Employer |
(Address of Principal Executive Offices, including zip code)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit). ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
At August 10, 2022, there were
KIORA PHARMACEUTICALS, INC.
Table of Contents
QUARTERLY REPORT ON FORM 10-Q
For the Period Ended June 30, 2022
INDEX
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Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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1
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations, and our plans, objectives, expectations, and intentions that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “goals,” “sees,” “estimates,” “projects,” “predicts,” “intends,” “think,” “potential,” “objectives,” “optimistic,” “strategy,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
● | the timing and success of preclinical studies and clinical trials conducted by us and our development partners; |
● | the ability to obtain and maintain regulatory approval of our product candidates, and the labeling for any approved products; |
● | the scope, progress, expansion, and costs of developing and commercializing our product candidates; |
● | the size and growth of the potential markets for our product candidates and the ability to serve those markets; |
● | our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing; |
● | the rate and degree of market acceptance of any of our product candidates; |
● | our expectations regarding competition; |
● | our anticipated growth strategies; |
● | our ability to attract or retain key personnel; |
● | our ability to establish and maintain development partnerships; |
● | our expectations regarding federal, state and foreign regulatory requirements; |
● | regulatory developments in the U.S. and foreign countries; |
● | our ability to obtain and maintain intellectual property protection for our product candidates; |
● | the anticipated trends and challenges in our business and the market in which we operate; and |
● | the impact of the evolving COVID-19 pandemic and the global response thereto. |
2
We discuss many of these risks in detail under the heading “Item 1A. Risk Factors” beginning on page 23 of our Annual Report on Form 10-K/A, as filed with the Securities and Exchange Commission, or the SEC, on July 7, 2022, or the Annual Report. You should carefully review all of these factors, as well as other risks described in our public filings, and you should be aware that there may be other factors, including factors of which we are not currently aware, that could cause these differences.
Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.
Kiora Pharmaceuticals, Inc. is referred to herein as “we,” “our,” “us,” and “the Company.”
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KIORA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30, 2022 |
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(unaudited) |
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December 31, 2021 |
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ASSETS |
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Current Assets: |
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Cash and Cash Equivalents |
$ |
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$ |
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Prepaid Expenses |
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Tax Receivables |
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Total Current Assets |
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Non-Current Assets: |
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Property and Equipment, Net |
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Restricted Cash |
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Intangible Assets and In-Process R&D, Net |
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Operating Lease Assets |
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Other Assets |
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Total Assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts Payable |
$ |
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$ |
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Accrued Expenses |
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Operating Lease Liabilities |
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Contingent Consideration |
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— |
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Total Current Liabilities |
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Non-Current Liabilities: |
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Contingent Consideration, Non-Current |
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Deferred Tax Liability |
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Operating Lease Liabilities, Non-Current |
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Total Non-Current Liabilities |
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Total Liabilities |
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Commitments and Contingencies (Note 9) |
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Stockholders’ Equity: |
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Preferred Stock, $ |
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Common Stock, $ |
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Additional Paid-In Capital |
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Accumulated Deficit |
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( |
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( |
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Accumulated Other Comprehensive Loss |
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( |
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( |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
$ |
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$ |
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See Accompanying Notes to Condensed Consolidated Financial Statements.
4
KIORA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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June 30, |
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June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating Expenses: |
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General and Administrative |
$ |
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$ |
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$ |
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$ |
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Research and Development |
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Executive Severance |
— |
— |
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— |
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Change in Fair Value of Contingent Consideration |
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( |
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Total Operating Expenses |
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Operating Loss Before Other Expense |
( |
( |
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( |
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( |
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Other Expenses, Net: |
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Gain on Forgiveness of Loan |
— |
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— |
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Gain on Disposal |
— |
— |
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— |
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Interest Income |
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Interest Expense |
— |
( |
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— |
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( |
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Total Other Expenses, Net |
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Net Loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Net Loss per Common Share - Basic and Diluted |
( |
( |
( |
( |
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Weighted Average Shares Outstanding - Basic and Diluted |
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Other Comprehensive Loss: |
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Net Loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Foreign Currency Translation Adjustments |
( |
( |
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( |
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( |
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Comprehensive Loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
KIORA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three Months Ended June 30, 2022 and 2021
(unaudited)
Accumulated |
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Additional |
Other |
Total |
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Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at March 31, 2022 |
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$ |
— |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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Stock-Based Compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common Stock from Panoptes Holdback Shares |
— |
— |
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( |
— |
— |
— |
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Foreign Currency Translation Adjustment |
— |
— |
— |
— |
— |
— |
( |
( |
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Net Loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at June 30, 2022 |
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$ |
— |
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$ |
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$ |
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( |
$ |
( |
$ |
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Accumulated |
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Additional |
Other |
Total |
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Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
$ |
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$ |
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Stock-Based Compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign Currency Translation Adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Net Loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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6
KIORA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2022 and 2021
(unaudited)
Accumulated |
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Additional |
Other |
Total |
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Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2021 |
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$ |
— |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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Stock-Based Compensation |
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— |
— |
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— |
— |
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— |
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— |
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Issuance of Common Stock from Panoptes Holdback Shares |
— |
— |
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( |
— |
— |
— |
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Foreign Currency Translation Adjustment |
|
— |
— |
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— |
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— |
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— |
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— |
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( |
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( |
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Net Loss |
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— |
— |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at June 30, 2022 |
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$ |
— |
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$ |
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$ |
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( |
$ |
( |
$ |
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Accumulated |
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Additional |
Other |
Total |
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Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Comprehensive |
Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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Stock-Based Compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common Stock from Warrants, Net |
— |
— |
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— |
— |
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Issuance of Common Stock from Private Placement, Net of Offering Costs of $ |
— |
— |
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— |
— |
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Foreign Currency Translation Adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Net Loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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See Accompanying Notes to Condensed Consolidated Financial Statements.
7
KIORA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30, |
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2022 |
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2021 |
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Operating Activities: |
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Net Loss |
$ |
( |
$ |
( |
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Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: |
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Depreciation and Amortization |
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Reduction of Right-of-Use Assets |
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Stock-Based Compensation |
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Change in Fair Value of Contingent Consideration |
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( |
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Paycheck Protection Program Loan Forgiveness |
— |
( |
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Gain on Disposal of Equipment |
( |
— |
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Changes in Operating Assets and Liabilities: |
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Prepaid Expenses |
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( |
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Tax Receivable |
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( |
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( |
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Other Assets |
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( |
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Accounts Payable |
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( |
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Lease Liabilities |
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( |
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( |
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Accrued Expenses |
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( |
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Net Cash Used in Operating Activities |
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( |
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( |
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Investing Activities: |
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Purchases of Property and Equipment |
— |
( |
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Proceeds on Sale of Equipment |
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— |
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Net Cash Provided by (Used in) Investing Activities |
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( |
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Financing Activities: |
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Proceeds from Stock Offerings, Net of Offering Costs |
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Exercise of Warrants |
— |
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Net Cash Provided by Financing Activities |
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Effect of Exchange Rate Changes on Cash |
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( |
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( |
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Net (Decrease) Increase in Cash |
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( |
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Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
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Cash, Cash Equivalents and Restricted Cash, End of Period |
$ |
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$ |
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Supplemental Disclosures of Noncash Operating and Financing Activities |
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Creation of Right-of-Use Assets and Related Lease Liabilities |
$ |
|
$ |
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
8
KIORA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
1. Business, Presentation and Recent Accounting Pronouncements
Overview
Kiora Pharmaceuticals, Inc. (“Kiora” or the “Company”) was formed as a Delaware corporation December 28, 2004, as amended. Kiora is a clinical-stage specialty pharmaceutical company developing and commercializing therapies for the treatment of ophthalmic diseases.
Since its inception, Kiora has devoted substantially all of its efforts to business planning, research and development, and raising capital.
Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that Kiora will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2022, Kiora had unrestricted Cash and Cash Equivalents of $
Unaudited Interim Financial Information
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in the Company’s 2021 Annual Report on Form 10-K/A dated July 7, 2022. The balance sheet as of December 31, 2021 was derived from audited consolidated financial statements of the Company but does not include all the disclosures required by U.S. GAAP.
Recent Accounting Pronouncements
We have evaluated all issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our condensed consolidated statements of operations and comprehensive loss, balance sheets or cash flows.
9
KIORA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
2. Balance Sheet Information
Cash, Cash Equivalents and Restricted Cash
A summary of cash and cash equivalents and restricted cash is as follows:
June 30, 2022 |
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(unaudited) |
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December 31, 2021 |
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Cash and Cash Equivalents |
$ |
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$ |
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Restricted Cash, Non-current |
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Total Cash, Cash Equivalents and Restricted Cash |
$ |
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$ |
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Non-current restricted cash consists of deposits with financial institutions for corporate credit cards.
Prepaid Expenses
Prepaid expenses consist of the following:
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June 30, 2022 |
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(unaudited) |
December 31, 2021 |
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Research and Development |
$ |
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$ |
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Insurance |
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Other |
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Total Prepaid Expenses |
$ |
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$ |
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Accrued Expenses
Accrued expenses consist of the following:
June 30, 2022 |
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(unaudited) |
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December 31, 2021 |
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Executive Severance |
$ |
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$ |
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Payroll and Benefits |
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Professional Fees |
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Clinical Trials |
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Other |
— |
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Total Accrued Expenses |
$ |
|
$ |
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3. Acquisition
Effective October 21, 2021, the Company acquired all of the capital stock of Bayon Therapeutics, Inc. (“Bayon”), a privately held ophthalmic specialty pharmaceutical company focused on developing light sensitive small molecules.
10
KIORA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
The fair value of the consideration for the Bayon acquisition as of the acquisition date is comprised of the following:
Common |
Price per |
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Shares |
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Share (a) |
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Amount |
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Contingent Consideration at Fair Value |
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$ |
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Cash Consideration |
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Kiora Common Stock |
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$ |
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Total Fair Value of Consideration |
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(a) | Average closing price of the Company’s common stock for five trading days immediately preceding October 21, 2021. |
The former stockholders of Bayon are eligible to receive up to $
The Company accounted for the Bayon acquisition using the acquisition method of accounting whereby the total purchase price was preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values. The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed at the date of acquisition.
Current Assets |
|
$ |
|
Intangible Assets |
|
|
|
Goodwill |
|
|
|
Accounts Payable |
|
( |
|
Deferred Tax Liability |
|
( |
|
Total Fair Value of Asset and Liabilities Purchased |
$ |
|
As of June 30, 2022, the purchase price allocation for the Bayon acquisition was preliminary in nature and subject to completion. Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations and assessments is finalized, including tax liabilities and other working capital accounts. Nearly
The acquired intangible assets, which consist solely of in-process R&D, will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval, the intangible assets are then accounted for as finite-lived intangible assets and amortized on a straight-line basis over its estimated useful life.
Consolidated Pro Forma Results
Net loss in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022 includes net losses of Bayon of $
11
KIORA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
4. Fair Value Disclosures
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction to a third party under current market conditions at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value. In connection with historical acquisitions, additional consideration may be paid related to the achievement of certain milestones. The following table provides information for liabilities measured at fair value on a recurring basis using Level 3 inputs:
June 30, 2022 |
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(unaudited) |
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December 31, 2021 |
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Contingent Consideration: |
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Current |
|
|
|
— |
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Noncurrent |
|
|
|
|
||
Total 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 3. Acquisition. 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 |
|
June 30, 2022 |
December 31, 2021 |
|
||
|
Discounted cash flow |
|
Payment discount rate |
|
|
% |
|
% |
|
Bayon |
|
|
Payment period |
|
2023 - 2028 |
2023 - 2028 |
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Panoptes |
|
|
Payment period |
|
2024 - 2028 |
2024 - 2028 |
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Jade |
|
|
Payment period |
|
2026 |
2026 |
Bayon |
|
Probability of Success for payment |
|
% |
% |
||
Panoptes |
Probability of Success for payment |
% |
% |
||||
Jade |
|
Probability of Success for payment |
|
|
% |
|
% |
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. There was a nominal change in fair value of contingent consideration for the three months ended June 30, 2022 and 2021 of $
5. Capital Stock
On January 6, 2021, the Company completed a private placement of
12
KIORA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
In connection with the Company’s acquisition of Panoptes Pharma Ges.m.b.H in December 2020 (“Panoptes Acquisition”), on June 18, 2022, the Company issued an aggregate of
The following is a summary of the Company’s reserved common stock as of June 30, 2022:
Common Stock Warrants |
|
|
Preferred Stock outstanding |
|
|
Total |
|
|
6. Warrants
The following is a summary of warrant activity for the Company’s equity-classified warrants for the six months ended June 30, 2022 and 2021:
Weighted Average |
Weighted Average |
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Number of |
Exercise |
Remaining |
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|
Warrants |
|
Price |
|
Term in Years |
||
Outstanding at December 31, 2021 |
|
$ |
|
|
|||
Expired |
( |
$ |
|
||||
Outstanding at June 30, 2022 |
|
$ |
|
||||
Outstanding at December 31, 2020 |
|
$ |
|
||||
Issued |
|
$ |
|
||||
Exercised |
( |
$ |
|
||||
Outstanding at June 30, 2021 |
|
|
$ |
|
7. Net Loss per Share
Basic net loss per share does not include the weighted-average unvested restricted common stock that has been issued and is subject to forfeiture totaling
|
2022 |
|
2021 |
|
Common Stock Warrants |
|