Washington,
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2023
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
___________
EYEGATE
Delaware | 98-0443284 | ||||
| (State or other jurisdiction of
| (I.R.S. Employer
| ||||
271 Waverley Oaks Road
Waltham, MA 02452
102
(781) 788-8869
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.01 par value | KPRX | The Nasdaq Capital Market | ||||||
| Large Accelerated filer | Accelerated filer | |||||||||||||
| Non-accelerated filer | Smaller reporting company | x | ||||||||||||
| Emerging growth company | ||||||||||||||
¨
At
EYEGATE PHARMACEUTICALS, INC.
2023
| Page | ||||||||
EyeGate
September 30, 2017 (unaudited) September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 2023 and 2022 Convertible Preferred Stock Additional Paid In Stockholders’ Notes Accumulated Other Comprehensive Total Stockholders’ (unaudited) 2023 orphan retinal diseases. September 30, 2017 (unaudited) September 30, 2016 (unaudited) (unaudited) Estimated Useful Life (Years) September 30, 2017 December 31, 2016 September 30, 2017 (unaudited) December 31, 2016 Number of Awards Weighted Average Exercise Price Weighted Average Remaining Term in Years (unaudited) 2023 Plans General terms of the 2014 Plan remain the same as that of the 2005 plan. Number of Options Weighted- Average Exercise Price Weighted-Average Contractual Life (In Years) Three Months Ended September 30, Nine Months Ended September 30, Exclusive Rights Agreements humans. The agreement requires the Company to pay an annual fee of $30,000 and a royalty of 6% on net sales of KIO-201 to Lineage based on revenue relating to any product incorporating the modified HA technology. The agreement expires when patent protection for the modified HA technology lapses in August 2027. be material to its accompanying condensed consolidated financial statements. . 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. development. As Results of Operations 2022 Comparison of Nine Months ended September 30, 2022 $0.1 million. $5.4 million and restricted cash totaling $4.0 thousand for a total of $5.4 million compared to $6.0 million at December 31, 2022. The following table sets forth the primary : 2022. Less than 1 year More than 3 years report and have made changes to address the material weaknesses identified. Proceeds. Disclosure. Exhibits President and Chief Executive Officer Executive Vice President of Finance December 31, 2016 ASSETS Current Assets: Cash and Cash Equivalents $ 9,244,570 $ 3,635,224 License and Grant Fees Receivable 602,000 37,349 Prepaid Expenses and Other Current Assets 360,305 464,981 Current Portion of Refundable Tax Credit Receivable 21,691 16,484 Total Current Assets 10,228,566 4,154,038 Property and Equipment, Net 24,431 38,040 Restricted Cash 45,000 45,000 Goodwill and In-Process R&D 5,438,210 5,438,210 Other Assets 323,206 55,314 Total Assets $ 16,059,413 $ 9,730,602 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current Liabilities: Accounts Payable $ 658,615 $ 1,412,128 Accrued Expenses 1,724,272 1,670,930 Deferred Revenue 10,254,600 4,225,000 Total Current Liabilities 12,637,487 7,308,058 Non-Current Liabilities: Contingent Consideration 1,210,000 1,210,000 Deferred Tax Liability 1,525,896 1,525,896 Long-Term Portion of Capital Lease Obligation 6,585 16,069 Total Non-Current Liabilities 2,742,481 2,751,965 Total Liabilities 15,379,968 10,060,023 Commitments and Contingencies (Note 9) Stockholders’ Equity (Deficit): Preferred Stock, $0.01 par value: 9,995,828 shares authorized; 3,750 designated Series A, 0 shares issued and outstanding at September 30, 2017 and December 31, 2016; 10,000 designated Series B, 600 and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively 6 - Common Stock, $0.01 par value: 100,000,000 shares authorized; 17,204,778 and 10,130,883 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 172,048 101,309 Additional Paid-In Capital 89,366,634 78,106,645 Accumulated Deficit (88,985,623 ) (78,598,738 ) Stockholder Note Receivable - (58,824 ) Accumulated Other Comprehensive Income 126,380 120,187 Total Stockholders’ Equity (Deficit) 679,445 (329,421 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 16,059,413 $ 9,730,602 September 30, 2023
(unaudited)December 31, 2022 ASSETS Current Assets: Cash and Cash Equivalents $ 5,400,498 $ 5,964,556 Prepaid Expenses and Other Current Assets 239,391 343,069 Tax Receivables 1,343,087 1,373,041 Total Current Assets 6,982,976 7,680,666 Non-Current Assets: Property and Equipment, Net 38,616 55,177 Restricted Cash 4,031 49,260 Intangible Assets and In-Process R&D, Net 8,820,100 10,743,164 Operating Lease Assets with Right-of-Use 18,725 116,992 Other Assets 31,995 33,000 Total Assets $ 15,896,443 $ 18,678,259 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 125,412 $ 1,008,262 Accrued Expenses 1,461,711 1,835,934 Operating Lease Liabilities 18,725 105,782 Contingent Consideration, short-term 495,000 322,385 Total Current Liabilities 2,100,848 3,272,363 Non-Current Liabilities: Contingent Consideration 5,002,505 3,309,175 Deferred Tax Liability 689,121 689,121 Total Non-Current Liabilities 5,691,626 3,998,296 Total Liabilities 7,792,474 7,270,659 Commitments and Contingencies (Notes 9 and 10) Stockholders’ Equity: Preferred Stock, $0.01 Par Value: 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; 3,750 designated Series A, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 10,000 designated Series B, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 10,000 shares designated Series C, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 20,000 shares designated Series D, 7 shares issued and outstanding at September 30, 2023 and December 31, 2022; 1,280 shares designated Series E, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 3,908 shares designated Series F, 420 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 5 — Common Stock, $0.01 Par Value: 50,000,000 shares authorized; 7,689,240 and 1,796,472 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 76,915 17,986 Additional Paid-In Capital 153,001,469 146,035,314 Accumulated Deficit (144,708,249) (134,462,959) Accumulated Other Comprehensive Loss (266,171) (182,741) Total Stockholders’ Equity 8,103,969 11,407,600 Total Liabilities and Stockholders’ Equity $ 15,896,443 $ 18,678,259 the Condensed Consolidated Financial Statements.3EYEGATE Three Months Ended Nine Months Ended Collaboration Revenue $ 74,696 $ 274,289 $ 407,518 $ 508,889 Operating Expenses: Research and Development (3,175,978 ) (2,449,445 ) (7,253,171 ) (5,844,951 ) General and Administrative (1,038,822 ) (1,201,804 ) (3,540,857 ) (4,309,737 ) Total Operating Expenses (4,214,800 ) (3,651,249 ) (10,794,028 ) (10,154,688 ) Operating Loss (4,140,104 ) (3,376,960 ) (10,386,510 ) (9,645,799 ) Other (Expense) Income, Net: Interest Income 40 298 537 3,423 Interest Expense (304 ) - (912 ) - Total Other (Expense) Income, Net (264 ) 298 (375 ) 3,423 Net Loss $ (4,140,368 ) $ (3,376,662 ) $ (10,386,885 ) $ (9,642,376 ) Net Loss per Common Share- Basic and Diluted $ (0.24 ) $ (0.36 ) $ (0.78 ) $ (1.13 ) Weighted Average Shares Outstanding- Basic and Diluted 17,204,778 9,269,535 13,267,501 8,499,709 Other Comprehensive Loss: Foreign Currency Translation Adjustments 3,272 715 6,193 (344 ) Comprehensive Loss $ (4,137,096 ) $ (3,375,947 ) $ (10,380,692 ) $ (9,642,720 ) Three Months Ended September 30, Nine Months ended September 30, 2023 2022 2023 2022 Operating Expenses: General and Administrative $ 1,415,844 $ 2,033,367 $ 3,782,596 $ 5,500,036 Research and Development 1,085,010 1,332,153 2,915,392 2,607,308 In-Process R&D Impairment 1,904,314 — 1,904,314 — Executive Severance — — — 962,833 Change in Fair Value of Contingent Consideration 1,513,400 337,515 1,865,945 604,348 Total Operating Expenses 5,918,568 3,703,035 10,468,247 9,674,525 Operating Loss (5,918,568) (3,703,035) (10,468,247) (9,674,525) Other Income (Expense), Net: Change in Fair Value of Warranty Liability — (1,425,102) — (1,425,102) Interest Income, Net 49,912 7,861 128,464 9,315 Other Income, Net 105,715 937 94,493 5,148 Total Other Income (Expense), Net 155,627 (1,416,304) 222,957 (1,410,639) Net Loss $ (5,762,941) $ (5,119,339) $ (10,245,290) $ (11,085,164) Deemed Dividends from Warrant Reset Provision (530,985) — (530,985) — Net Loss Attributable to Common Shareholders $ (6,293,926) $ (5,119,339) $ (10,776,275) $ (11,085,164) Net Loss per Common Share - Basic and Diluted $ (0.89) $ (6.03) $ (2.73) $ (22.06) Weighted Average Shares Outstanding - Basic and Diluted 7,106,900 848,534 3,948,181 502,436 Other Comprehensive Loss: Net Loss $ (5,762,941) $ (5,119,339) $ (10,245,290) $ (11,085,164) Foreign Currency Translation Adjustments (40,310) (38,537) (83,430) (176,967) Comprehensive Loss $ (5,803,251) $ (5,157,876) $ (10,328,720) $ (11,262,131) the Condensed Consolidated Financial Statements.4EYEGATESTATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)Preferred Stock Common Stock Additional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Stockholders’
EquityShares Amount Shares Amount Balance at June 30, 2023 957 $ 10 6,910,720 $ 69,129 $ 152,744,385 $ (138,945,308) $ (225,861) $ 13,642,355 Stock-Based Compensation — — — — 264,865 — — 264,865 Conversion of Series F Preferred Stock into Common Stock (530) (5) 481,770 4,818 (4,813) — — — Issuance of Common Stock from Restricted Stock Awards — — 296,750 2,968 (2,968) — — — Foreign Currency Translation Adjustment — — — — — — (40,310) (40,310) Net Loss — — — — — (5,762,941) — (5,762,941) Balance at September 30, 2023 427 $ 5 7,689,240 $ 76,915 $ 153,001,469 $ (144,708,249) $ (266,171) $ 8,103,969 Preferred Stock Common Stock Additional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Stockholders’
EquityShares Amount Shares Amount Balance at June 30, 2022 7 $ — 326,686 $ 3,266 $ 135,828,737 $ (126,845,174) $ (224,861) $ 8,761,968 Stock-Based Compensation — — — — 130,153 — — 130,153 Issuance of Stock from Public Offering, Net of Offering Costs of $505,020 — — 592,392 5,924 2,456,914 — — 2,462,838 Issuance of Series E Preferred Stock from Public Offering, Net of Offering Costs of $136,401 1,280 13 — — 665,178 — — 665,191 Conversion of Series E Preferred Stock into Common Stock (1,280) (13) 160,000 1,600 (1,587) — — — Reclassification of Warrant Liability — — — — 3,674,791 — — 3,674,791 Adjustments Due to the Rounding Impact from the Reverse Stock Split for Fractional Shares — — (33) — (15,629) — — (15,629) Foreign Currency Translation Adjustment — — — — — — (38,537) (38,537) Net Loss — — — — — (5,119,339) — (5,119,339) Balance at September 30, 2022 7 $ — 1,079,045 $ 10,790 $ 142,738,557 $ (131,964,513) $ (263,398) $ 10,521,436 2017 Common Stock Accumulated Shares Amount Shares Amount Capital Receivable Income Deficit Equity (Deficit) Balance at December 31, 2016 - $ - 10,130,883 $ 101,309 $ 78,106,645 $ (58,824 ) $ 120,187 $ (78,598,738 ) $ (329,421 ) Stock-Based Compensation 700,833 700,833 Cancellation of Stockholder Note Receivable 58,824 58,824 Issuance of Common Stock in Offerings, Net of Offering Costs of $1,086,736 5,978,817 59,788 8,551,895 8,611,683 Issuance of Series B Preferred Stock, Net of Offering Costs of $246,333 1,995 20 1,977,480 1,977,500 Conversion of Series B Preferred Stock (1,395 ) (14 ) 930,000 9,300 (9,286 ) - Exercise of Common Stock Options 61,078 611 40,107 40,718 Issuance of Restricted Stock 104,000 1,040 (1,040 ) - Foreign Currency Translation Adjustment 6,193 6,193 Net Loss (10,386,885 ) (10,386,885 ) Balance at September 30, 2017 600 $ 6 17,204,778 $ 172,048 $ 89,366,634 $ - $ 126,380 $ (88,985,623 ) $ 679,445 Preferred Stock Common Stock Additional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Stockholders’
EquityShares Amount Shares Amount Balance at December 31, 2022 7 $ — 1,796,472 $ 17,986 $ 146,035,314 $ (134,462,959) $ (182,741) $ 11,407,600 Stock-Based Compensation — — — — 572,600 — — 572,600 Issuance of Stock from Public Offering, Net of Offering Costs of $729,038 3,908 39 2,197,628 21,976 5,573,947 — — 5,595,962 Issuance of Common Stock from Private Placement, Net of Offering Costs of $84,285 — — 52,798 528 115,187 — — 115,715 Issuance of Common Stock from ELOC Purchases — — 125,000 1,250 441,060 — — 442,310 Issuance of Common Stock from Warrant Exercises — — 50,000 500 298,000 — — 298,500 Conversion of Series F Preferred Stock into Common Stock (3,488) (34) 3,170,592 31,707 (31,673) — — — Issuance of Common Stock from Restricted Stock Awards — — 296,750 2,968 (2,968) — — — Foreign Currency Translation Adjustment — — — — — — (83,430) (83,430) Net Loss — — — — — (10,245,290) — (10,245,290) Balance at September 30, 2023 427 $ 5 7,689,240 $ 76,915 $ 153,001,469 $ (144,708,249) $ (266,171) $ 8,103,969 the Condensed Consolidated Financial Statements.5EYEGATEPreferred Stock Common Stock Additional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
LossTotal
Stockholders’
EquityShares Amount Shares Amount Balance at December 31, 2021 7 $ — 316,599 $ 3,166 $ 135,541,662 $ (120,879,349) $ (86,431) $ 14,579,048 Stock-Based Compensation — — — — 417,328 — — 417,328 Issuance of Common Stock from Panoptes Holdback Shares — — 10,087 100 (100) — — — Issuance of Stock from Public Offering, Net of Offering Costs of $505,020 — — 592,392 5,924 2,456,914 — — 2,462,838 Issuance of Series E Preferred Stock from Public Offering , Net of Offering Costs of $136,401 1,280 13 — — 665,178 — — 665,191 Conversion of Series E Preferred Stock into Common Stock (1,280) (13) 160,000 1,600 (1,587) — — — Reclassification of Warrant Liability — — — — 3,674,791 — — 3,674,791 Adjustments Due to the Rounding Impact from the Reverse Stock Split for Fractional Shares — — (33) — (15,629) — — (15,629) Foreign Currency Translation Adjustment — — — — — — (176,967) (176,967) Net Loss — — — — — (11,085,164) — (11,085,164) Balance at September 30, 2022 7 $ — 1,079,045 $ 10,790 $ 142,738,557 $ (131,964,513) $ (263,398) $ 10,521,436 Nine Months Ended September 30, 2017 2016 Operating Activities Net Loss $ (10,386,885 ) $ (9,642,376 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation and Amortization 13,608 649 Stock-Based Compensation 700,833 390,469 Loss on Cancellation of Stockholder Note Receivable 91,054 - Changes in Operating Assets and Liabilities: Prepaid Expenses and Other Current Assets (194,364 ) (35,748 ) Refundable Tax Credit Receivable (3,173 ) 9,786 License and Grant Receivable (564,650 ) 2,378,635 Other Assets (1,083 ) (15,364 ) Accounts Payable (753,513 ) 704,912 Deferred Revenue 6,029,600 48,324 Accrued Expenses 53,342 (200,829 ) Net Cash Used in Operating Activities (5,015,231 ) (6,361,542 ) Investing Activities Acquisition of Jade (Net of Cash Acquired) - 185,746 Restricted Cash - (25,000 ) Equipment Purchased Under Capital Lease - (11,000 ) Net Cash Provided by Investing Activities - 149,746 Financing Activities Proceeds from Stock Offerings 11,922,252 3,768,698 Stock Issuance Costs (1,333,069 ) (323,814 ) Exercise of Common Stock Options 40,718 56,206 Equipment Financing Payments (9,484 ) - Net Cash Provided by Financing Activities 10,620,417 3,501,090 Effect of Exchange Rate Changes on Cash 4,160 (1,053 ) Net Increase (Decrease) in Cash 5,609,346 (2,711,759 ) Cash, Beginning of Period 3,635,224 8,394,133 Cash, End of Period $ 9,244,570 $ 5,682,374 Supplemental Disclosure of Noncash Investing and Financing Activities Conversion of Preferred Stock into Common Stock $ 9,300 $ 6,890 Issuance of Common Stock to Acquire Jade Therapeutics, Inc. $ - $ 2,909,766 Contingent Liability in Connection with the Jade Acquisition $ - $ 1,210,000 Property and Equipment Acquired Under Capital Lease $ - $ 31,576 Nine Months ended September 30, 2023 2022 Operating Activities: Net Loss $ (10,245,290) $ (11,085,164) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation and Amortization of Intangible Assets 43,863 31,324 Reduction of Right-of-Use Assets 98,073 113,574 Stock-Based Compensation 572,600 417,328 Impairment of In-process R&D 1,904,314 — Change in Fair Value of Contingent Consideration 1,865,945 604,348 Change in Fair Value of Warrant Liability — 1,425,102 Gain on Disposal of Equipment — (4,211) Changes in Operating Assets and Liabilities: Prepaid Expenses and Other Current Assets 98,854 342,029 Tax Receivables (18,996) (1,174,109) Other Assets 939 2,596 Accounts Payable (848,651) 635,153 Operating Lease Liabilities (86,863) (124,784) Accrued Expenses (360,398) 517,681 Net Cash Used in Operating Activities (6,975,610) (8,299,133) Investing Activities: Proceeds on Sale of Equipment — 6,375 Net Cash Provided by Investing Activities — 6,375 Financing Activities: Proceeds from Public Offering 6,325,000 5,882,739 Public Offering Costs (729,038) (505,020) Proceeds from Private Placement, Net of Offering Costs 200,000 — Private Placement Offering Costs (84,285) — Proceeds from ELOC Purchases 442,310 — Exercise of Warrants 298,500 — Net Cash Provided by Financing Activities 6,452,487 5,377,719 Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash (86,164) (133,998) Net Change in Cash, Cash Equivalents and Restricted Cash (609,287) (3,049,037) Cash, Cash Equivalents and Restricted Cash, Beginning of Period 6,013,816 7,899,690 Cash, Cash Equivalents and Restricted Cash, End of Period $ 5,404,529 $ 4,850,653 Supplemental Disclosures of Noncash Operating and Financing Activities Recognition of Right-of-Use Assets and Related Lease Liabilities $ — $ 55,415 Conversion of Preferred Stock into Common Stock $ 31,707 $ 1,600 Grant of Restricted Stock Awards $ 2,968 — Amounts Owed for Fractional Shares Related to the Reverse Stock Split in Accounts Payable $ — 15,629 the Condensed Consolidated Financial Statements.6EYEGATEs2017Organization, Business,EyeGate Presentation and Recent Accounting PronouncementsEyeGate”Kiora” or the “Company”) was formed as a Delaware corporation began operations inon December 2004 and28, 2004. Kiora is a clinical-stage specialty pharmaceutical company that is focused on developing and commercializing products for treating diseases and disorders of the eye. EyeGate’s first product in clinical trials incorporates a reformulated topically active corticosteroid, dexamethasone phosphate, EGP-437, that is delivered into the ocular tissues though its proprietary iontophoresis drug delivery system, the EyeGate® II Delivery System. The Company is developing the EyeGate® II Delivery System and EGP-437 combination product (together, the “EGP-437 Product”)therapies for the treatment of various inflammatory conditions of the eye, including anterior uveitis, a debilitating form of intraocular inflammation of the anterior portion of the uvea, such as the iris and/or ciliary body, post-cataract surgery for inflammation and pain, and macular edema, an abnormal thickening of the macula associated with the accumulation of excess fluids in the retina. Effective March 7, 2016, the Company acquired all of the capital stock of Jade Therapeutics, Inc. (“Jade”), a privately-held company developing locally-administered, polymer-based products designed to treat poorly-served ophthalmic indications (the “Jade Acquisition”). EyeGate and Jade are an integrated line of business developing ophthalmic solutions for a variety of ocular diseases and disorders.On June 30, 2016, the Company completed a registered direct offering of 441,000 shares of Common Stock and 2,776.5 shares of Series A Preferred Stock (convertible into 1,234,000 shares of Common Stock), along with a concurrent private placement of warrants to purchase Common Stock. The total net proceeds to the Company from this offering, after deducting the placement agent fees and offering expenses, were approximately $3.4 million. The warrants were initially exercisable on December 30, 2016, and expire on December 30, 2021. On February 21, 2017, the Company authorized the restart of sales under the At The Market Offering Agreement between the Company and H.C. Wainwright & Co., LLC (the “ATM Agreement”) and subsequently sold 642,150 shares of Common Stock during the first quarter of 2017. No shares of Common Stock were sold pursuant to the ATM Agreement during the second or third quarters of 2017. The total net proceeds to the Company from this offering, after deducting the placement agent fees and offering expenses, were approximately $1.8 million. On June 14, 2017, the Company completed a public offering of 5,336,667 shares of Common Stock and 1,995 shares of Series B Preferred Stock (convertible into 1,330,000 shares of Common Stock), along with warrants to purchase 6,666,667 shares of Common Stock. The total net proceeds to the Company from the offering, after deducting the placement agent fees and offering expenses, were approximately $8.8 million. The warrants became exercisable upon issuance, and expire on June 14, 2022.See Note 5, “Capital Stock”.Effective July 31, 2015, the Company’s Common Stock began trading on The Nasdaq Capital Market under the symbol “EYEG”.EyeGateKiora has devoted substantially all of its efforts to business planning, research and development, and raising capital.Condensed Consolidated Financial Statementsunaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s consolidated financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes previously distributed in the Company’s 2022 Annual Report on Form 10-K dated March 23, 2023. The balance sheet as of December 31, 2022 was derived from audited consolidated financial statements of the Company but does not include all the disclosures required by U.S. GAAP.EyeGateKiora will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. AtAs of September 30, 2017, EyeGate2023, Kiora had unrestricted Cash and Cash Equivalents of $9,244,570,$5.4 million, and an Accumulated Deficit of $88,985,623. EyeGate$144.7 million. Kiora has incurred losses and negative cash flows since inception, and future losses are anticipated. TheBased on the cash on hand as of September 30, 2023, the Company anticipates having sufficient cash to fund planned operations for approximately eight months,into May 2024, however, the acceleration or reduction of cash outflows by Company management can significantly impact the timing for raisingthe need to raise additional capital to complete development of its products. To continue development, EyeGateKiora will need to raise additional capital through equity financing, license agreements, and/or additional U.S. government grants. Although historically the Company successfully completed its IPO, a follow-on offering, a registered direct offering,has been successful at raising capital, most recently raising net proceeds of approximately $5.6 million in a public offering and sales under the ATM Agreement,that closed on June 6, 2023, as well as an equity line of credit that provides an additional $9.6 million (subject to certain limitations), additional capital may not be available on terms favorable to EyeGate,Kiora, if at all. On May 6, 2016, the SEC declared effective EyeGate’s registration statement on Form S-3, registering a total of $100,000,000 of its securities for sale to the public from time to time in what is known as a “shelf offering”. The Company does not know if any future offerings pursuant to its shelf registration statement will succeed. Accordingly, no assurances can be given that Company management will succeed in these endeavors. The Company’s recurring losses from operationsfactors described above have caused management to determine there is substantial doubt about the Company’s ability to continue as a going concern. The Condensed Consolidated Financial Statementsaccompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.7EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20172. Summary of Significant Accounting PoliciesBasis of PresentationPrinciples of ConsolidationThe accompanying Condensed Consolidated Financial Statements include the accounts of the CompanyDevelopmentitsKiora Pharmaceuticals Pty Ltd subsidiaries, EyeGate Pharma S.A.S.is entitled to receive certain refundable tax incentives associated with eligible research and Jade, collectively referred to as “the Company”. All inter-company balancesdevelopment expenses in Austria and transactions have been eliminated in consolidation.Australia, respectively. These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally acceptedrefunds are realized in the United States (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally includedform of a cash payment in Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP have been condensed or eliminated. Accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the annual financial statements of the Company as of and for the year ended December 31, 2016.Unaudited Interim Financial InformationThe accompanying interim financial statementsfollowing the incurred research and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods presented. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for an interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.Use of EstimatesThe 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 its clinical trial and research activities, establishing the useful lives of intangible assets and property and equipment, and conducting impairment reviews of long-lived assets. 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.development expenses. The Company records changesestimates of the refundable payment as a tax receivable and a reduction in estimatesexpense in the period that it becomes aware ofin which the change.Research and Development ExpensesThe 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.In-processincurred.business combinationsasset 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 annually evaluates this asset annually for impairment until the R&D process has been completed or abandoned.completed. Once the R&D process is complete, the Company amortizes the R&D asset over its remaining useful life. At September 30, 2017,The Company performed an annual evaluation of its indefinite-lived intangible assets for impairment as of August 31, 2023 with a quantitative analysis using the Company had recorded $3,912,314 as in-process R&D in connection with the Jade Acquisition on the balance sheet.Income Approach. As of September 30, 2017,2023, the Company determined that there were no indications of impairment.8EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20172. Summary of Significant Accounting Policies - (continued)Accrued Clinical ExpensesAs part of the Company’s process of preparing the Condensed 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.Related Party TransactionsThe Company has entered into certain related-party transactions, making payments for services to one vendor, eight consultants and a public university, 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 we also make payments during the year, typically as a consultant or a service provider. The amounts recorded or paid are not material to the accompanying Condensed Consolidated Financial Statements.Net Loss per ShareThe computation of Net Loss per Common Share - Basic and Diluted, is based on the weighted-average number of shares outstanding of Common Stock. In computing diluted loss per share, no effect has been given to the shares of common stock issuable upon the conversion or exercise of the following dilutive securities, as the Company’s net loss would make the effect anti-dilutive. Common Stock Warrants 9,519,403 2,852,736 Employee Stock Options 1,858,300 1,533,311 Preferred Stock 400,000 545,000 Total Shares of Common Stock Issuable 11,777,703 4,931,047 Fair Value of Financial InstrumentsThe carrying amounts of Accounts Receivable and Accounts Payable approximate their fair values due to the short-term nature of these financial instruments. As of September 30, 2017, and December 31, 2016, theestimated fair value of the Company’s money market fundsKIO-101 and contingent considerationKIO-201 assets was $750,946 and $1,210,000, and $1,500,882 and $1,210,000, respectively.At September 30, 2017 and December 31, 2016, the Company had no other assets or liabilities that are subject to fairless than their carrying value methodology and estimation in accordance with FASB Accounting Standards Codification (“ASC”) Topic 820,Fair Value Measurement.9EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20172. Summary of Significant Accounting Policies - (continued)Revenue RecognitionThe Company follows Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements, and ASU 2010-17,Revenue Recognition-Milestone Method in connection with its accounting for collaboration arrangements. The Company’s revenues are generated primarily through arrangements which generally contain multiple elements, or deliverables, including licenses and R&D activities to be performed by the Company on behalf of the licensor or grantor. Payments to EyeGate under these arrangements typically include one or more of the following: (1) nonrefundable, upfront license fees, (2) funding of discovery research efforts on a full-time equivalent basis, (3) reimbursement of research, development and intellectual property costs, (4) milestone payments, and (5) royalties on future product sales.When evaluating multiple element arrangements, Company management considers whether the deliverables under the arrangement represent separate units of accounting. This evaluation requires subjective determinations and requires Company management to make judgments about individual deliverables, including whether such deliverable is separable from the other aspects of the contractual relationship. In determining a unit of accounting, Company management evaluates certain criteria, including whether the deliverable has standalone value, based on the consideration of the relevant facts and circumstances for each arrangement. The consideration received is allocated among each separate unit of accounting using the relative selling price method, and the applicable revenue recognition criteria is applied to each separate unit.The Company generally expects to recognize revenue attributable to a future license obtained on a straight-line basis over the Company’s contractual or estimated performance period, which is typically the term of the Company’s R&D obligation. If Company management cannot reasonably estimate when the Company’s performance obligation ends, then revenue is deferred until Company management can reasonably estimate when the performance obligation ends. The periods over which revenue should be recognized are subject to estimates by management and may change over the course of the R&D agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods. At the inception of arrangements that include milestone payments, Company management evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.Company management evaluates factors such as the scientific, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. The Company has concluded that the clinical and development milestones pursuant to its R&D arrangements are substantive.The Company aggregates its milestones into four categories: (i) clinical and development milestones, (ii) the chemistry, manufacturing and controls (“CMC”) validation, (iii) regulatory milestones, and (iv) commercial milestones. Clinical and development milestones are typically achieved when a product candidate advances into a defined phase of clinical research or completes such phase or when a contractually specified clinical trial enrollment target is attained. CMC validation milestones are typically achieved when the validation paperwork is finalized. Regulatory milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the FDA or other global regulatory authorities. For example, a milestone payment may be due to the Company upon the FDA’s acceptance of an NDA. Commercial milestones are typically achieved when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee, such as when a product first achieves global sales or annual sales of a specified amount.Revenues from clinicalstrategic decision to stop development leading to commercialization and development, CMC and regulatory milestone payments (if the milestones are deemed substantive and the milestone payments are nonrefundable) are recognized upon successful accomplishment of the milestones. Revenue from commercial milestone payments are accountedseek partnership for as royalties and are recorded as Revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.10EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20172. Summary of Significant Accounting Policies - (continued)Payments or reimbursements resulting from the Company’s R&D activities are recognized as the services are performed and are presented on a gross basis so long as there is persuasive evidence of an arrangement, the fee is fixed or determinable, and collection of the related receivable is reasonably assured. Amounts received prior to satisfying the above revenue recognition criteria are recorded as Deferred Revenue on the Condensed Consolidated Balance Sheet.On July 9, 2015,future development. Accordingly, the Company entered intorecognized an exclusive, worldwide licensing agreement with a subsidiaryimpairment loss of Valeant Pharmaceuticals International, Inc. (“Valeant”), through$1.9 million which the Company granted to Valeant an exclusive, worldwide commercial and manufacturing right to the Company’s EGP-437 Product in the field of anterior uveitis, as well as a right of last negotiation to license its EGP-437 Product for indications other than anterior uveitis (the “Valeant Agreement”). There are four principal R&D milestones under the Valeant Agreement: (i) the Phase 3 Clinical Trial, (ii) the Endothelial Cell Count Safety Trial (a trial to determine that treatment has not adversely affected a patient’s corneal endothelial cell density), (iii) the CMC Validation, and (iv) the New Drug Application, or “NDA”, filing with the FDA (collectively, the “Four Milestones”, and each individually, a “Milestone”). Under the Valeant Agreement, Valeant paid to the Company an initial upfront payment, and the Company is eligible to receive certain other payments, upon and subject to the achievement of certain specified development and commercial progress of the EGP-437 Product for the treatment of anterior uveitis. The Company received the initial up-front payment in 2015, which it recorded as Deferred Revenue on its Condensed Consolidated Balance Sheet, and later in 2015 began receiving certain additional payments, based on R&D progress, to continue over several years. The Company receives payments both when it crosses certain thresholds on the way to each Milestone (each, a “Progress Payment”), as well as once it achieves each Milestone. The Company is entitled to retain all of these payments. The Company defers each Progress Payment, capitalizes each payment on its Condensed Consolidated Balance Sheet as Deferred Revenue, and recognizes these payments in the aggregate as Revenue once it achieves the Milestone to which the Progress Payment relates. The Company recognizes the initial upfront payment as Revenue ratably as it completes each of the Four Milestones, the amount recognized being the total upfront payment times the percentage represented by the proportionate share of fair value of each Milestone relative to the total fair value of all Milestones. Accordingly, the Deferred Revenue account on the Condensed Consolidated Balance Sheet is reduced as Revenue is recognizedshown in the Condensed Consolidated Statement of Operations and Comprehensive Loss. Due to longer enrollment time, the Company expects to begin recognizing Revenue with respect to the Valeant Agreement Progress PaymentsLoss in the second quarter of 2018.On February 21, 2017, the Company entered into another exclusive, worldwide licensing agreement with a subsidiary of Valeant (the “New Valeant Agreement”), through which the Company granted Valeant exclusive, worldwide commercialline In-process R&D Impairment. At September 30, 2023 and manufacturing rights to its EGP-437 Product in the field of ocular iontophoretic treatment for post-operative ocular inflammation and pain in ocular surgery patients (the “New Field”). Under the New Valeant Agreement, Valeant paid the Company an initial upfront payment of $4.02022, there was $8.7 million and $10.6 million, respectively, of in-process R&D as part of intangible assets and in-process R&D, net on the Company is eligible to receive milestone payments totaling up to approximately $99.0 million, upon and subject to the achievementCondensed Consolidated Balance Sheets.certain specified developmental and commercial progress of the EGP-437 Product for the New Field. The Company has received milestone payments totaling $1.428 million through the third quarter of 2017. In accordance with its revenue recognition policy, the initial upfront payment and milestone payments have been recorded as Deferred Revenue. The Company expects to begin recognizing Revenue with respect to the New Valeant Agreement Progress Payments in the first quarter of 2018. In addition, the Company is eligible under the New Valeant Agreement to receive royalties based on a specified percent of net sales of its EGP-437 Product for the New Field throughout the world, subject to adjustment in certain circumstances.
Contents11EYEGATEKIORA PHARMACEUTICALS, INC.20172. Summary of Significant Accounting Policies - (continued)The Company receives government grant funds from two sources: the U.S. Department of Defense (“DoD”) and the National Science Foundation (“NSF”). The Company is paid by the DoD after it performs specified, agreed-upon research, and it records these grant funds as Revenue as it performs the research. The Company is generally paid by the NSF before it performs specified, agreed-upon research. The Company records these NSF funds on our Condensed Consolidated Balance Sheet as Deferred Revenue when invoiced, and recognize these amounts as Revenue ratably as the research is performed, typically over a six-month period.The DoD and NSF have each committed to grant funds to Jade for specified ocular therapeutic research activities (together, the “U.S. Government Grants”) to be conducted through 2017, which have been fully funded as of September 30, 2017. The Company recognizes grant funds as Revenue when it performs the activities specified by the terms of the grant and is entitled to the funds.Recent Accounting PronouncementsIn November 2016, FASB issued ASU No. 2016-18,Restricted Cash, which clarifies guidance and presentation related to restricted cash in the statement of cash flows, including stating that restricted cash should be included within cash and cash equivalents on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively. The Company did not elect to adopt this standard early and is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.In February 2016, the FASB issued ASU No. 2016-02,Leases (“ASU 2016-02”), which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Under ASU 2016-02, lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and the right-to-use assets, which are asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. The Company does not expect to early adopt this standard and currently has leases (see Note 9) that will be in place at the effective date. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606) (”ASU 2014-09”), as subsequently amended, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract, and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented, or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, the FASB deferred the effective date of this guidance until January 1, 2018. The Company is not early adopting this standard. The Company’s sole revenue activities currently relate to the Valeant Agreements and its U.S. Government Grants. The Company has commenced its implementation analysis, including identification of revenue streams and reviews of customer contracts under ASU 2014-09’s framework. The analysis includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under this new standard. The Company has reviewed its contracts with Valeant. ASU 2014-09 requires increased disclosure, which in turn is expected to require certain new processes. The determination of the impact of adoption of ASU 2014-09 on the Company’s financial condition, results of operations, cash flows and disclosures, is ongoing, and, as such, the Company is not able to reasonably estimate the effect that the adoption of the new standard will have on its financial statements. Based on a preliminary assessment of this ASU, the Company anticipates that the adoption of the new standard will have a material effect. The Company has determined that it will elect the modified retrospective transition method, meaning the cumulative effect of applying the new guidance is recognized at the date of initial application as an adjustment to the opening accumulated deficit balance. The Company continues to monitor additional changes, modifications, clarifications or interpretations being undertaken by the FASB, which may impact the Company’s current conclusions.
202312EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20173. Property and EquipmentProperty and equipment at September 30, 2017 (unaudited) and December 31, 2016 consists of the following: Laboratory Equipment 3 $ 42,576 $ 42,576 Less: Accumulated Depreciation 18,145 4,536 $ 24,431 $ 38,040 Depreciation expense was $4,536 and $404 for the three-month periods ended September 30, 2017 and 2016, respectively, and $13,608 and $649 for the nine-month periods ended September 30, 2017 and 2016, respectively.4. Accrued ExpensesAccrued expenses consist of the following: Clinical Trials $ 977,882 $ 770,158 Payroll and Benefits 564,525 668,802 Professional Fees 163,703 174,342 Short-Term Portion of Capital Lease Obligation 12,645 12,645 Consulting 5,517 44,983 Total Accrued Expenses $ 1,724,272 $ 1,670,930 5. Capital StockOn May 24, 2016, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Sales Agent”), to create an at the market equity program under which the Company can from time to time offer and sell up to 1,319,289 shares of its Common Stock through the Sales Agent. Effective June 26, 2016, the Company halted indefinitely all future offers and sales of its Common Stock pursuant to the ATM Agreement. On June 30, 2016, the Company closed on the sale of its equity securities in connection with a registered direct offering, described below, and as a result, the Company was restricted from issuing any shares pursuant to the ATM Agreement for a period of 90 days following the close of the ATM Agreement. This restriction lapsed on September 28, 2016. On February 21, 2017, the Company authorized the Sales Agent to restart sales under the ATM Agreement for maximum aggregate gross proceeds of up to $3,285,798. During the first quarter of 2017, the Company sold 642,150 shares of Common Stock under this agreement for total net proceeds to the Company from this offering, after deducting the placement agent fees and offering expenses, of approximately $1.8 million. No shares of Common Stock were sold pursuant to the ATM Agreement during the second or third quarters of 2017. On June 14, 2017, the Company closed on the sale of its equity securities in connection with a public offering, described below, and as a result, the Company is restricted from issuing any shares pursuant to the ATM Agreement for a period of twenty-four months following the closing date of the offering. However, this restriction is suspended for any sale of shares of Common Stock under the ATM Agreement that is above $3.00 per share.13EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20175. Capital Stock - (continued)On June 14, 2017, the Company completed a public offering of 5,336,667 shares of Common Stock and 1,995 shares of Series B Preferred Stock (convertible into 1,330,000 shares of Common Stock), along with warrants to purchase 6,666,667 shares of Common Stock. Concurrently with the closing of the public offering, a holder elected to convert 675 shares of Series B Preferred Stock into 450,000 shares of Common Stock. Subsequently, on June 15, 2017, a holder converted 720 shares of Series B Preferred stock into 480,000 shares of Common Stock. The total net proceeds to the Company from the offering, after deducting the placement agent fees and offering expenses, were approximately $8.8 million. Additionally, the investors received, for each share of Common Stock, or for each share of Common Stock issuable upon conversion of a share of Series B Preferred Stock purchased in the public offering, warrants to purchase one share of Common Stock at an exercise price of $1.50 per share, which totaled warrants to purchase an aggregate of 6,666,667 shares of Common Stock. The warrants issued to investors became initially exercisable immediately upon issuance and terminate on June 14, 2022, five years following the date of issuance.At each of September 30, 2017 and December 31, 2016, the Company had 100,000,000 authorized shares of Common Stock, $0.01 par value, of which 17,204,778 and 10,130,883 shares, respectively, were outstanding. At each of September 30, 2017 and December 31, 2016, the Company had 9,995,828 and 9,997,223 authorized shares of Preferred Stock, $0.01 par value, respectively, of which 3,750 shares were designated as Series A Preferred Stock and 0 shares are issued and outstanding, and 10,000 shares were designated as Series B Preferred Stock, and 600 and 0 shares, respectively, are issued and outstanding. The reduction in shares of authorized Preferred Stock is a result of 1,395 shares of Series B Preferred Stock, which were converted to Common Stock and retired during2017. At each of September 30, 2017 and December 31, 2016, there were 0 shares of Common Stock underlying2023, the outstanding shares of Series A Preferred Stock, and 400,000 and 0 shares of Common Stock underlyingCompany made payments totaling approximately $0.13 million for services to a related party vendor, Ora, Inc., who is providing the outstanding shares of Series B Preferred Stock, respectively.6. WarrantsAt September 30, 2017, the following warrants were outstanding: Outstanding at December 31, 2016 2,852,736 $ 7.45 4.26 Issued 6,666,667 1 1.50 2 4.71 Outstanding at September 30, 2017 9,519,403 $ 3.28 4.50 1Consists of 6,666,667 warrants to purchase 6,666,667 shares of Common Stock issued in connection with the Company’s public offering on June 14, 2017.2Warrant exercise price for a full share of Common Stock.AllCompany with clinical study services for KIO-301. One of the warrant agreements provideCompany’s directors is an executive at Ora, Inc.September 30, 2023 December 31, 2022 Cash and Cash Equivalents $ 5,400,498 $ 5,964,556 Restricted Cash, Non-current 4,031 49,260 Total Cash, Cash Equivalents and Restricted Cash $ 5,404,529 $ 6,013,816 a cashless exercisecorporate credit cards, and such amounts are included in the event a registration statement covering the issuanceprepaid expenses and other current assets.shares of common stock underlying the warrants is not effective, whereby the number of warrants to be issued will be reduced by the number of shares which could be purchased from the proceedsfollowing:September 30, 2023 December 31, 2022 Prepaid Insurance $ 116,853 $ 117,315 Prepaid Research and Development 49,377 128,429 Other 73,161 97,325 Total Prepaid Expenses and Other Current Assets $ 239,391 $ 343,069 exercise offollowing:September 30, 2023 December 31, 2022 Payroll and Benefits $ 828,694 $ 1,312,443 Professional Fees 68,819 282,721 Clinical Trials 424,026 57,020 Other 140,172 183,750 Total Accrued Expenses $ 1,461,711 $ 1,835,934 respective warrant. The outstanding warrants expireprice that would be received from 2020 through 2025.7. Stockholder Notes ReceivableIn 2007, a Stockholder of the Company was issued various promissory notes totaling $58,824 for the sale of Common Stock. The notes were full recoursean 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 collateralized byranks the shareslevel of Common Stock sold. The amended notes bore compound interest at 0.93% effective October 1, 2012, and asobservability of October 1, 2016 these notes had matured.On September 5, 2017, these notes were forgiven by the Company in the amountinputs$91,054, which included accrued interest of $32,230. These amounts are recorded in General and Administrative on the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Contents14EYEGATEKIORA PHARMACEUTICALS, INC.2017September 30, 2023 December 31, 2022 Contingent Consideration: Current $ 495,000 $ 322,385 Non-current 5,002,505 3,309,175 Total Contingent Consideration $ 5,497,505 $ 3,631,560 Valuation Technique Unobservable Inputs September 30, 2023 December 31, 2022 Discounted cash flow Payment discount rate 13.6 % 14.7 % Bayon Payment period 2023 - 2028 2023 - 2028 Panoptes Payment period 2025 - 2028 2024 - 2028 Jade Payment period 2027 2026 Bayon Probability of success for payment 42% - 100% 17% - 67% Panoptes Probability of success for payment 30% - 33% 17% - 36% Jade Probability of success for payment 56 % 56 % Valuation Technique Unobservable Inputs Input Discount Rate KIO-101 Relief from Royalty Method Probability of success for next development phase 17 % 30 % KIO-104 Multi-Period Excess Earnings Method Probability of success for next development phase 17% to 36% 25 % KIO-201 Relief from Royalty Method Probability of success for next development phase 17% to 46% 30 % KIO-301 Multi-Period Excess Earnings Method Probability of success for next development phase 17% to 67% 25 % Estimated Useful
Life (Years)September 30, 2023 December 31, 2022 Trade Secrets 10 $ 250,000 $ 250,000 Less: Accumulated Amortization (125,000) (106,250) Intangible Assets, Net 125,000 143,750 In-Process R&D 8,695,100 10,599,414 Total Intangible Assets and In-Process R&D, Net $ 8,820,100 $ 10,743,164 Number of Common Shares
Issuable Upon Exercise
of Outstanding WarrantsWeighted Average
Exercise
PriceWeighted Average
Remaining
Term in YearsOutstanding at December 31, 2022 1,597,606 $ 21.22 3.07 Issued 11,605,596 $ 0.55 2.40 Exercised (50,000) $ 5.97 Expired (72,503) $ 108.80 Outstanding at September 30, 2023 13,080,699 $ 2.45 2.70 Outstanding at December 31, 2021 168,932 $ 199.65 3.42 Issued 1,504,786 $ 8.00 2.72 Expired (11,112) $ 900.00 Outstanding at September 30, 2022 1,662,606 $ 150.40 3.14 2023 2022 Common Stock Warrants 13,080,699 1,662,606 Employee Stock Options 831,253 12,650 Restricted Stock 237,916 2 Preferred Stock 381,832 52 Common Stock Reserved for Future Issuance 165,491 — Total Shares of Common Stock Issuable 14,697,191 1,675,310 Plan891,22259,414 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 at2017,2023, the maximum number of shares of Common Stock that may be issued pursuant to the ESPP was 284, of which 191 shares were available for future issuance. As of September 30, 2023, the maximum number of shares of Common Stock that may be issued pursuant to the 2014 Plan was 1,297,363 of which 165,300 shares were available for awards.Three months ended September 30 Nine months ended September 30 2023 2022 2023 2022 Research and Development $ 118,439 $ 19,625 $ 249,352 $ 78,786 General and Administrative 146,426 110,528 323,248 338,542 Total Stock-Based Compensation Expense $ 264,865 $ 130,153 $ 572,600 $ 417,328 ESPPremainder vest ratably over a 24-month period. The Company has also issued grants with a four year vesting term, of which one-fourth of the underlying shares vested immediately, one-fourth on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period.The fair value of time-based stock options is 1,690,123determined using the Black-Scholes Option Pricing Model, with such value recognized as expense over the service period, which is typically three years, net of actual forfeitures. A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the nine months ended September 30, 2023 and 170,567 shares,2022 is shown in the following table.Nine months ended September 30 2023 2022 Risk-Free Interest Rate 4.54 % 2.42 % Expected Life (years) 5.52 5.00 Expected Stock Price Volatility 141 % 140 % Expected Dividend Yield — % — % In January 2017, The expected term of the numberoptions 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 sharesshare option exercises. Expected volatility is based on the historical volatility of the Company’s common stock issuable understock. The risk-free interest rate is determined based upon a constant U.S. Treasury security rate with a contractual life that approximates the 2014 Plan automatically increased by 405,235 shares pursuantexpected term of the option. Unamortized compensation expense related to the termsoptions amounted to $1.0 million as of the 2014 Plan. Additionally, in June 2017, the numberSeptember 30, 2023 and is expected to be recognized over a weighted average period of sharesapproximately 2.33 years.common stock issuable under the 2014 Plan was increased by 250,000 shares and issuable under the ESPP was increased by 100,000 shares, as approved by the Company’s Stockholders. These additional shares are included in the total of 1,690,123 shares issuable under the 2014 Plan and 170,567 shares issuable under the ESPP.The followingContent20172023:Number of
OptionsWeighted Average
Exercise PriceWeighted Average
Remaining
Term in YearsOutstanding at December 31, 2022 84,722 $ 36.90 9.59 Granted 764,400 $ 1.11 Expired (417) $ 86.42 Forfeited (17,452) $ 6.05 Outstanding at September 30, 2023 831,253 $ 4.61 9.60 Exercisable and vested at September 30, 2023 149,764 $ 16.58 9.78 2016: Outstanding at December 31, 2016 1,509,711 $ 2.85 5.04 Granted 482,950 1.44 9.60 Exercised (61,078 ) 0.67 Expired (73,283 ) 2.19 Outstanding at September 30, 2017 1,858,300 $ 2.62 5.61 Exercisable at September 30, 2017 1,188,317 $ 2.68 4.56 Vested and Expected to Vest at September 30, 2017 1,188,317 $ 2.68 4.56 Outstanding at December 31, 2015 1,277,367 $ 2.75 4.94 Granted 355,071 2.81 9.50 Exercised (86,765 ) 0.65 Forfeited (12,362 ) 3.93 Outstanding at September 30, 2016 1,533,311 $ 2.91 6.44 Exercisable at September 30, 2016 907,445 $ 2.84 4.09 Vested and Expected to Vest at September 30, 2016 907,445 $ 2.84 4.09 On January 31, 2017,exercisable as of September 30, 2023 had an aggregate intrinsic value of $1,184. The aggregate intrinsic value is calculated as the Board approveddifference between the grant of options to purchase 36,000 shares of its Common Stock to three consultantsexercise price of the Company. On February 6, 2017,underlying options and the Board approved the grant of options to purchase 15,450 shares of its Common Stock to three employees. On May 18, 2017, the Board approved the grant of options to purchase 63,000 shares of its Common Stock to two employees and four consultantsmarket price of the Company. On June 21, 2017,Company’s common stock for options that had exercise prices lower than $0.57, the Board approved the grant of options to purchase 350,000 shares of its Common Stock to six membersclosing price of the Board, six employees, and one consultantCompany’s stock on September 30, 2023.Company. On June 30, 2017, the Board approved the grant of options to purchase 1,500underlying shares of its Common Stock to three employees of the Company. On September 28, 2017, the Board approved the grant of options to purchase 17,000 shares of its Common Stock to two employees of the Company.15EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20178. Equity Incentive Plan - (continued)On February 6, 2017, the Board approved the grant of 104,000 shares of restricted stock to eight employees. These vest 33.33% on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period. Unamortized compensation expense related to the 24-month period following the one-year anniversary. Asrestricted stock awards amounted to $0.4 million as of September 30, 2017, none of these shares were vested.On January 25, 2016, the Board approved the grant of options2023 and is expected to purchase 48,300 shares of its Common Stock to two executives and seven members of the Board. On March 7, 2016, in connection with the Jade Acquisition, the Board approved the grant of options to purchase 47,786 shares of its Common Stock to two executives. On March 29, 2016, the Board approved the grant of options to purchase 114,438 shares of its Common Stock. On April 25, 2016, the Board approved the grant of options to purchase 41,732 shares of its Common Stock. In the third quarter of 2016, the Board approved the grant of options to purchase 102,815 shares of its Common Stock.All grants were issued pursuant to the 2014 Plan. In general, grants under the 2014 Plan vest 33.33% on the one-year anniversary of the grant date, and the remainder ratablybe recognized over the 24-month period following the one-year anniversary.For the nine months ended September 30, 2017 and 2016, 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: 2017 2016 Risk-Free Interest Rate 1.82% 1.82% Expected Life 7.28 years 7.00 years Expected Volatility 171% 65% Expected Dividend Yield 0% 0% Using the Black-Scholes Option Pricing Model, the estimateda weighted average fair valueperiod of an option to purchase one shareapproximately 2.79 years. The following is a summary of commonrestricted stock granted during the nine months ended September 30, 2017 and 2016 was $1.46 and $2.94, respectively.The total stock-based compensation expense for employees and non-employees is included in the accompanying Condensed Consolidated Statements of Operations and as follows: 2017 2016 2017 2016 Research and Development $ 57,544 $ 17,092 $ 165,538 $ 35,692 General and Administrative 131,148 135,973 535,295 354,777 $ 188,692 $ 153,065 $ 700,833 $ 390,469 The fair value of options grantedactivity for the nine months ended September 30, 20172023:Number of
UnitsWeighted Average
Grant Date Fair ValueWeighted Average
Remaining
Term in YearsNon-vested Outstanding at December 31, 2022 30,000 $ 6.78 2.79 Awarded 270,050 $ 1.06 Released (58,834) $ 0.72 Forfeited (3,300) $ 3.83 Non-vested Outstanding at September 30, 2023 237,916 $ 1.82 2.79 20162023 and 2022, the remaining shares reserved for future offerings was approximately $550,000191.$720,000,ContingenciesThe fair value of restricted stock grantedTotal operating costs for the nine months ended September 30, 20172023 and September 30, 20162022 was approximately $158,000$121,159 and $0,$120,274, respectively. AsOperating lease costs include a nominal short-term and variable lease cost.2017 and September 30, 2016, there is approximately $1,113,000 and $1,209,000 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 2.12 and 2.35 years, respectively. The aggregate intrinsic value of stock options outstanding and exercisable at September 30, 2017 and September 30, 2016 is approximately $242,000 and $597,000, respectively. The intrinsic value of stock options exercised during the nine months ended September 30, 2017 and September 30, 2016 was approximately $78,000 and $207,000, respectively.At September 30, 2017, there were 170,416 options available under the 2014 Plan.16Years Ending December 31, 2023 (remaining months) $ 18,725 Total Lease Liabilities 18,725 Less Current Portion (18,725) $ — EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20179. CommitmentsLicense and ContingenciesLeasesa real property operating lease for the rental of office space in Waltham, Massachusetts of up to 4,516 square feet, that is used for its corporate headquarters. This lease terminates in December 2017. On October 4, 2017, the Company entered into an amendment to extend the terms of this lease through December 2019. On July 6, 2016, the Company entered into a real property operating lease for office and laboratory space of approximately 2,300 square feet in Salt Lake City, Utah. This lease terminates in June 2019.The Company is a party to two nominal equipment capital lease agreements, one for a three-year term and one for a two-year term, for the use of scientific instruments in its Salt Lake City laboratory.License AgreementsThe Company is a party to sixseven license agreements as described below. Four of the sixThese license agreements require the Company to pay or receive royalties or fees to or from the licensorcounterparties based on Revenue related to the licensed technology, and the agreements with Valeant require Valeant to pay royalties to the Company based on revenue or milestones related to the licensed technology.February 15, 1999,July 2, 2013, the Company entered in to an exclusive worldwide license agreement with the University of Miami School of Medicine to license technology relating to the Company’s EyeGate® II Delivery System. This agreement, which was amended in December 2005, requires the Company to pay to the University of Miami an annual license fee of $12,500. This license also requires payments to the University of Miami upon the Company’s achievement of certain milestones. Unless terminated pursuant to the license agreement, this license will expire 12 years after the date of the first commercial sale of a product containing the licensed technology.On July 23, 1999, the Company(through its subsidiary, Kiora Pharmaceuticals, GmbH) entered into a perpetual Transaction Protocolpatent and know-how assignment agreement with Francine Behar-Cohen4SC Discovery GmbH (“4SC”) transferring to acknowledge the Company’s right to use certain patents that Ms. Behar-Cohen had certain ownership rights with respect to and which are used in the Company’s EGP-437 Combination Product. The agreement also provides for the Company all patent rights and know-how to pay Ms. Behar-Cohen a fee basedthe compound KIO-101. The Company is responsible for paying royalties of 3.25% on a percentage of the pre-tax turnover generated fromnet sales of KIO-101.Company’s EGP-437 Combination Product relating toCompany (through its inclusion of the EyeGate® II Delivery System. The fees due under the agreement are required to be paid until January 2018.On September 12, 2013, Jadesubsidiary, Kiora Pharmaceuticals, GmbH) entered into an out-license agreement with BioTime, Inc.4SC granting to it4SC the exclusive worldwide right to commercialize cross-linked thiolated carboxymethyl hyaluronic acid (“CMHA-S”)the compound KIO-101 for ophthalmic treatments in humans. The agreement calls for a license issue fee paid to BioTime of $50,000,rheumatoid arthritis and requires the Company (through its Jade subsidiary) to pay royalties to BioTime based on revenue relating to any product incorporating the CMHA-S technology. The agreement expires when patent protection for the CMHA-S technology lapses.On July 9, 2015, the Company entered into an exclusive worldwide licensing agreement with a subsidiary of Valeant through which EyeGate has granted Valeant exclusive, worldwide commercialinflammatory bowel disease, including Crohn’s Disease and manufacturing rights to its EGP-437 Product in the field of anterior uveitis, as well as a right of last negotiation to license the EGP-437 Product for other indications. Under the agreement, Valeant paid the Company an upfront payment of $1.0 million.Ulcerative Colitis. The Company is eligible to receive milestone payments totaling up to $32.5€155 million, upon and subject to the achievement of certain specified developmental and commercial milestones. The Company has not received any milestones payments from 4SC. In addition, the Company is eligible to receive royalties basedof 3.25% on a specified percent of net sales of KIO-101.Product throughoutCompany (through its subsidiary, Jade Therapeutics, Inc.) entered into an agreement with Lineage Cell Therapeutics, Inc. (“Lineage”), formerly known as BioTime, Inc. granting to the world, subjectCompany the exclusive worldwide right to adjustmentcommercialize cross-linked thiolated carboxymethyl hyaluronic acid (“modified HA”) for ophthalmic treatments in certain circumstances.JuneNovember 17, 2016,2014, the Company (through its subsidiary Kiora Pharmaceuticals GmbH) entered into an intellectual property and know-how licensing agreement with Laboratoires Leurquin Mediolanum S.A.S. (“Mediolanum”) for the commercialization of KIO-101 (the “Mediolanum Agreement”) in specific territories. Under the Mediolanum agreement, the Company out-licensed rights to commercialize KIO-101 for uveitis, dry eye and viral conjunctivitis in Italy, and France. This Agreement was amended on December 10, 2015 to also include Belgium and Netherlands. Under the Mediolanum Agreement, Mediolanum is obligated to pay up to approximately €20 million in development and commercial milestones and a 7% royalty on net sales of KIO-101 in the territories through the longer of the expiry of the valid patents covering KIO-101 or 10 years from the first commercial sale. The royalty is reduced to 5% after patent expiry. On September 7, 2023, the Companyexclusive worldwide licenseintellectual property licensing agreement (the “SentrX Agreement”) with SentrX, a veterinary medical device company that develops and manufactures veterinary wound care products. Under the University of Utah Research FoundationSentrX Agreement, the Company in-licensed the rights to further the commercial development of the NASH technology, together with alkylated HA. The agreement calls for payments duetrade secrets and know-how related to the Universitymanufacturing of Utah, consistingKIO-201. The SentrX Agreement enables the Company to pursue a different vendor with a larger capacity for manufacturing and an FDA-inspected facility for commercialization of a license grant fee of $15,000 due within 30 days of signing, and an annual licensing fee, initially $5,000, and escalating ratably up to $20,000 in 2021.17EYEGATE PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20179. Commitments and Contingencies - (continued)On February 21, 2017, the Company entered into an exclusive, worldwide licensing agreement with a subsidiary of Valeant (the “New Valeant Agreement”), through which the Company granted Valeant exclusive, worldwide commercial and manufacturing rights to its EGP-437 Product in the field of ocular iontophoretic treatmentproduct for post-operative ocular inflammation and pain in ocular surgery patients (the “New Field”).human use. Under the New ValeantSentrX Agreement, Valeant paid the Company an initial upfront payment of $4.0 million, and the CompanySentrX is eligible to receive milestone payments totaling up to approximately $99.0$4.75 million, upon and subject to the achievement of certain specified developmental and commercial progressmilestones. On June 7, 2023, the Company entered into an amendment agreement (the "SentrX First Amendment") whereby SentrX removed the Company's obligation to make any further payments, milestone or otherwise.The term of the EGP-437 Productamendment agreement remains unchanged, which is until the product is no longer in the commercial marketplace. In addition, on June 7, 2023, the Company entered into a new exclusive license agreement (the "New SentrX Agreement") with SentrX, whereby the Company out-licensed certain KIO-201 patents for use in animal health and veterinary medicine. Under the New Field. SentrX Agreement, SentrX is obligated to pay the Company a flat low single-digit royalty on net sales, and is effective until the last licensed patent terminates.Maximum Obligation
per AgreementsCurrent Fair
Value EstimatedBayon $ 7,135,000 $ 2,709,945 Panoptes 9,500,000 2,043,169 Jade 2,164,451 744,391 $ 18,799,451 $ 5,497,505 addition,the normal course of business, the Company periodically becomes involved in various claims and lawsuits, as well as governmental proceedings and investigations that are incidental to the business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and amount of the claim, and an estimate of the possible loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. With respect to governmental proceedings and investigations, like other companies in the industry, the Company is eligible undersubject to extensive regulation by national, state and local governmental agencies in the New Valeant AgreementU.S. and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to receive royalties based on a specified percent of net salescooperate with regulators and investigators in responding to inquiries.EGP-437 Productbusiness, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice.New Field throughoutInflation Reduction Act of 2022 was signed into law. As guidance is released the world, subjectCompany is continually evaluating the impact of the recently enacted law. However, the Company does not expect the impact to adjustment in certain circumstances.Employee Benefit PlansTheSubsequent Eventshas an employee benefit planthrough its subsidiary Kiora Pharmaceuticals GmbH, entered into a new office lease agreement for its United States-based employees under Section 401(k)office in Vienna, Austria which will commence on October 15, 2023 for a term of 60 months, expiring on October 14, 2028. The prior office lease ended October 31, 2023.Internal Revenue Code. The Plan allows all eligible employees to make contributions up to a specified percentageassignment. Per the terms of their compensation. Under the Plan,agreement, upon execution of the amendment the Company may, but is not obligatedwas required to match a portionpay UC $15,000.the employee contribution up to a defined maximum. The Company made no matching contribution for the nine months ended September 30, 2017 and 2016.
Contents18or the SEC, on FebruaryMarch 23, 2017.2023. You should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on page 1 of this Quarterly Report on Form 10-Q.EyeGate Jade Therapeutics, Inc., a wholly owned subsidiary of the Company, is referred to herein as “Jade”.Business Overview specialty pharmaceutical company focused on developing and commercializing products for treating diseasesthe treatment of orphan retinal diseases.disordersall sub-forms). KIO-301 is a potential vision-restoring small molecule that acts as a “photoswitch” specifically designed to restore vision in patients with inherited and age-related degenerative retinal diseases. The molecule is specifically designed to restore the eyes’ ability to perceive and interpret light in visually impaired patients. It selectively enters viable downstream retinal ganglion cells (no longer receiving electrical input due to degenerated rods and cones) and is intended to turn them into light sensing cells, capable of signaling the brain as to the presence or absence of light. On March 17, 2022, we were granted Orphan Drug Designation by the United States (“U.S.”) Food and Drug Administration (“FDA”) for the Active Pharmaceutical Ingredient (“API”) in KIO-301. KIO-301 (formerly known as B-203) was acquired through the Bayon transaction which closed October 21, 2021. We initiated a Phase 1b clinical trial in the third quarter of 2022.eye. Phase 1b trial, we plan to expand development of KIO-301 to treat patients with late stages of Choroideremia and Stargardt disease. These diseases have a similar underlying late-stage pathology as retinitis pigmentosa, hence the mechanism of action of KIO-301 could potentially provide a similar benefit to these patients.accomplish this by leveraging ourare also planning to develop KIO-104 for the treatment of Posterior Non-Infectious Uveitis, a rare T cell-mediated, intraocular inflammatory disease. KIO-104, which uses the same active compound in KIO-101, but formulated for intravitreal delivery, is ideally suited to suppress overactive T-cell activity to treat the underlying condition. KIO-101 is an ophthalmic topical eyedrop formulation of a novel and potent inhibitor of dihydroorotate dehydrogenase (DHODH). Data from a previous Phase 1b/2a study, reported in October 2022, showed that a single injection of KIO-104 decreased intraocular inflammation and improved visual acuity significantly for the duration of the study. Further, there is evidence of reduced Cystoid Macular Edema from baseline.proprietary platform technologies, crosslinked thiolated carboxymethyl hyaluronic acidadditional assets, KIO-101 and KIO-201, that the Company is currently seeking to partner. KIO-101 is a next generation, non-steroidal, immuno-modulatory, small-molecule inhibitor of Dihydroorotate Dehydrogenase (“CMHA-S”DHODH”) with what we believe to be best-in-class picomolar potency and iontophoresis drug delivery system. Our first platforma validated immune modulating mechanism designed to overcome the off-target side effects and safety issues associated with commercially available DHODH inhibitors. KIO-201 is based on CMHA-S, a modified form of the natural polymer hyaluronic acid, (“HA”), which is a geldesigned 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 possesses unique physicalhelp hydrate and chemical properties such as hydrating and promoting wound healing when applied toprotect the ocular surface. We believe that the ability of CMHA-S to adhere longer to the ocular surface, while hydrating and promoting wound healing, makes it well-suited for treating various ocular surface injuries.Hyaluronic acid iscompleted a naturally occurring polymer that is important in many physiological processes, including wound healing, tissue homeostasis, and joint lubrication. To create this hydrogel, the HA is modified to create CMHA that is then crosslinked together through the thiol groups to CMHA-S. Crosslinking slows degradation of the HA backbone and provides a matrix for incorporating therapeutic agents. Variations in the number of thiols per molecule, the molecular weight of the polymer, the concentration of the polymer, the type of crosslinking, and incorporation of active ingredients, provides a highly versatile platform that can be tailored to a specific application and formulated as eye drops, gels, or films.Our first CMHA-S-based product candidate, the EyeGate OBG, is a topically applied 0.75% CMHA-S eye drop formulation that has completed its first-in-manPhase 2 clinical trial. Preclinical studies suggest that the specific CMHA-S chemical modification comprising the EyeGate OBG creates a favorable set of attributes, including prolonged retention time on the ocular surface, and a smooth continuous clear barrier without blur that can minimize mechanical lid friction, reduce repeat injury, and mechanically protect the ocular surface, allowing accelerated corneal re-epithelization. It is intended for the management of corneal epithelial wounds/defects and epitheliopathies, and to accelerate re-epithelization of the ocular surface following surgery, infections, and other traumatic and non-traumatic conditions.EyeGate OBG is being developed pursuant to ade novo 510(k) regulatory pathway for devices submitted for marketing clearance to the U.S. Food and Drug Administration, or FDA. We believe that EyeGate OBG is the first and only eye drop being developed in the U.S. to target acceleration of corneal re-epithelization. We anticipate initiating a second trial in the fourth quarter of 2017, for which we expect to report top-line data in the first quarter of 2018. Assuming positive results from this trial and a subsequent pivotal trial we expect to initiate in the second quarter of 2018 and to report topline data from in the third quarter of 2018, we plan to filede novo 510(k) and CE mark applications in the fourth quarter of 2018 with potential commercial launch in 2019.The same crosslinked HA in EyeGate OBG is presently available commercially as a veterinary device indicated for use in the management of superficial noninfectious corneal ulcers. Manufactured by SentrX Animal Care and sold in the U.S. by Bayer Animal Health as Remend® Corneal Repair, the product has been used successfully for five years in dogs, cats and horses, without adverse effects. The composition of the veterinary product is identical to that of the EyeGate OBG. We have obtained a license from BioTime, Inc. for the exclusive worldwide right to commercialize CMHA-S for ophthalmic treatments in humans. We paid BioTime $50,000, and are required to pay royalties to BioTime based on revenue relating to any product incorporating the CMHA-S technology. Our license agreement expires when patent protection for the CMHA-S technology lapses, which is expected to occur in the U.S. in 2027. We do not have the rights to the CMHA-S platform for animal health or veterinary medicine. 19Our other product candidate from our second platform is EGP-437, a reformulated topically active corticosteroid, dexamethasone phosphate, delivered into the ocular tissues through our proprietary innovative iontophoresis drug delivery system, the EyeGate® II Delivery System. The EyeGate® II Delivery System features a compact and easy-to-use device that we believe has the potential to deliver drugs non-invasively and quickly into the ocular tissues through the use of iontophoresis, which can accelerate the onset of action, dramatically reduce dosing frequency compared to regular eye drops, and sustain the duration of therapeutic effect. Iontophoresis employs the use of a low electrical current that promotes the migration of a charged drug substance across biological membranes. The EyeGate® II Delivery System is easy-to-use, taking only a few minutes to deliver medication. More than 2,400 treatments have been administered to date using our EyeGate® II Delivery System in clinical trials. EGP-437 is currently in clinical development for the treatment of various inflammatory conditions of the eye. Current programs include the treatment of ocular inflammation and pain in post-surgical cataract patients with a Phase 2b trial commencing in the third quarter of 2017, and the treatment of uveitis, a debilitating form of intraocular inflammation of the anterior portion of the uvea, such as the iris and/or ciliary body, with a Phase 3 trial currently enrolling. We expect to report top-line data from the cataract surgery trial in the first quarter of 2018, and for the uveitis trial in the second quarter of 2018.EGP-437 is being developed pursuant to a new drug application, or NDA, under the Section 505(b)(2) pathway, which enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing product, or published literature, in support of its NDA. In the case of EGP-437, the existing reference product is dexamethasone eye drops. Based on guidance provided by the FDA, we believe that if the planned confirmatory Phase 3 trial of EGP-437 in anterior uveitis meets non-inferiority criteria, the results of that trial, along with data from our previously completed Phase 3 trial in anterior uveitis, will be sufficient to support a NDA filing in the second half of 2018. We also believe, based on guidance provided by the FDA, that the design of the ongoing confirmatory Phase 3 anterior uveitis trial is acceptable and that the nonclinical work completed to date is sufficient to support a NDA filing.Medical products containing a combination of new drugs, biological products, or medical devices may be regulated as “combination products” in the U.S. A combination product generally is defined as a product comprised of components from two or more regulatory categories, such as drug/device, device/biologic, or drug/biologic. Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic, or device. In order to facilitate premarket review of combination products, the FDA designates one of its centers to have primary jurisdiction for the premarket review and regulation of both components. We expect that the Center for Drug Evaluation and Research will have primary jurisdiction over our EGP-437 combination product. The determination whether a product is a combination product or two separate products is made by the FDA on a case-by-case basis. We have had discussions with the FDA about the status of our EGP-437 combination product as a combination product and we have been advised that the FDA considers our product a combination drug/device.We have entered into two exclusive global license agreements with subsidiaries of Valeant Pharmaceuticals International, Inc. (“Valeant”Persistent Corneal Epithelial Defects ("PCEDs"), through which we have granted Valeant exclusive, worldwide commercial and manufacturing rights to the combination of our EyeGate® II Delivery System and our EGP-437 product in the fields of uveitis and ocular iontophoretic treatment for post-operative ocular inflammation and pain in ocular surgery patients, as well as a right of last negotiation to license the combination product for other indications. We are responsible for the clinical development of the product in the U.S. for the indications licensed, together with the costs associated therewith. Valeant has the right to develop the product in the fields outside of the U.S. and has agreed to fund 100% of any costs associated therewith.2017,2023, our losses from operations have aggregated $89.0$144.7 million. Our Net Lossnet loss was approximately $10.4$10.2 million and $9.6$11.1 million for the nine months ended September 30, 20172023 and 2016,2022, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continueEGP-437 Product for the treatment of uveitis as well as other indications, and the EyeGate OBG, our lead product candidate for corneal epithelial defects, and any other product candidates we advance to clinical development.candidates. If we obtain regulatory approval for EyeGate OBG,our product candidates, we expect to incur significant expenses in order to create an infrastructure to support thetheir commercialization of EyeGate OBG including sales, marketing, and distribution functions.20were formed in Delaware on December 26, 2004. We were originally incorporated in 1998 under the namerecently made a strategic decision to stop development leading to commercialization 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.KIO-101 and became a subsidiary of EyeGate Pharmaceuticals, Inc. Jade was formed in Delaware on December 31, 2012. EyeGate Pharma S.A.S.KIO-201 and Jade are wholly-owned subsidiaries of EyeGate Pharmaceuticals, Inc.21Financial OverviewRevenuesTo date, we have recognized Collaboration Revenue from several U.S. government grants made to Jade for ocular therapeutic research (collectively, the “U.S. Government Grants”). While we receive cash amounts from Valeant as progress payments toward milestones, these are not yet recorded as Revenue. See Note 2, “Significant Accounting Policies”. We expectseeking partnership to continue to incur significant operating losses as we fund research and clinical trial activities relating to our ocular therapeutic assets, consisting of EGP-437, our iontophoretic delivery technology, and our CMHA-S-based products. There can be no guarantee that the losses incurred to fund these activities will succeed in generating revenue.Research and Development ExpensesWe expense all research and development expenses as they are incurred. Research and development expenses primarily include: ·non-clinical development, preclinical 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.Substantially all of our research and development expenses to date have been incurred in connection with our EGP-437 Combination Product and the EyeGate OBG. We expect our research and development expenses to increase for the near future as we advance EGP-437 and EyeGate OBG 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 EGP-437 Combination Product and EyeGate OBG. 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 including, 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 ExpensesGeneral 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 CMHA-S based products, which could lead to an increase in these expenses.Total Other Income (Expense)Total other income (expense) consists primarily of interest income we earn on interest-bearing accounts, and interest expense incurred on our outstanding financing arrangements.22Critical Accounting Policies and Significant Judgments and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our 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 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 financial statements, as well as the 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 critical accounting policies are discussed in more detail in Note 2 to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the policies below are particularly important in evaluating our financial condition and results of operations.Accrued Research and Development Expenses part of the process of preparing financial statements, we are required to estimate and accrue research and development expenses. This process involves the following: ·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 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, preclinical 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, preclinical 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 of September 30, 2023, 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.Stock-Based CompensationWe have issued options to purchase our common stock and restricted stock. Stock-based compensation cost is measured at the grant date based on theestimated fair value of the awardKIO-101 and is recognized as expense over the requisite service/vesting period. Determining the appropriate fairKIO-201 assets was less than their carrying 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.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 differentresulting in the future.
realization of an impairment loss of $1.9 million.23Revenue RecognitionThe Valeant Agreements entitle us to initial up-front payments, which we received in 2015We also recently expanded our 301 program into two new diseases, Choroideremia and 2017, and recorded as Deferred Revenue on our Condensed Consolidated Balance Sheet, as well as certain additional payments, based on R&D progress and paid over several years. Under the Valeant Agreements, there are R&D Milestones, or deliverables, for which we receive additional payments. We receive payments both when we cross certain thresholds on the path to each Milestone (each, a “Progress Payment”), as well as once we finally achieve each Milestone. We are entitled to retain allStargardt disease.these payments once received. We defer all Progress Payments and capitalize these payments on our Condensed Consolidated Balance Sheet as Deferred Revenue, and we recognize these payments as Revenue once we achieve the Milestone to which the Progress Payment relates. The upfront payments are recognized as Revenue ratably as we complete each of the R&D Milestones, the amount recognized being the amount of the upfront payment times the percentage represented by the proportionate share of fair value of each Milestone relative to the total fair value of the all the R&D Milestones. Accordingly, the Deferred Revenue account on our Condensed Consolidated Balance Sheet is reduced as Revenue is recognized in our Condensed Consolidated Statement of Operations and Comprehensive Loss.We receive U.S. Government Grant funds from two sources: the U.S. Department of Defense (“DoD”) and the National Science Foundation (“NSF”). We are paid by the DoD after we perform specified, agreed-upon research, and we record these grant funds as Revenue as we perform the research. We are generally paid by the NSF every six months, before we perform specified, agreed-upon research. The NSF funds are recorded on the Condensed Consolidated Balance Sheet as Deferred Revenue when invoiced, and recognized as Revenue ratably as the research is performed, typically over a six-month period. The U.S. Government Grants from the DOD and NSF have been fully funded as of September 30, 2017.Recent Accounting PronouncementsIn May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606), as subsequently amended, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract, and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented, or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, the FASB deferred the effective date of this guidance until January 1, 2018. We are not early adopting this standard. Our sole revenue is from our Valeant Agreements and U.S. Government Grants.We have commenced our implementation analysis, including identification of revenue streams and reviews of customer contracts under ASU 2014-09’s framework. Our analysis includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under this new standard. We have reviewed our contracts with Valeant. ASU 2014-09 requires increased disclosure, which in turn is expected to require certain new processes. The determination of the impact of adoption of ASU 2014-09 on our financial condition, results of operations, cash flows and disclosures, is ongoing, and, as such, we are not able to reasonably estimate the effect that the adoption of the new standard will have on our financial statements. Based on our preliminary assessment of this ASU, we anticipate that the adoption of the new standard will have a material effect. We expect to use the modified retrospective transition method, meaning the cumulative effect of applying the new guidance is recognized at the date of initial application as an adjustment to the opening accumulated deficit balance. We continue to monitor additional changes, modifications, clarifications or interpretations being undertaken by the FASB, which may impact our current conclusions.24Other InformationJOBS ActOn April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more, (b) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering, or December 31, 2020, (c) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.20172023, and 201620172023 and 2016: Three Months Ended September 30, 2017 2016 Change Collaboration Revenue $ 74,696 $ 274,289 $ (199,593 ) Operating Expenses: Research and Development (3,175,978 ) (2,449,445 ) (726,533 ) General and Administrative (1,038,822 ) (1,201,804 ) 162,982 Total Operating Expenses (4,214,800 ) (3,651,249 ) (563,551 ) Other (Expense) Income, Net: (264 ) 298 (562 ) Net Loss $ (4,140,368 ) $ (3,376,662 ) $ (763,706 ) Collaboration Revenue. Collaboration Revenue2022:2023 2022 Change Operating Expenses: General and Administrative $ 1,415,844 $ 2,033,367 $ (617,523) Research and Development 1,085,010 1,332,153 (247,143) In-Process R&D Impairment 1,904,314 — 1,904,314 Change in Fair Value of Contingent Consideration 1,513,400 337,515 1,175,885 Total Operating Expenses 5,918,568 3,703,035 2,215,533 Other Income (Expense), Net 155,627 (1,416,304) 1,571,931 Net Loss $ (5,762,941) $ (5,119,339) $ (643,602) $0.075primarily due to a decrease in professional fees of $0.4 million for consultants used during the three months ended September 30, 2017, compared2022 for interim accounting services during the transition of accounting staff, SEC filing services and legal fees, a net decrease in expenses of $0.1 million related to $0.274the settlement of an insurance claim and $0.1 million in costs related to the issuance of warrants expensed in 2022.2016, reflecting the Collaboration Revenue we generate from the U.S. Government Grants in accordance with our contracted agreements. These grants were fully funded2023 as of September 30, 2017.Research and Development Expenses. Research and Development Expenses were $3.176 million forcompared to the three months ended September 30, 2017, compared to $2.449 million2022, together comprising a decrease of approximately $1.4 million. This decrease was partially offset by an increase in clinical development expenses for KIO-101 and KIO-301 clinical trial activities during the three months ended2016.2023 totaling approximately $0.4 million, as well as an increase of $0.1 million in costs to terminate the Mediolanum licensing agreement and an increase of $0.1 million in salaries and other corporate expenses primarily related to scientific advisory fees. Additionally, there was a decrease of the offsetting R&D expense credit by approximately $0.5 million in 2023 due to reduced development spend.$0.727$1.9 million was primarily due to increasesa change in clinicalthe estimated fair value of KIO-101 and other activityKIO-201 that resulted in impairment. This was caused by a strategic decision to stop internal development activities leading to commercialization. Continued development will be dependent on a partnership.Phase 2b trialprobability of success for post-cataract surgery inflammationthe Bayon milestone payment.painreclassification to equity was $1.4 million and the EyeGate OBG, partially offset bywas primarily due to a decrease in costs related to the EGP-437 Phase 3 trial for the treatmentour stock price over this period. In addition, there was an increase in net interest income of anterior uveitis.General and Administrative Expenses. General and Administrative Expenses were $1.039$0.2 million for the three months ended September 30, 2017, compared to $1.202 million for the three months ended September 30, 2016. The decrease of $0.163 million was mainly due to lower professional fees incurred during the third quarter of 2017 as compared to the third quarter of 2016.
increased interest rates.2520172023, and 201620172023 and 2016: Nine Months Ended September 30, 2017 2016 Change Collaboration Revenue $ 407,518 $ 508,889 $ (101,371 ) Operating Expenses: Research and Development (7,253,171 ) (5,844,951 ) (1,408,220 ) General and Administrative (3,540,857 ) (4,309,737 ) 768,880 Total Operating Expenses (10,794,028 ) (10,154,688 ) (639,340 ) Other (Expense) Income, Net: (375 ) 3,423 (3,798 ) Net Loss $ (10,386,885 ) $ (9,642,376 ) $ (744,509 ) Collaboration Revenue. Collaboration Revenue2022:2023 2022 Change Operating Expenses: General and Administrative $ 3,782,596 $ 5,500,036 $ (1,717,440) Research and Development 2,915,392 2,607,308 308,084 In-Process R&D Impairment 1,904,314 — 1,904,314 Executive Severance — 962,833 (962,833) Change in Fair Value of Contingent Consideration 1,865,945 604,348 1,261,597 Total Operating Expenses 10,468,247 9,674,525 793,722 Other Income (Expense), Net 222,957 (1,410,639) 1,633,596 Net Loss $ (10,245,290) $ (11,085,164) $ 839,874 $0.408primarily due to a decrease in professional fees of $1.4 million for consultants used during the nine months ended September 30, 2017, compared2022 for interim accounting services and SEC filing services during the transition of accounting staff. Additionally, there was a net decrease in expenses of $0.1 million related to $0.509a settlement of an insurance claim, $0.1 million forof facilities and IT costs related to the nine months ended September 30, 2016, reflecting the Jade Acquisition in the first quarterallocation of 2016expenses to R&D, and the accompanying Collaboration Revenue we generate from the U.S. Government Grants in accordance with our contracted agreements. These grants were fully funded asstock compensation related expense of September 30, 2017. Research and Development Expenses were $7.253 million for the nine months ended September 30, 2017, compared to $5.845 million for the nine months ended September 30, 2016. The increase of $1.408$0.3 million was primarily due to increases of $1.1 million in clinical and other activityexpenses related to the Phase 2bKIO-301 and KIO-101 clinical trial for post-cataract surgery inflammationactivities and pain, the EyeGate OBG, as well as$0.2 million in salaries and personnel costs resulting from non-executive severance expenses related costs from the expansion of operations following the Jade Acquisitionto staffing changes in the first quarterclinical team. Additionally, other corporate expenses increased by approximately $0.1 million primarily related to scientific advisory fees and an increase of 2016.$0.1 million in facilities and IT related to allocated R&D expenses which were previously unallocated and included entirely in general and administrative expenses. These increases were partially offset by a decrease in clinical activitypreclinical work related to KIO-100 and drug manufacturing fill and finish for KIO-300 in 2022 of $1.3 million.EGP-437 Phase 3 trialfair value of KIO-101 and KIO-201 resulting from a strategic decision to pursue a partnership for the treatmentcontinued development of anterior uveitis.General and Administrative Expenses. General and Administrative Expenses were $3.541 million for the nine months ended September 30, 2017, compared to $4.310 million for the nine months ended September 30, 2016. these programs.$0.769$1.0 million was mainly due to decreasesseverance pay expensed at the time of termination in professional fees, including costs incurred duringMarch 2022, but paid over the first quarter18 month term of 2016the agreement.Jade Acquisition.
probability of success for the Bayon milestone payment.26Since becoming acompanyor private equity, debt financings, license and development agreements, or other sources, which may include collaborations with third parties.2015,increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, or making capital expenditures. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to us. Although historically we have financed our operations from four registered offerings of our Common Stock and Convertible Preferred Stock, payments from our Valeant License Agreements and the U.S. Government Grants, and sales through our At The Market Offering Agreement. From inception through September 30, 2017, we have raised a totalbeen successful at raising capital, most recently raising net proceeds of approximately $84.5$5.6 million from such sales of our equity and debt securities, both as a public company and prior to our IPO, as well as approximately $10.8 million in payments received under our license agreements and U.S. Government Grants.On February 21, 2017, we received the initial $4.0 million upfront payment from Valeant as provided under the New Valeant Agreement related to our EGP-437 Product in the field of ocular iontophoretic treatment for post-operative ocular inflammation and pain in ocular surgery patients. Through September 30, 2017, we have received cash payments of $9.653 million under the Valeant Agreements, which are presented as Deferred Revenue on our Condensed Consolidated Balance Sheet.On May 24, 2016, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Sales Agent”), to create an at the market equity program under which we can from time to time offer and sell up to 1,319,289 shares of its Common Stock through the Sales Agent. Effective as of June 26, 2016, we halted indefinitely all future offers and sales of our Common Stock pursuant to the ATM Agreement. On June 30, 2016, we closed on the sale of our equity securities in connection with a registered direct offering, described below, and as a result, we were restricted from issuing any shares pursuant to the ATM Agreement for a period of 90 days following June 30, 2016. This restriction lapsed on September 28, 2016. On February 21, 2017, we authorized the Sales Agent to restart sales under the ATM Agreement for maximum aggregate proceeds of up to $3,285,798. During the first quarter of 2017, we sold 642,150 shares of Common Stock under this agreement for total net proceeds to us from this offering, after deducting the placement agent fees and offering expenses, of approximately $1.8 million. We did not sell any shares of Common Stock pursuant to the ATM Agreement during the second or third quarters of 2017. On June 14, 2017, we closed on the sale of our equity securities in connection with a public offering described below,that closed on June 6, 2023, and have approximately $9.6 million available from an equity line of credit (subject to certain limitations), additional capital may not be available on terms favorable to us, if at all. We do not know if any future offerings will succeed. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. These conditions raise substantial doubt about our ability to continue as a result,going concern. We will need to generate significant revenue to achieve profitability, and we are restricted from issuing any shares pursuant to the ATM Agreement for a period of twenty-four months following the closing date of the offering. However, this restriction is suspended for any sale of shares of Common Stock under the ATM Agreement that is above $3.00 per share.On June 14, 2017, we completed a public offering of 5,336,667 shares of Common Stock and 1,995 shares of Series B Preferred Stock (convertible into 1,330,000 shares of Common Stock), along with warrants to purchase 6,666,667 shares of Common Stock. The total net proceeds to us from this offering, after deducting the placement agent fees and offering expenses, were approximately $8.8 million. may never do so.2017, a holder of the Series B Preferred Stock2023, we had converted 1,395 shares of Series B Preferred Stock into an aggregate of 930,000 shares of Common Stock.At September 30, 2017, we hadunrestricted cash and cash equivalents totaling $9,244,570. sources and uses of cash for the nine months ended September 30, 2017 and 2016: Nine Months Ended September 30, 2017 2016 Net Cash Used in Operating Activities $ (5,015,231 ) $ (6,361,542 ) Net Cash Provided by Investing Activities - 149,746 Net Cash Provided by Financing Activities 10,620,417 3,501,090 Comparison of Nine Months Ended September 30, 2017 and 20162023 2022 Net Cash Used in Operating Activities $ (6,975,610) $ (8,299,133) Net Cash Provided by Investing Activities $ — $ 6,375 Net Cash Provided by Financing Activities $ 6,452,487 $ 5,377,719 was $5.015decreased $1.3 million for the nine months ended September 30, 2017, comparedprimarily due to $6.362a net decrease in changes in assets and liabilities of $1.4 million for the nine months ended September 30, 2016. The primary usedue primarily to timing of Cash was to fund operating lossespayments and receipt of $10.387approximately $1.2 million in 2017, offset by the positive impact of receivingR&D tax credits during 2023.payments from Valeant of $5.428 million and the U.S. Government, some of which is classified as Deferred Revenue on the Condensed Consolidated Balance Sheet, and some of which is included in Collaboration Revenue in the Condensed Consolidated Statement of Operations and Comprehensive Loss.Investing Activities. There was no net cash provided by investing activities for the nine months ended September 30, 2017, comparedis due to $0.150 million for the nine months ended September 30, 2016. On March 7, 2016, we acquired Jade Therapeutics, Inc., a Common Stock and Cash transaction that required the usesale of $0.186 millionan asset in cash (net of cash acquired). We received $10.620 million The increase in cash from financing activities for the nine months ended September 30, 2017,is primarily due to receiving net proceeds of approximately $0.4 million from equity line of credit share purchases, $0.3 million from warrant exercises and $5.6 million in net proceeds from a public offering that closed on June 6, 2023, compared to $3.501$5.3 million for the nine months ended September 30, 2016. This increase of $7.119 million was mainly due toin net proceeds received from sales under our ATM Agreement of $1.824 million, as well as net proceeds received from oura public offering in 2022 that closed on July 26, 2022. EGP-437 Combination Product and our CMHA-S-based product pipeline areis still in various stages of preclinical and clinical development. We expect to continue to incur significant expenses and increasing operating losses for the nearforeseeable future. We anticipate that our expenses will increase substantially if and as we:·seek marketing approval for our EGP-437 Combination Product and our CMHA-S-based products;·establish a sales and marketing infrastructure to commercialize our CMHA-S-based products in the United States, if approved;·add operational, financial and management information systems and personnel, including personnel to support our product development and future commercialization efforts.Stockholdersstockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a Common Stockholder.holders of common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, including our EGP-437 ProductKIO-301, KIO-101, KIO-104 and our CMHA-S-basedKIO-201 products, or grant licenses on terms that may not be favorable to us. IfWe have currently stopped development work on KIO-101 and KIO-201 and are seeking partnership for any further development of those programs. For our active programs, if we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market the EGP-437 ProductKIO-301 and CMHA-S-basedKIO-104 products, or any other products that we would otherwise prefer to develop and market ourselves.2017 and cash2023, we expect to receive over the remainder of 2017, we believe that we will have sufficient cash to fund planned operations for approximately eight months.into May 2024 with the ability to extend cash runway by drawing on the remaining $9.6 million available through the equity line of credit, subject to certain limitations on the timing and amount of shares that may be sold pursuant to that arrangement. However, the acceleration or reduction of cash outflows by management can significantly impact the timing for raising additional capital to complete development of ourits products. To continue development, we will need to raise additional capital through debt and/or equity financing, or access additional funding through grants. Although historically we completed the IPO, follow-on, registered direct offering, public offering, and sales under the ATM Agreement,have been successful at raising capital, additional capital may not be available on terms favorable to us, if at all. On May 6, 2016, the SEC declared effective our registration statement on Form S-3, registering a total of $100,000,000 of our securities for sale to the public in what is known as a “shelf offering”. We do not know if ourany future offerings pursuant to our shelf registration statement will succeed. Accordingly, no assurances can be given that management will be successful in these endeavors. Our recurring losses from operations have caused management to determine there is substantial doubt about our ability to continue as a going concern. Our Unaudited Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern.Off-Balance Sheet ArrangementsWe hadoff-balance sheet arrangements as of September 30, 2017.
material changes from such disclosures.28Contractual ObligationsThe following table summarizes our contractual obligations as of September 30, 2017: Total 1-3 years Leases (1) $ 374,496 $ 180,751 $ 193,745 $ - Licensing Agreement (2) 257,500 52,500 105,000 100,000 Purchase Obligations (3) 1,223,772 1,223,772 - - Total (4) $ 1,855,768 $ 1,457,023 $ 298,745 $ 100,000 (1)Lease obligations reflect our obligation to make payments in connection with operating leases for our office space and capital leases with respect to laboratory equipment.(2)Licensing Agreement obligations represent our commitments under license agreements, including those made by us under our license agreements with the University of Miami School of Medicine, the University of Utah Research Foundation, and BioTime.(3)Purchase Obligations relate to a Master Service Agreement with a contract research organization (“CRO”). The CRO will provide clinical research services for Phase 3 trials in patients with non-infectious anterior segment uveitis.(4)This table does not include (a) anticipated expenditures under supply agreements for periods for which we are not yet bound under binding purchase orders, and (b) contracts that are entered into in the ordinary course of business that are not material in the aggregate in any period presented above.President and Chief Executive Officer and Executive Vice President of Finance, to allow timely decisions regarding required disclosures.President and Chief Executive Officer and our Interim Chief Financial Officer,Executive Vice President of Finance, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.2023. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and our management necessarily was required to apply its judgment in evaluating and implementing our disclosure controls and procedures. Based upon the evaluation described above and material weaknesses identified in our President andForm 10-K as of December 31, 2022, our Chief Executive Officer and our Interim Chief Financial OfficerExecutive Vice President of Finance have concluded that they believe that our disclosure controls and procedures were not effective as of the end of the period covered by this report.the Interim Chief Financial Officer, hasExecutive Vice President of Finance, have evaluated whether any change in our internal control over financial accounting and reporting occurred during the third quarterthree months ended September 30, 2017. Management2023 and concluded that no changes did occur. These changes were made to address the material weaknesses identified in the Form 10-K for the fiscal year ended December 31, 2022. We have identified and implemented and continue to implement, certain remediation efforts to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures. The following remediation efforts are underway:occurred duringon all open contract commitments, which is being shared with management to verify the three months ended September 30, 2017 that have materially affected, or are reasonably likelycompleteness and ensure accuracy of financial reporting.materially affect,enhance our internal control over financial accountingreporting, we are still in the process of implementing, documenting and reporting. Additionally, ourtesting these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the effectiveness and sustainability of these procedures. We will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management does not anticipate the adoptionhas concluded, through testing, that these controls are operating effectively.Item 1A ofof“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 23, 2017, contains risk factors identified2022, each of which is incorporated herein by the Company. There have been no material changes to the risk factors we previously disclosed. Our operationsreference and which could also be affected by additional factors thatmaterially affect our business, financial condition or future results. The risks described herein and in those filings are not presentlythe only risks facing our Company. Additional risks and uncertainties not currently known to us or by factors that we currently considerdeem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Except as set forth below, we do not believe that there have been any material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.business.common stock must be at least $1.00 per share for a minimum of 10 consecutive trading days during this 180-day compliance period, unless the Nasdaq staff exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).ProceedsDisclosures.None.Exhibits.30Date: November 14, 20179, 2023By: /s/ Stephen FromBrian M. Strem, Ph.D.
(Principal executive officer)Date: November 14, 20179, 2023By: /s/ Sarah RomanoMelissa Tosca Interim Chief Financial Officer
(Principal financial and accounting officer)31ExhibitExhibit
NumberDescription of Exhibit 31.1**10.1* 10.2***† 10.3*** 31.1 31.2**31.232.1** 32.2** 101.INS XBRL Instance Document (embedded within the Inline XBRL document) 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Labels Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document **This certification shall not be deemed “filed” for purposes of Section 18 of104 Cover Page Interactive Data File (embedded within the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act.32Inline XBRL document)