UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission File Number: 001-38803

 

Hoth Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada   82-1553794
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)

 

1 Rockefeller Plaza, Suite 1039    
New York, NY   10020
(Address of principal executive offices)   (Zip Code)

 

(646) 756-2997

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which
registered
Common Stock, $0.0001 par value   HOTH   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☐
Non-accelerated filer ☒   Smaller reporting company ☒
      Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of the issuer’s common stock, $0.0001 par value per share, outstanding at May 10, 2022 was 32,210,576.

 

 

 

 

 

 

Table of Contents

 

  Page No.
PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 1
     
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (Unaudited) 2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited) 3
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited) 4
     
  Notes to the Condensed Consolidated Financial Statements (Unaudited) 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
     
Item 4. Controls and Procedures 15
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 16
     
Item 1A. Risk Factors 16
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
     
Item 3. Defaults Upon Senior Securities 16
     
Item 4. Mine Safety Disclosures 16
     
Item 5. Other Information 16
     
Item 6. Exhibits 17
     
Signatures 18

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

 

  ● our business strategies;

 

  ● the timing of regulatory submissions;

 

  ● our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain;

 

  ● risks relating to the timing and costs of clinical trials and the timing and costs of other expenses;

 

  ● risks related to market acceptance of products;

 

  ● the ultimate impact of the current Coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole;

 

  ● intellectual property risks;

 

  ● risks associated with our reliance on third party organizations;

 

  ● our competitive position;

 

  ● our industry environment;

 

  ● our anticipated financial and operating results, including anticipated sources of revenues;

 

  ● assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches;

 

  ● management’s expectation with respect to future acquisitions;

 

  ● statements regarding our goals, intentions, plans and expectations, including the introduction of new products and markets; and

 

  ● our cash needs and financing plans.

 

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

 

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

 

ii

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

HOTH THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,
2022		   December 31,
2021		 
   (Unaudited)     
ASSETS        
Current assets        
Cash  $6,380,782   $8,538,270 
Marketable equity securities, at fair value   1,914,785    1,892,837 
Prepaid expenses   189,689    93,972 
Note receivable - current   50,000    50,000 
Total current assets   8,535,256    10,575,079 
           
Investment in joint ventures at fair value   410,000    410,000 
Total assets  $8,945,256   $10,985,079 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable  $699,811   $360,964 
Accrued expenses   45,952    426,823 
Accrued license fee - current portion   80,000    80,000 
Total current liabilities   825,763    867,787 
           
Accrued license fee - less current portion   235,000    235,000 
Total liabilities   1,060,763    1,102,787 
           
Commitments and contingencies   
-
    
-
 
           
Stockholders’ equity          
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2022 and  December 31, 2021, respectively   
-
    
-
 
Series A Convertible Preferred Stock, $0.0001 par value,  5,000,000 shares designated; 0 shares issued and outstanding at March 31, 2022 and  December 31, 2021   
-
    
-
 
Common stock, $0.0001 par value, 75,000,000 shares authorized, 23,975,098 and 23,974,546 shares issued and outstanding at March 31, 2022 and  December 31, 2021, respectively   2,398    2,398 
Additional paid-in-capital   44,166,909    43,589,471 
Accumulated deficit   (36,298,670)   (33,727,163)
Accumulated other comprehensive gain   13,856    17,586 
Total stockholders’ equity   7,884,493    9,882,292 
Total liabilities and stockholders’ equity  $8,945,256   $10,985,079 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

 

 

HOTH THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   Three Months Ended
March 31,		 
   2022   2021 
         
Operating costs and expenses        
Research and development  $948,379   $1,533,105 
Research and development - licenses acquired (including stock-based compensation)   41,272    93,747 
Compensation and related expenses (including stock-based compensation)   957,769    1,652,648 
Professional fees (including stock-based compensation)   486,701    801,268 
Rent   13,896    7,439 
Other general and administrative expenses   212,677    180,903 
Total operating expenses   2,660,694    4,269,110 
Loss from operations   (2,660,694)   (4,269,110)
           
Other income          
Gains on marketable securities   47,502    19,410 
Other income (loss), net   41,685    (11,984)
Total other income   89,187    7,426 
           
Net loss  $(2,571,507)  $(4,261,684)
Other comprehensive loss          
Foreign currency translation adjustment   (3,730)   (6,474)
Total comprehensive loss  $(2,575,237)  $(4,268,158)
           
Net loss per share applicable to common stockholders - basic and diluted  $(0.11)  $(0.24)
Weighted average number of common shares outstanding, basic and diluted   23,974,828    17,677,443 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 

HOTH THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

For the Three Months Ended March 31, 2022

 

   Common Stock   Additional
Paid-in		   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Income (Loss)   Equity 
Balance at  December 31, 2021   23,974,546   $2,398   $43,589,471   $(33,727,163)  $17,586   $9,882,292 
Stock-based compensation   552    
-
    577,438    
-
    
-
    577,438 
Cumulative translation adjustment   -    
-
    
-
    
-
    (3,730)   (3,730)
Net loss   -    
-
    
-
    (2,571,507)   
-
    (2,571,507)
Balance at March 31, 2022   23,975,098   $2,398   $44,166,909   $(36,298,670)  $13,856   $7,884,493 

 

For the Three Months Ended March 31, 2021

 

   Common Stock   Additional
Paid-in		   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Income (Loss)   Equity 
Balance at December 31, 2020   13,438,535   $1,343   $24,073,059   $(19,413,458)  $(15,351)  $4,645,593 
Issuance of common stock, common stock warrants and prefunded warrants (net of offering costs of $1,491,600)   6,826,962    683    13,506,949    
-
    
-
    13,507,632 
Issuance of common stock and warrants (net of offering costs of $435,000)   2,475,248    248    4,564,753    
-
    
-
    4,565,001 
Warrant exercise   358,745    36    358,709    
-
    
-
    358,745 
Stock-based compensation   2,634    -    1,126,038    
-
    
-
    1,126,038 
Cumulative translation adjustment   -    
-
    
-
    
-
    6,474    6,474 
Net loss   -    
-
    
-
    (4,261,684)   
-
    (4,261,684)
Balance at March 31, 2021   23,102,124   $2,310   $43,629,508   $(23,675,142)  $(8,877)  $19,947,799 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

HOTH THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three Months Ended
March 31,		 
   2022   2021 
Cash flows from operating activities        
Net loss  $(2,571,507)  $(4,261,684)
Adjustments to reconcile net loss to net cash used in operating activities:          
Research and development-acquired license, expensed   25,000    62,545 
Stock-based compensation   577,438    1,126,038 
Realized loss on marketable securities   
-
    (33,330)
Unrealized loss (gain) on marketable securities   (21,949)   17,930 
Changes in operating assets and liabilities:          
Prepaid expenses   (92,556)   (88,020)
Accounts payable   (52,915)   453,930 
Net cash used in operating activities   (2,136,489)   (2,722,591)
           
Cash flows from investing activities          
Purchase of research and development licenses   (25,000)   (69,545)
Sale of marketable securities   
-
    1,026,755 
Net cash (used in) provided by investing activities   (25,000)   957,210 
           
Cash flows from financing activities          
Proceeds from issuance common stock, common stock warrants and prefunded warrants, net of offering cost   
-
    13,507,632 
Proceeds from issuance common stock and warrants, net of offering cost   
-
    4,565,001 
Proceeds from exercise of warrants   
-
    358,745 
Net cash provided by financing activities   
-
    18,431,378 
           
Effect of exchange rate changes on cash and cash equivalents   4,001    6,474 
           
Net change in cash   (2,161,489)   16,665,997 
Cash, beginning of period   8,538,270    2,629,670 
           
Cash, end of period  $6,380,782   $19,302,141 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1-Organization and description of business operations

 

Hoth Therapeutics, Inc. (together with its wholly-owned subsidiary, Hoth Therapeutics Australia Pty Ltd., the “Company”) was incorporated under the laws of the State of Nevada on May 16, 2017. The Company is a clinical-stage biopharmaceutical company focused on developing new generation therapies for unmet medical needs. The Company is focused on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer; (ii) a treatment for mast-cell derived cancers and anaphylaxis; (iii) a treatment for traumatic brain injury and ischemic stroke; and (iv) a treatment and/or prevention for Alzheimer’s or other neuroinflammatory diseases. The Company also has assets being developed for (i) atopic dermatitis (also known as eczema); (ii) a treatment for asthma and allergies using inhalational administration; and (iii) a treatment for inflammatory bowel diseases. In addition, the Company is developing a diagnostic device via a mobile device. The Company also has interests in certain other assets being developed by third parties (See Note 6 for a discussion of the Company’s agreement with Zylö Therapeutics, Inc. and Voltron Therapeutics, Inc.).

 

Liquidity and capital resources

 

Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern, requires management to evaluate the Company’s ability to continue as a going concern one year beyond the filing date of the given financial statements. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised.

 

The Company has funded its operations from proceeds from the sale of equity and debt securities. The Company will require significant additional capital to make the investments it needs to execute its longer-term business plan. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if it were successful, future equity issuances may result in dilution to its existing stockholders and future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

 

The Company believes current cash is sufficient to fund operations for at least the next 12 months from the date of these financial statements. However, the Company will need to raise additional funding, through strategic relationships, public or private equity or debt financings, grants or other arrangements, to develop and seek regulatory approvals for the Company’s current and future product candidates. If such funding is not available, or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative infrastructure may be curtailed.

 

Note 2-Significant accounting policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 30, 2022.

 

The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary, Hoth Therapeutics Australia Pty Ltd, which was incorporated under the laws of the State of Victoria in Australia on June 5, 2019. All significant intercompany balances and transactions have been eliminated in consolidation.

 

5

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Use of estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. The most significant estimates in the Company’s condensed consolidated financial statements relate to stock-based compensation and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

 

Significant Accounting Policies

 

There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on March 30, 2022.

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.

 

Fair Value Measurement

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

 

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

 

Level 1:   Quoted prices in active markets for identical assets or liabilities.
     
Level 2:   Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
     
Level 3:   Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

 

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

 

Fair value option - Note receivable

 

The guidance in ASC 825, Financial Instruments, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in the Company’s consolidated balance sheets from those instruments using another accounting method.

 

Investment in joint venture

 

Ownership interests in entities for which the Company has significant influence that are not consolidated are accounted for as equity method investments. SEC Staff Announcement: Accounting for Limited Partnership Investments (codified in ASC 323-30-S99-1) guidance requires the use of the equity method unless the investor’s interest “is so minor that the limited partner may have virtually no influence over partnership operating and financial policies.” The SEC staff’s position is that investments in limited partnerships of greater than 3% to 5% are considered more than minor and, therefore, should be accounted for using the equity method or fair value option. Investments accounted for using the equity method may be reported on a lag up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date. The determination of whether an investee’s results are recorded on a lag is made on an investment-by-investment basis. This investment in joint venture is further described in Note of 6 these consolidated financial statements.

 

6

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Net loss per share

 

Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Since the Company had a net loss in the periods presented, basic and diluted net loss per common share are the same. The following were excluded from the computation of diluted shares outstanding due to the losses for each period presented, as they would have had an anti-dilutive impact on the Company’s net loss:

 

   As of March 31, 
Potentially dilutive securities  2022   2021 
Warrants   10,070,764    11,042,448 
Options   2,616,212    1,321,212 
Non-vested restricted stock awards   2,249    7,248 
Total   12,689,225    12,370,908 

 

Recent accounting pronouncements

 

Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements, if currently adopted, would have an effect on the Company’s condensed consolidated financial statements.

 

7

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 3-License agreements

 

The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31,		 
   2022   2021 
The George Washington University  $16,272   $31,202 
University of Maryland and Isoprene Pharmaceuticals, Inc.   -    3,933 
North Carolina State University   20,000    48,584 
University of Cincinnati   5,000    10,028 
   $41,272   $93,747 

 

The George Washington University

 

During the three months ended March 31, 2022, the Company recorded an expense of approximately $16,000 related to warrants granted to The George Washington University pursuant to a patent license agreement.

 

North Carolina State University

 

During the three months ended March 31, 2022, the Company paid $20,000 for a license fee.

 

University of Cincinnati

 

During the three months ended March 31, 2022, the Company paid $5,000 for the yearly minimum annual royalty fee.

  

Note 4-Note Receivable

 

Pursuant to the sublicense agreement dated July 30, 2020 by and between the Company and Isoprene Pharmaceuticals, Inc. (“Isoprene”), the Company made an investment of $50,000 in Isoprene in the form of a convertible promissory note (the “Isoprene Note”) on September 10, 2020. The Isoprene Note matures on September 10, 2022 and accrues interest at a rate equal to the lower of: (i) the highest lawful rate permitted under applicable law and (ii) 6% per annum. The Isoprene Note may not be prepaid without the prior written consent of the Company. In the event a Qualified Financing (as defined below) occurs before the Isoprene Note is repaid in full or the conversion of such note pursuant to a Change of Control (as defined in the Isoprene Note) transaction, the Isoprene Note may be converted into such number of convertible preferred stock issued in the Qualified Financing equal to the balance of such note divided by the Capped Conversion Price (as defined below). “Qualified Financing” means the first sale of Isoprene’s convertible preferred stock in a private financing that results in gross proceeds of at least $5 million. “Capped Conversion Price” means the lesser of (i) the per share or unit price in the Qualified Financing and (ii) an amount determined by dividing (A) $15 million by (B) the fully diluted capitalization of Isoprene immediately prior to the conversion of the Isoprene Note. In the event a Change of Control occurs before the Isoprene Note is repaid in full or the conversion of such note pursuant to a Qualified Financing, the Isoprene Note may be converted into such number of shares of Isoprene’s common stock equal to the quotient obtained by dividing (i) the balance of the Isoprene Note by (ii) two times the fair market value of a share of Isoprene common stock as set for in the acquisition agreement pertaining to such Change of Control.

 

Note 5-Investments in Marketable Securities

 

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three months ended March 31, 2022 and 2021, which are recorded as a component of other income (loss) on the condensed consolidated statements of operations and comprehensive loss, are as follows:

 

   Three Months Ended
March 31,		 
   2022   2021 
Unrealized gain (loss)  $21,949   $(17,930)
Realized loss   
-
    33,330 
Dividend income   25,553    4,010 
   $47,502   $19,410 

 

8

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 6-Fair Value of Financial Assets and Liabilities

 

The following table presents the Company’s assets and liabilities that are measured at fair value at March 31, 2022 and December 31, 2021:

 

   Fair value measured at March 31, 2022 
   Total at March 31,   Quoted prices in
active markets		   Significant other
observable inputs		   Significant unobservable
inputs		 
   2022   (Level 1)   (Level 2)   (Level 3) 
Assets                
Marketable securities - mutual funds  $1,914,785   $1,914,785   $
            -
   $
-
 
Investment in joint venture  $410,000   $
-
   $
-
   $410,000 
Note receivable - current  $50,000   $
-
   $
-
   $50,000 

 

   Fair value measured at December 31, 2021 
   Total at December 31,   Quoted prices in active markets   Significant other
observable inputs		   Significant unobservable inputs 
   2021   (Level 1)   (Level 2)   (Level 3) 
Assets                
Marketable securities - mutual funds  $1,892,837   $1,892,837   $
              -
   $
-
 
Investment in joint venture  $410,000    
-
    
-
   $410,000 
Note receivable - current  $50,000    
-
    
-
   $50,000 

 

Investment in joint venture

 

The Company has elected to measure the investment in joint venture using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the consolidated statements of operations.

 

The value at which the Company’s investment in joint venture is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market conditions and those characteristics specific to the underlying investments.

 

Investment in HaloVax

 

On March 23, 2020, the Company entered into a Development and Royalty Agreement (the “Development and Royalty Agreement”) with Voltron Therapeutics, Inc. (“Voltron”) to form a joint venture entity named HaloVax, LLC (“HaloVax”) to jointly develop potential product candidates for the prevention of COVID-19 based upon certain technology that had been exclusively licensed by Voltron from The General Hospital Corporation (d/b/a Massachusetts General Hospital). Pursuant to the Development and Royalty Agreement, the Company is entitled to receive sales-based royalties. In addition, pursuant to the terms of the Development and Royalty Agreement, on March 23, 2020, the Company and HaloVax entered into a Membership Interest Purchase Agreement pursuant to which the Company purchased 5% of HaloVax’s outstanding membership interests for $250,000 on March 27, 2020 (the “Initial Closing Date”) and had the option to purchase up to an additional 25% of HaloVax’s membership interests (for $3,000,000 (inclusive of the $250,000)), which option expired 30 days after the Initial Closing Date. On May 28, 2020, the Company entered into a Membership Interest Purchase Agreement to purchase 1% of HaloVax’s outstanding membership interest for a purchase price of $100,000. No change in fair value occurred during the three months ended March 31, 2022.

 

Investment in Zylö

 

In connection with the Company’s March 2020 underwritten public offering of shares of its common stock, on May 4, 2020, the Company purchased 120,000 shares of Zylö’s Class B common stock for $60,000. No change in fair value occurred during the quarter ended March 31, 2022. On December 8, 2021, the Company entered into a third amendment (the “Zylö Amendment”) to the Exclusive Sublicense Agreement with Zylö originally dated August 19, 2019 pursuant to which the Company licensed its novel cannabinoid therapeutic, HT-005 for lupus patients, back to Zylö. Pursuant to the Zylö Amendment, on December 6, 2021, Zylö issued the Company 100,000 shares of its Class B common stock. In addition, pursuant to the Zylö Amendment, within 90 days following a sale by Zylö of all of its assets and rights related to HT-005 to a third party (a “Sale”), Zylö shall pay the Company a low single digit percent of the net proceeds received by it attributable to HT-005 in the United States and Canada and their respective territories (collectively, the “Territory”) for the purposes of therapeutic uses related to lupus in humans (the “Field”). After the Sale, any and all rights of the Company pursuant to the Exclusive Sublicense Agreement, including all amendments thereto, shall terminate. Furthermore, pursuant to the Zylö Amendment, following the date of the first commercial sale of HT-005 in the Territory, in the Field, Zylö shall pay the Company (i) a low single digit percent of the Net Sales (as defined in the Exclusive Sublicense Agreement) of HT-005 in the event HT-005 is sold in the Territory and (ii) a low double digit percent of any royalty that Zylö receives through the sublicense to a third party based on Net Sales of HT-005 in the Territory which payments shall continue in each country in the Territory until expiration of the last-to-expire Valid Claim (as defined in the Exclusive Sublicense Agreement).

 

9

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note receivable

 

As of March 31, 2022, the fair value of the Isoprene Note was measured at $50,000, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the three months ended March 31, 2022.

 

Note 7-Stockholders’ Equity

 

2018 Equity Incentive Plan

 

The compensation committee of the board of directors increased the number of shares reserved pursuant to the Company’s 2018 Equity Incentive Plan (“2018 Plan”) by 671,926 shares effective as of January 1, 2021, such that as of January 1, 2021, the Company had an aggregate of 1,671,926 shares of common stock reserved for issuance pursuant to the 2018 Plan. On June 24, 2021, at the annual shareholder meeting, shareholders of the Company approved an amendment to the 2018 Plan to further increase the number of shares reserved for issuance thereunder from 1,671,926 shares to 3,671,926 shares. On February 2, 2022 the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 3,671,926 shares to 3,921,926 shares.

 

Restricted Stock Awards

 

A summary of the Company’s restricted stock awards granted under the 2018 Plan during the three months ended March 31, 2022 is as follows:

 

   Number of Restricted
Stock Awards		   Weighted Average
Grant Day Fair Value		 
Nonvested at December 31, 2021   2,801   $3.00 
Vested   (552)   3.00 
Nonvested at March 31, 2022   2,249   $3.00 

 

As of March 31, 2022, approximately $1,300 of unrecognized stock-based compensation expense is related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards is approximately 0.51 years at March 31, 2022.

 

Stock Options

 

A summary of option activity under the Company’s stock option plan for three months ended March 31, 2022 is presented below:

 

   Number of Shares   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted Average
Remaining Contractual
Life (in years)		 
Outstanding as of December 31, 2021   1,321,212   $3.37   $
-
    8.6 
Employee options issued   1,295,000    0.59    132,090    10.0 
Outstanding as of March 31, 2022   2,616,212   $1.99   $132,090    9.0 
Options vested and exercisable as of March 31, 2022   2,616,212   $1.99   $132,090    9.0 

 

Stock Based Compensation

 

Stock-based compensation expense for the three months ended March 31, 2022 and 2021 was as follows:

 

   Three Months Ended
March 31,		 
   2022   2021 
Employee stock option awards  $560,375   $1,092,429 
Non-employee stock option awards   
-
    
-
 
Employee restricted stock awards   791    2,407 
Non-employee stock warrant awards   16,272    31,202 
   $577,438   $1,126,038 

 

Employee related stock-based compensation is recognized as “compensation and related expenses (including stock-based compensation)” and non-employee related stock-based compensation is recognized as “professional fees (including stock-based compensation)” or “research and development - licenses acquired (including stock-based compensation)” in the condensed consolidated statements of operations and comprehensive loss.

 

10

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Warrants

 

A summary of warrant activity for the three months ended March 31, 2022 is as follows:

 

   Number of Warrants   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted Average
Remaining Contractual
Life (in years)		 
Outstanding as of December 31, 2021   10,070,764   $1.99   $
      -
    2.3 
Outstanding as of March 31, 2022   10,070,764   $1.99   $
-
    2.1 
Warrants exercisable as of March 31, 2022   10,018,093   $1.99   $
-
    2.3 

 

The Company has determined that the warrants should be accounted as a component of stockholders’ equity.

 

Note 8-Commitments and contingencies

 

Office lease

 

The Company leases office space for approximately $4,500 a month. Rent expense for the three months ended March 31, 2022 and 2021 was approximately $14,000 and $7,000, respectively. The Company is not a party to a lease that is in excess of 12 months.

 

Litigation

 

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

 

Note 9-Risk and Uncertainties

 

The outbreak of the novel Coronavirus (COVID-19) evolved into a global pandemic. The Coronavirus has spread to many regions of the world. The extent to which the Coronavirus impacts the Company’s business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the Coronavirus and the actions to contain the Coronavirus or treat its impact, among others.

 

As a result of the continuing spread of the Coronavirus, certain aspects of the Company’s business operations have been delayed, and the Company may be subject to additional delays or interruptions. Specifically, as a result of the shelter-in-place orders and other mandated local travel restrictions, among other things, the research and development activities of certain of the Company’s partners may be affected, which may result in delays to the Company’s clinical trials, and the Company can provide no assurance as to when such trials, if delayed, will resume at this time or the revised timeline to complete trials once resumed.

 

11

 

 

HOTH THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Furthermore, site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If the Coronavirus continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and the Company may be unable to conduct its clinical trials. Further, if the spread of the Coronavirus pandemic continues and the Company’s operations are adversely impacted, the Company risks a delay, default and/or nonperformance under existing agreements which may increase its costs. These cost increases may not be fully recoverable or adequately covered by insurance.

 

Infections and deaths related to the pandemic may disrupt the healthcare and healthcare regulatory systems in both the United States and globally, including in Australia. Such disruptions could divert healthcare resources away from, or materially delay review and/or approval with respect to the Company’s clinical trials by the U.S. Food and Drug Administration and foreign regulatory authorities, including the Belberry Human Research Ethics Committee in Australia. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of the Company’s clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company’s product candidates.

 

The Company currently utilizes third parties to, among other things, manufacture raw materials. If any third-party in the supply chain for materials used in the production of the Company’s product candidates are adversely impacted by restrictions resulting from the Coronavirus outbreak, the Company’s supply chain may be disrupted, limiting the Company’s ability to manufacture its product candidates for its clinical trials and research and development.

 

The spread of the Coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on the Company’s business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may negatively impact the Company’s ability to access capital on favorable terms, if at all. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the Coronavirus could materially and adversely affect the Company’s business and the value of its common stock.

 

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s operations, and the Company will continue to monitor the situation closely.

 

Note 10-Subsequent events

 

The Company evaluates events that have occurred after the balance sheet date through the date for which the condensed consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements except as set forth herein.

 

On April 14, 2022, the Company closed an underwritten public offering of 8,235,294 shares of the Company’s common stock at a price to the public of $0.85 per share (the “Offering Price”). Pursuant to the terms of an underwriting agreement dated April 11, 2022 between the Company and EF Hutton, division of Benchmark Investments, LLC, as representative of the several underwriters (the “Underwriters”), the Company granted the Underwriters a 45-day option to purchase up to an additional 1,235,294 shares of the Company’s common stock to cover over-allotments, if any, at the Offering Price less the underwriting discounts and commissions. The net proceeds to the Company from the sale of the shares, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were $6.1 million.

 

12

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

You should read the following discussion and analysis of our financial condition and results of operations together with and our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

Overview

 

We are a clinical-stage biopharmaceutical company focused on developing new generation therapies for unmet medical needs. We are focused on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer (HT-001); (ii) a treatment for mast-cell derived cancers and anaphylaxis (HT-KIT); (iii) a treatment for traumatic brain injury and ischemic stroke (HT-TBI); and (iv) a treatment and/or prevention for Alzheimer’s or other neuroinflammatory diseases (HT-ALZ). We also have assets being developed for (i) atopic dermatitis (also known as eczema) (BioLexa); (ii) a treatment for asthma and allergies using inhalational administration (HT-004); and (iii) a treatment for inflammatory bowel diseases (HT-003). In addition, we are continuing to evaluate HT-002, a novel peptide that may be used to slow the transmission of SARS-CoV-2, and HT-006 for the treatment of lung diseases resulting from bacterial infections. We are also developing a diagnostic device via a mobile device. Furthermore, we have interests in certain other assets being developed by third parties including a treatment for patients with lupus that is being developed by Zylö Therapeutics, Inc. and potential product candidates being developed pursuant to our agreement with Voltron Therapeutics, Inc. for the prevention of COVID-19.

  

Results of Operations

 

Comparison of the Three Months Ended March 31, 2022 and 2021

 

Operating Costs and Expenses

 

Research and Development Expenses

 

During the three months ended March 31, 2022, we incurred research and development expenses of approximately $1.0 million as compared to $1.6 million during the three months ended March 31, 2021. The $0.6 million decrease was primarily attributed to the decreased number of research and development activities undertaken by us during the three months ended March 31, 2022.

 

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

 

●employee-related expenses, which include salaries and benefits, and rent expenses;

 

●fees related to in-licensed products and technology;

 

●expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct our clinical trials and a substantial portion of our pre-clinical activities;

 

●costs of acquiring and manufacturing clinical trial materials; and

 

●costs associated with non-clinical activities and regulatory approvals.

 

Compensation, Professional Fees, Rent and Other (“General and Administrative Expenses”)

 

During the three months ended March 31, 2022, we incurred General and Administrative Expenses of approximately $1.7 million as compared to $2.6 million during the three months ended March 31, 2021. The $0.9 million decrease was primarily attributed to a decrease in compensation and related expenses. Specifically, the fair value of options granted to our officers and directors during the three months ended March 31, 2022 decreased by $0.5 million as compared March 31, 2021.

 

We anticipate that our General and Administrative Expenses will increase in future periods, reflecting continued and increasing costs associated with:

 

●support of our research and development activities;

 

●stock compensation granted to key employees and non-employees;

 

●support of business development activities; and

 

●increased professional fees and other costs associated with the regulatory requirements.

 

13

 

 

Liquidity and Capital Resources

 

We have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022, we had approximately $6.4 million in cash, marketable securities of $1.9 million, current liabilities of $0.8 million and an accumulated deficit of approximately $36.3 million.

 

We have entered into certain license, sublicense, sponsored research and option agreements with third parties. Pursuant to such agreements, we may be required to make certain: (i) license maintenance fee payments; (ii) out-of-pocket expense payments, including, but not limited to, payments related to intellectual property and research related expenses; (iii) development and commercialization expense payments; (iv) annual and quarterly minimum payments; (v) diligence expense payments; and (vi) revenue interest payments. In addition, subject to the achievement of certain development and/or commercialization events, we may also be required to make certain: (i) minimum royalty payments, ranging from middle to high five figures, (ii) sales-based royalties and running royalties, ranging from low single digits to low double digits; and (iii) milestone payments, of up to approximately $21 million (if all milestones in all of our current agreements are achieved).

 

Cash Flows from Operating Activities

 

For the three months ended March 31, 2022, net cash used in operations was approximately $2.1 million, which primarily resulted from a net loss of approximately $2.6 million and changes in operating assets and liabilities of approximately $0.1 million, partially offset by approximately $0.6 million stock-based compensation.

 

For the three months ended March 31, 2021, net cash used in operations was approximately $2.7 million, which primarily resulted from a net loss of approximately $4.3 million, partially offset by changes in operating assets and liabilities of approximately $0.4 million and approximately $1.1 million of stock-based compensation.

 

Cash Flows from Investing Activities

 

For the three months ended March 31, 2022, net cash used in investing activities was $25,000 which was related to the purchase of research and development licenses.

 

For the three months ended March 31, 2021, net cash provided by investing activities was approximately $1.0 million, which was primarily related to the purchase of marketable securities of approximately $1.0 million.

 

Cash Flows from Financing Activities

 

For the three months ended March 31, 2022, net cash provided by financing activities was $0.

 

For the three months ended March 31, 2021, net cash provided by financing activities was approximately $18.4 million which primarily resulted from approximately $18.1 million in net proceeds from the issuance of common stock, common stock warrants and/or pre-funded warrants.

 

JOBS Act

 

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (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 chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

 

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 of 2002, as amended, and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board 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 (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

 

14

 

 

Critical Accounting Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

 

  ● it requires assumptions to be made that were uncertain at the time the estimate was made; and
     
  ● changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition.

 

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material.

 

See Note 2 to our condensed consolidated financial statements for a discussion of our significant accounting policies.

 

Recently Issued Accounting Standards Not Yet Effective or Adopted

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Our principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of March 31, 2022, the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that our disclosure controls and procedures were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. 

 

Changes in Internal Control

 

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

  

15

 

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

 

ITEM 1A. RISK FACTORS.

 

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 30, 2022 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the three months ended March 31, 2022, the Company issued an aggregate of 552 shares of the Company’s common stock, which shares were subject to a vesting schedule, to members of the Company’s Board of Directors for services.

 

The foregoing issuances were exempt from registration under Section 4(a)(2) of the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

  

ITEM 5. OTHER INFORMATION.

 

None.

 

16

 

 

ITEM 6. EXHIBITS.

 

Exhibit No.   Description
     
10.1+   Hoth Therapeutics, Inc. 2018 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed on February 4, 2022)
     
31.1*   Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2*   Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2*   Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104*   Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 is formatted in Inline XBRL

 

  * Filed herewith.

 

  + Indicates a management contract or any compensatory plan, contract or arrangement.

 

17

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  HOTH THERAPEUTICS, INC.
   
Date: May 12, 2022 By: /s/ Robb Knie
    Robb Knie,
Chief Executive Officer
(Principal Executive Officer)
   
Date: May 12, 2022 By: /s/ David Briones
    David Briones,
Chief Financial Officer
(Principal Financial and Accounting Officer)

 

 

18

 

 

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