Kiora Pharmaceuticals, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Equity Incentive Plan

Equity Incentive Plan

12 Months Ended

Dec. 31, 2023

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, 2023, the maximum number of shares of Common Stock that may be issued pursuant to the 2014 Plan and the ESPP was 1,298,848 and 284 shares, respectively.

In January 2023, the number of shares of common stock issuable under the 2014 Plan automatically increased by 76,632 shares pursuant to the terms of the 2014 Plan. Additionally, in September 2023, the number of shares of common stock issuable under the 2014 Plan was increased by 1,000,000 shares, as approved by the Company’s Stockholders. These additional shares are included in the total of 1,298,848 shares issuable under the 2014 Plan.

As of December 31, 2023, there were 183,604 shares of Common Stock available for grant under the 2014 Plan and 191 shares available under the Company’s ESPP.

The following is a summary of stock option activity for the years ended December 31, 2023 and 2022:


	Number of Options	Weighted Average Exercise Price		Weighted Average Contractual Life (In Years)
Outstanding at December 31, 2021	12,954	$	426.25	5.56
Granted	78,641	8.49
Expired	(14)	842.57
Forfeited	(6,830)	446.34
Outstanding at December 31, 2022	84,751	$	36.92	9.59
Exercisable at December 31, 2022	4,939	$	442.52	7.27
Vested and Expected to Vest at December 31, 2022	84,751	$	36.92	9.59
Granted	764,400	1.11
Expired	(927)	373.32
Forfeited	(35,279)	5.08
Outstanding at December 31, 2023	812,945	$	4.26	9.56
Exercisable at December 31, 2023	173,394	$	13.79	9.46
Vested and Expected to Vest at December 31, 2023	812,945	$	4.26	9.56

During the years ended December 31, 2023 and 2022, the Board approved the grant of options to purchase 764,400 and 78,641 shares of its Common Stock, respectively. All option grants were pursuant to the 2014 Plan. The Company grants time-based stock options which generally vest one-third of the underlying shares on the one-year anniversary of the grant date and the remainder ratably over a 24-month period. The Company has also issued grants with a four-year vesting term, of which one-fourth of the underlying shares vested immediately, one-fourth on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period. The fair value of time-based stock options is determined using the Black-Scholes Option Pricing Model, with such value recognized as expense over the service period, which is typically three years, net of actual forfeitures. For the years ended December 31, 2023 and 2022, 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:


	2023	2022
Risk-Free Interest Rate	3.95% - 4.61%	2.42%
Expected Life	5.0 - 5.6 years	5.0 years
Expected Average Volatility	141.0% - 145.2%	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, 2023 and 2022 was $1.11 and $27.08 respectively. The expected term of the options granted is calculated in accordance with the simplified method, whereby for service-based awards the expected life is calculated as a midpoint between the vest and expiry period. The Company uses the simplified method as there is not a sufficient history of share option exercises. Expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate is determined based upon a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the option.

The following is a summary of restricted stock activity for the years ended December 31, 2023 and 2022:


	Number of Shares	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Recognition Period
Non-vested Outstanding at December 31, 2021	375	$	261.47	1.09
Awarded	30,000	6.78
Released	(248)	261.45
Forfeited	(127)	261.51
Non-vested Outstanding at December 31, 2022	30,000	$	6.78	2.79
Awarded	270,050	1.06
Released	(67,377)	1.49
Forfeited	(3,300)	3.83
Non-vested Outstanding at December 31, 2023	229,373	$	1.64	2.57

During the years ended December 31, 2023 and 2022, 3,300 and 127 shares of restricted stock, which had not vested, were forfeited and returned to the Company, respectively. During the years ended December 31, 2023 and 2022, the Board approved the grant of 270,050 and 30,000 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,
	2023		2022
General and Administrative	$	345,488	$	343,475
Research and Development	409,456		118,975
Total Stock-Based Compensation Expense	$	754,944	$	462,450

The fair value of options granted for the years ended December 31, 2023 and 2022 was approximately $0.8 million and $0.6 million, respectively. As of December 31, 2023 and 2022, there was approximately $0.8 million and $0.7 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 2.1 and 2.4 years, respectively. The stock options outstanding and exercisable as of December 31, 2023 and 2022 had an aggregate intrinsic value of $0. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices lower than $0.5220 and $3.43, the closing price of the Company’s stock on December 31, 2023 and 2022, respectively.

Unamortized compensation expense related to the restricted stock awards amounted to $0.3 million and $0.2 million as of December 31, 2023 and 2022, respectively, and is expected to be recognized over a weighted average period of approximately 2.3 and 2.8 years, respectively.