UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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(Mark One)
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the quarterly period ended
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For the transition period from ________________ to ________________
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Securities registered pursuant to Section 12(b) of the Act:
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| The |
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
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Indicate
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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.
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The number of shares of the issuer’s common stock, $0.0001 par
value per share, outstanding at November 10, 2021 was
Table of Contents
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; |
| ● | the timing and costs of clinical trials and the timing and costs of other expenses; |
| ● | market acceptance of our 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; |
| ● | our intellectual property; |
| ● | 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; |
| ● | 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
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Marketable equity securities, at fair value | ||||||||
| Prepaid expenses | ||||||||
| Note receivable - current | - | |||||||
| Total current assets | ||||||||
| Note receivable | ||||||||
| Investment in joint venture | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued license fee - current portion | ||||||||
| Total current liabilities | ||||||||
| Accrued license fee - less current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Series A Convertible Preferred Stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive gain (loss) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Operating costs and expenses | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| Research and development - licenses acquired (including stock-based compensation) | ||||||||||||||||
| Compensation and related expenses (including stock-based compensation) | ||||||||||||||||
| Professional fees (including stock-based compensation) | ||||||||||||||||
| Rent | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Other income (expenses), net | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive gain (loss) | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share applicable to common stockholders - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
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 September 30, 2021
| Common Stock | Additional Paid-in | Accumulated | Cumulative Translation | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Adjustment | Equity | |||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Offering cost related with issuance of common stock, common stock warrants and prefunded warrants (net of offering costs of $1,591,600) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Prepaid stock-based compensation | ||||||||||||||||||||||||
| Cumulative translation adjustment | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
For the Three Months Ended September 30, 2020
| Common Stock | Additional Paid-in | Accumulated | Cumulative Translation | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Adjustment | Equity | |||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Hoth Therapeutics, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
For the Nine months Ended September 30, 2021
| Common Stock | Additional Paid-in | Accumulated | Cumulative Translation | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Adjustment | Equity | |||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of common stock, common stock warrants and prefunded warrants (net of offering costs of $ | ||||||||||||||||||||||||
| Issuance of common stock and warrants (net of offering costs of $ | ||||||||||||||||||||||||
| Warrant exercise | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Prepaid stock-based compensation | ||||||||||||||||||||||||
| Cumulative translation adjustment | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
For the Nine months Ended September 30, 2020
| Common Stock | Additional Paid-in | Accumulated | Cumulative Translation | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Adjustment | Equity | |||||||||||||||||||
| Balance at December 31, 2019 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of common stock and warrants (net of offering costs of $ | ||||||||||||||||||||||||
| Issuance of common stock (net of offering costs of $ | ||||||||||||||||||||||||
| Cancellation of common stock | ( | ) | ( | ) | ||||||||||||||||||||
| Warrant exercise | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Cumulative translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Hoth Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Research and development-acquired license, expensed | ||||||||
| Stock-based compensation | ||||||||
| Amortization of prepaid stock-based compensation | ||||||||
| Realized loss (gain) on marketable securities | ||||||||
| Unrealized loss (gain) on marketable securities | ( | ) | ||||||
| Loss on foreign currency exchange | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of investments in joint venture | ( | ) | ||||||
| Purchase of research and development licenses | ( | ) | ( | ) | ||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Purchase of convertible promissory note in Isoprene | ( | ) | ||||||
| Sale of marketable securities | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance common stock, common stock warrants and prefunded warrants, net of offering cost | ||||||||
| Proceeds from issuance common stock and warrants, net of offering cost | ||||||||
| Proceeds from issuance common stock, net of offering cost | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Cancellation and retirement of common stock | $ | $ | ||||||
| Prepaid stock-based compensation | $ | - | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Hoth Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 which was formed to initially focus on developing new generation therapies for dermatological disorders including atopic dermatitis (also known as eczema), chronic wounds, psoriasis, asthma and acne. Since its formation, the Company expanded its business to also focus on developing a topical formulation for treating side effects from drugs used for the treatment of cancer; a treatment for asthma and allergies using inhalational administration; a topical treatment for patients with lupus; a treatment for mast-cell derived cancers and anaphylaxis; and a treatment for lung diseases resulting from bacterial infections. The Company is also potentially developing a COVID-19 treatment as well as a diagnostic device for the detection of viruses via a mobile device.
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.
Based on management’s evaluation, the Company’s 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 existing and new 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 16, 2021.
6
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.
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, 2020 as filed with the SEC on March 16, 2021.
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
FASB 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. |
7
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.
The following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2021 and December 31, 2020:
| Fair value measured at September 30, 2021 | ||||||||||||||||
| Total at September 30, | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities - mutual funds | $ | $ | $ | $ | ||||||||||||
| Fair value measured at December 31, 2020 | ||||||||||||||||
| Total at December 31, | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||
| 2020 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities - mutual funds | $ | $ | $ | $ | ||||||||||||
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 September 30, | ||||||||
| Potentially dilutive securities | 2021 | 2020 | ||||||
| Warrants | ||||||||
| Options | ||||||||
| Non-vested restricted stock awards | ||||||||
| Total | ||||||||
Recent accounting pronouncements
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 effective January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.
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.
8
Note 3-License agreements
The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during three and nine months ended September 30, 2021 and 2020:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| The George Washington University | $ | $ | $ | $ | ||||||||||||
| Isoprene Pharmaceuticals, Inc. | ||||||||||||||||
| North Carolina State University | ||||||||||||||||
| Virginia Commonwealth University | ||||||||||||||||
| University of Cincinnati | ||||||||||||||||
| Adjustment | ( | ) | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The George Washington University
During
the three and nine months ended September 30, 2021, the Company recorded an expense of approximately $
Isoprene Pharmaceuticals, Inc.
During
the three and nine months ended September 30, 2021, the Company paid $
North Carolina State University
During
the three and nine months ended September 30, 2021, the Company paid $
Virginia Commonwealth University
During
the three and nine months ended September 30, 2021, the Company paid $
University of Cincinnati
During
the three and nine months ended September 30, 2021, the Company paid $
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 $
9
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 and nine months ended September 30, 2021 and 2020, which are recorded as a component of other income (expenses) on the condensed consolidated statements of operations and comprehensive loss, are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Unrealized gain | $ | $ | $ | ( | ) | $ | ||||||||||
| Realized loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Dividend income | ||||||||||||||||
| Interest income | - | - | ||||||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
Note 6-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
Note 7-Stockholders’ Equity
Common Stock
Securities Purchase Agreements
On
January 5, 2021, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which the Company
offered and sold to the investors an aggregate of
10
On
March 8, 2021, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant
to which it offered and sold to the investors
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
Restricted Stock Awards
A summary of the Company’s restricted stock awards granted under the 2018 Plan during the nine months ended September 30, 2021 is as follows:
| Number of Restricted Stock Awards | Weighted Average Grant Day Fair Value | |||||||
| Nonvested at December 31, 2020 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Nonvested at September 30, 2021 | $ | |||||||
As
of September 30, 2021, approximately $
11
Stock Options
A summary of option activity under the Company’s stock option plan for nine months ended September 30, 2021 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, 2020 | $ | $ | ||||||||||||||
| Employee options issued | ||||||||||||||||
| Outstanding as of September 30, 2021 | $ | $ | ||||||||||||||
| Options vested and exercisable | $ | $ | ||||||||||||||
Stock Based Compensation
Stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Employee stock option awards | $ | $ | $ | $ | ||||||||||||
| Non-employee stock option awards | $ | |||||||||||||||
| Employee restricted stock awards | ||||||||||||||||
| Non-employee restricted stock awards | ||||||||||||||||
| Non-employee stock warrant awards | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Employee related stock-based compensation is recognized as “compensation and related expenses” and non-employee related stock-based compensation is recognized as “professional fees” or “research and development - licenses acquired” in the condensed consolidated statements of operations and comprehensive loss.
Warrants
A summary of warrant activity for the nine months ended September 30, 2021 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, 2020 | $ | $ | ||||||||||||||
| Issued | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding as of September 30, 2021 | $ | $ | ||||||||||||||
| Warrants exercisable as of September 30, 2021 | $ | $ | ||||||||||||||
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
$
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Litigation
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; however, as of September 30, 2021, the Company is not a party to any legal proceedings and is not aware of any pending or threatened claims.
Note 9-Risk and Uncertainties
The outbreak of the novel Coronavirus (COVID-19) evolved into a global pandemic as COVID-19 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, including variants such as the delta variant, 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.
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 United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay U.S. Food and Drug Administration review and/or approval with respect to the Company’s clinical trials. 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 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.
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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, 2020 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 and were formed in May 2017 to initially focus on developing new generation therapies for dermatological disorders. We believe that our pipeline has the potential to improve the quality of life for patients suffering from indications including atopic dermatitis (also known as eczema), chronic wounds, psoriasis, asthma and acne. Since our formation, we have expanded our business to also focus on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer; (ii) a treatment for asthma and allergies using inhalation administration; (iii) a topical treatment for patients with lupus; (iv) a treatment for mast-cell derived cancers and anaphylaxis; and (v) a treatment for lung diseases resulting from bacterial infections. We are also potentially developing a COVID-19 treatment as well as a diagnostic device for the detection of viruses via a mobile device.
Dermatological Disorders
The BioLexa Platform
We have obtained an exclusive license from the University of Cincinnati to make, use, have made, import, offer for sale, and sell products based upon or involving the use of a proprietary, patented, drug compound platform (“BioLexa”) for the treatment of eczema. BioLexa combines a U.S. Food and Drug Administration (“FDA”) approved zinc chelator with one or more approved antibiotics in a topical dosage form to address unchecked eczema flare-ups by preventing the formation of infectious biofilms and the resulting clogging of sweat ducts. We intend to initially use BioLexa to develop two different topical cream products: (i) a product to treat eczema and (ii) a product that reduces post-procedure infections, accelerates healing and improves clinical outcomes for patients undergoing aesthetic dermatology procedures. We intend to develop BioLexa for use in patients following the Section 505(b)(2) regulatory pathway of the FDA rules which permits us rely upon publicly available data with respect to gentamicin and zinc chelator in our New Drug Application (“NDA”) submission to the FDA for marketing approval. Based on our meetings with the FDA, we are conducting our first clinical trial for BioLexa in Australia in order to enroll both adults and adolescents to support future clinical development before conducting trials on pediatric patients.
HT-001
On February 1, 2020, we entered into a patent license agreement with The George Washington University (“GW”) pursuant to which GW granted us a license to certain patent rights to, among other things, make, use, offer and sell certain licensed products throughout the world with respect to HT-001, which we intend to potentially use for treating dermatological side effects from epidermal growth factor receptor inhibitors, and potentially other drugs used for the treatment of cancer. We intend to develop HT-001 for use in patients following the Section 505(b)(2) regulatory pathway of the FDA rules which permits us to rely upon publicly available data in our NDA submission to the FDA for marketing approval. Based on our meetings with the FDA, we plan to conduct our first clinical trial for HT-001 in the United States after completing the required safety and toxicology studies.
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On February 23, 2021, we filed a provisional patent application with the United States Patent and Trademark Office for the use of the active ingredient of HT-001 to treat and prevent Alzheimer’s disease and other neuroinflammatory diseases. We intend to develop this drug under the name HT-ALZ pursuant to the 505(b)(2) regulatory pathway of the FDA rules which permits us to rely upon publicly available data in our NDA submission to the FDA for marketing approval.
HT-003
On July 30, 2020, we entered into a Sublicense Agreement with Isoprene Pharmaceuticals, Inc. (“Isoprene”) pursuant to which Isoprene granted us an exclusive sublicense to certain intellectual property (i) to make, have made, use, sell, offer to sell and import certain licensed products, (ii) in connection therewith, to use certain inventions and licensed materials and (iii) to practice certain patent rights for the treatment of dermatological conditions or diseases, referred to as HT-003.
In December 2019, we entered into a research collaboration agreement with Joan and Sanford I. Weill Medical College for the completion of pre-clinical studies investigating the mechanism of action of HT-003 that was renewed in January 2021 as a result of positive pre-clinical results. On July 2, 2021, we entered into a Sublicense Agreement with Isoprene (“Sublicense Agreement”) to expand the therapeutic indication of the sublicensed retinoic acid metabolism blocking agent (“RAMBA”) from Isoprene. The Sublicense Agreement includes the investigation of RAMBAs for treatment of inflammatory bowel diseases, including Crohn’s disease and ulcerative colitis.
HT-005 Z-Pods™
On August 19, 2019, we entered into a sublicense agreement with Zylö Therapeutics, Inc. (“Zylö”) pursuant to which Zylö granted us an exclusive sublicense to certain licensed patent rights and certain licensed technology to, among other things, develop, make and sell certain licensed products and to practice certain licensed technology in the United States and Canada initially with respect to therapeutic uses related to lupus in humans.
Respiratory Products
HT-004
On November 20, 2019, we entered into a license agreement with North Carolina State University (“NC State”) pursuant to which NC State granted us an exclusive license to, among other things, develop, make, use, offer and sell certain licensed products throughout the world with respect to HT-004 for treating allergic diseases. HT-004 is currently under investigation for the treatment of asthma and allergies using inhalational administration.
HT-006
On December 22, 2020, we entered into a non-exclusive commercial evaluation license agreement with the U.S. Army Medical Research and Development Command (“USAMRDC”), as amended, pursuant to which USAMRDC granted us a non-exclusive commercial evaluation license to HT-006 for the treatment of lung diseases resulting from bacterial infections. We will initially target treatment of serious bacterial infections of the lung, such as hospital-acquired pneumonia and ventilator-associated pneumonia. Given the indication, we intend to develop HT-006 for inhalational administration.
Cancer Treatments
HT-KIT
On February 25, 2021, we entered into a license agreement with NC State pursuant to which NC State granted us an exclusive, worldwide, royalty bearing license to certain intellectual property to, among other things, discover, develop, make, have made, use and sell certain licensed products and sell, use and practice certain licensed services with respect to cancer and anaphylaxis; this is being developed as HT-KIT. We intend to initially target mast cell neoplasms for development of HT-KIT, which is a rare, aggressive cancer with poor prognosis. In addition, we intend pursue the anaphylaxis indication for HT-KIT in parallel to cancer treatment.
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COVID-19 Products
HT-002
On May 18, 2020, we entered into an Exclusive License Agreement with the Virginia Commonwealth University Intellectual Property Foundation (“VCU”) pursuant to which VCU granted us an exclusive, royalty bearing license to HT-002, a novel peptide developed by researchers at VCU that may be used to slow the transmission of SARS-CoV-2 (the “VCU Peptide”) and a non-exclusive royalty bearing, worldwide license with respect to certain licensed technical information patents to make, have made, use, offer to sell, sell and import certain licensed products and perform certain licensed services. On June 29, 2020, we entered into a Sponsored Project Agreement (“SPA”) with VCU for the development of a potential COVID-19 treatment using the VCU Peptide, and amended the SPA on April 28, 2021.
VaxCelerate SARS-CoV-2 Vaccine
On March 23, 2020, we entered into Royalty and Development Agreement with Voltron Therapeutics, Inc. (“Voltron”) pursuant to which we formed 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) (“Mass Gen”). The joint venture is seeking to develop a SARS-CoV-2 vaccine using VaxCelerate, a self-assembling vaccine platform licensed from Mass Gen by HaloVax. VaxCelerate offers two unique elements to combat SARS-CoV-2: a fixed immune adjuvant and variable immune targeting, the combination which is designed to illicit a robust, protective immune response.
Devices
Direct Detect Breath Diagnostic Device
On August 7, 2020, we entered into a Patent License Agreement (“f Patent License Agreement”) with GW pursuant to which GW granted us an exclusive, worldwide, royalty bearing license to certain intellectual property that can be used to develop a device designed to detect the presence of viruses. Specifically, the GW Patent License Agreement permits us to make, have made, use, import, offer for sale and sell certain licensed products in the field of virus sensing and detection. We have engaged a company to develop a platform prototype and, once developed, we will select target analytes for further development.
Results of Operations
Comparison of the Three Months Ended September 30, 2021 and 2020
Operating Costs and Expenses
Research and Development Expenses
During the three months ended September 30, 2021, we incurred research and development expenses of approximately $2.2 million as compared to approximately $0.7 million during the three months ended September 30, 2020. The increase of approximately $1.5 million was primarily attributable to the increased number of research and development activities undertaken by us.
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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; |
| ● | the cost 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 September 30, 2021, we incurred General and Administrative Expenses of approximately $1.1 million as compared to approximately $1.4 million during the three months ended September 30, 2020. The decrease of approximately $0.3 million was primarily attributable to decrease in stock-based compensation and decrease in professional fees.
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. |
Comparison of the Nine Months Ended September 30, 2021 and 2020
Operating Costs and Expenses
Research and Development Expenses
During the nine months ended September 30, 2021, we incurred research and development expenses of approximately $5.6 million as compared to approximately $2.7 million during the nine months ended September 30, 2020. The increase of approximately $2.9 million was primarily attributable to the increased number of research and development activities undertaken by us.
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; |
| ● | the cost of acquiring and manufacturing clinical trial materials; and |
| ● | costs associated with non-clinical activities and regulatory approvals. |
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General and Administrative Expenses
During the nine months ended September 30, 2021, we incurred General and Administrative Expenses of approximately $5.1 million as compared to approximately $3.8 million during the nine months ended September 30, 2020. The increase of approximately $1.3 million was primarily attributable to an increase in compensation and related expenses as a result of options granted to our officers and directors. Specifically, during the nine months ended September 30, 2021, we incurred $1.1 million in stock-based compensation expense related to employee stock option awards as we granted options to purchase an aggregate of 0.6 million shares of our common stock to our officers and directors.
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. |
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 we may never become profitable. As of September 30, 2021, we had approximately $12.4 million in cash, marketable securities of approximately $2.0 million, current liabilities of approximately $1.6 million and an accumulated deficit of approximately $30.2 million.
We have entered into certain license, sublicense, sponsored research and option agreements with third parties. Pursuant to such agreements, we may be required 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 nine months ended September 30, 2021, net cash used in operations was approximately $8.2 million, which primarily resulted from a net loss of approximately $10.8 million, and was partially offset by changes in operating assets and liabilities of approximately $1.1 million and approximately $1.3 million stock-based compensation.
For the nine months ended September 30, 2020, net cash used in operations was approximately $5.5 million, which primarily resulted from a net loss of approximately $6.4 million and changes in operating assets and liabilities of approximately $0.2 million, and was partially offset by approximately $0.5 million research and development expense related with license acquisitions and $0.6 million stock-based compensation.
Cash Flows from Investing Activities
For the nine months ended September 30, 2021, net cash provided by investing activities was approximately $0.2 million, which was primarily related to the sale of marketable securities of approximately $2.6 million, and was partially offset by the purchase of marketable securities of approximately $2.5 million.
For the nine months ended September 30, 2020, net cash used in investing activities was approximately $1.0 million, which was primarily related to the purchase of marketable securities of $1.5 million and purchase of investments in HaloVax, LLC and Zylö of approximately $0.4 million, and was partially offset by the sale of marketable securities of approximately $1.1 million.
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Cash Flows from Financing Activities
For the nine months ended September 30, 2021, net cash provided by financing activities was approximately $18.2 million. The cash provided by financing activities primarily resulted from approximately $17.8 million in net proceeds from the issuance of common stock, common stock warrants and/or pre-funded warrants, and $0.4 million in proceeds from the exercise of warrants.
For the nine months ended September 30, 2020, net cash provided by financing activities was approximately $8.7 million. The cash provided by financing activities primarily resulted from approximately $8.7 million in net proceeds from the issuance of common stock and warrants.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of September 30, 2021, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources, nor did we have any commitments or contractual obligations.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is set forth in Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
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.
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.
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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 September 30, 2021, 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 over Financial Reporting
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.
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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, 2020 as filed with the SEC on March 16, 2021 (“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 quarter ended September 30, 2021, the Company issued:
| ● | an aggregate of 1,261 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; and |
| ● | 100,000 shares of the Company’s common stock to a consultant 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.
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ITEM 6. EXHIBITS.
| * | Filed herewith. |
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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: November 10, 2021 | By: | /s/ Robb Knie |
| Robb Knie, Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 10, 2021 | By: | /s/ David Briones |
| David Briones, Chief Financial Officer (Principal Financial and Accounting Officer) |
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