13. Acquisitions

Bayon Therapeutics, Inc. Acquisition

Effective October 21, 2021, the Company acquired all of the capital stock of Bayon, a privately held ophthalmic specialty pharmaceutical company focused on developing light sensitive small molecules. With the Bayon acquisition, Bayon became a wholly-owned subsidiary of Kiora. The assets acquired and liabilities assumed have been recorded at fair value on the date of the acquisition. The excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill, which is not expected to be deductible for tax purposes.

Under the terms of the Bayon acquisition agreement, in consideration for 100% of the outstanding equity interests in Bayon, the Company paid cash in the amount of $0.097 million to certain sellers and creditors and issued 33,798 shares of Kiora common stock. The former stockholders of Bayon are also eligible to receive up to $7.1 million in additional cash or stock payments based on clinical trial and FDA approval milestones for Bayon’s product candidates, as set forth in the Purchase Agreement. The cash or stock earn-out payments were recorded as contingent consideration and fair valued at $1.388 million at the acquisition date.

The fair value of the shares issued in the Bayon acquisition was approximately $0.068 million based on the average closing price of the Company’s Common Stock for five trading days immediately preceding the closing date, or $2.01 per share.

The following table summarizes the purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed in the Bayon acquisition at the date of acquisition.

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Net loss in the Consolidated Statement of Operations for the twelve months ended December 31, 2021 includes net losses of Bayon of $0.128 million from the date of acquisition. The acquired intangible assets, which consist solely of in-process research and development, 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.

The Company recognized approximately $0.090 million of acquisition-related costs for the Bayon acquisition that were expensed in the year ended December 31, 2021 as a component of general and administrative expense.

Pro forma disclosure for Bayon acquisition

The following table includes the pro forma results for Bayon the year ended December 31, 2021 of the combined companies as though the Bayon Acquisition had been completed as of the beginning of the period presented.

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13. Acquisitions - (continued)

The pro forma financial information is presented for information purposes only. The unaudited pro forma financial information may not necessarily reflect the Company’s future results of operations or what the results of operations would have been had the Company owned and operated Bayon as of the beginning of the period presented.

Panoptes Pharma Ges.m.b.H. Acquisition

Effective December 18, 2020, the Company acquired all of the capital stock of Panoptes Pharma Ges.m.b.H. (“Panoptes”), a privately held clinical stage biotech company focused on developing a novel proprietary small molecule for the treatment of severe eye diseases with a high unmet medical need, as well as for conditions outside the ocular space. With the Panoptes acquisition, Panoptes became a wholly-owned subsidiary of Kiora. The assets acquired and liabilities assumed have been recorded at fair value on the date of the acquisition. The excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill, which is not expected to be deductible for tax purposes.

Under the terms of the Panoptes acquisition agreement, in consideration for 100% of the outstanding equity interests in Panoptes, the Company paid cash in the amount of $0.445 million to certain founders and creditors, issued 884,222 shares of Kiora common stock, and issued 45.893 shares (convertible into 13,000 shares of common stock) of Kiora Series D Convertible Preferred Stock. An additional cash payment is due to a creditor in December 2021 and is recorded at a fair value of $0.212 million at the acquisition date.

Additionally, up to 1,500 shares of Series D Convertible Preferred Stock (convertible into 424,685 shares of common stock) will be issued after a period of 18 months from closing, subject to post-closing adjustments or indemnification obligations, and are recorded as contingent consideration and fair valued at $1.353 million at the acquisition date.

The Panoptes acquisition also includes two cash or stock earn-out provisions providing for an additional cash or stock payment of $4.750 million per milestone contingent upon (1) the enrollment and randomization of a first patient into the first FDA Phase III pivotal study of a Panoptes product and (2) the FDA approval of the first New Drug Application of a Panoptes product. The cash or stock earn-out payments were recorded as contingent consideration and fair valued at $2.067 million at the acquisition date.

The fair value of the shares issued in the Panoptes acquisition was approximately $3.169 million based on the 30-day volume weighted average price of the Company’s Common Stock as reported by Bloomberg on the closing date of the acquisition, or $3.5321 per share.

The following table summarizes the purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed in the Panoptes acquisition at the date of acquisition.

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(1)Current Assets include cash, receivables, and prepaid expenses of $333,860, $73,368, and $3,635, respectively.

Net loss in the Consolidated Statement of Operations for the twelve months ended December 31, 2020 includes net losses of Panoptes of $0.034 million from the date of acquisition. The Company’s intangible assets, which consist solely of in-process research and development, 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.

13. Acquisitions - (continued)

The Company recognized approximately $0.050 million and $0.414 million of acquisition-related costs for the Panoptes acquisition that were expensed in the years ended December 31, 2021 and 2020, respectively, as a component of general and administrative expense.

Pro forma disclosure for Panoptes acquisition

The following table includes the pro forma results for Panoptes the year ended December 31, 2020 of the combined companies as though the Panoptes Acquisition had been completed as of the beginning of the period presented.

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The pro forma financial information is presented for information purposes only. The unaudited pro forma financial information may not necessarily reflect the Company’s future results of operations or what the results of operations would have been had the Company owned and operated Panoptes as of the beginning of the period presented.