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, 20192021

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, IncInc.

(Exact Name of Registrant as Specified in its Charter)

(646) 756-2997

(Registrant’s telephone number, including area code)

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

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.

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 7(a)(2)(B)13(a) of the SecuritiesExchange Act.☐

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

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

The number of shares of the issuer’s common stock, $0.0001 par value per share, outstanding at May 13, 201912, 2021 was 9,603,624.23,871,671.

Table of Contents

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:

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.

PART I -— FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Hoth Therapeutics, Inc.

Condensed Consolidated Balance Sheets

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

Hoth Therapeutics, Inc.

Condensed Statements of Operations

(Unaudited)

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

Hoth Therapeutics, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ EquityOperations and Comprehensive Loss

(Unaudited)

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

Hoth Therapeutics, Inc.

Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity

(Unaudited)

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

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

Hoth Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1-Organization and description of business operations

Hoth Therapeutics, Inc. (the(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’s primary assetCompany is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuantclinical-stage biopharmaceutical company which was formed to which Chelexa has grantedinitially 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 an exclusive sublicenseexpanded its business to use its BioLexa Platform,also focus on developing a proprietary, patented, drug compound platform developed at the University of Cincinnati. The license enables the Company to develop the platformtopical formulation for all indications in humans. The Company’s initial focus will be ontreating side effects from drugs used for the treatment of eczema. The BioLexa Platform combinescancer; a U.S. Foodtreatment for asthma and Drug Administration (“FDA”) approved zinc chelator with one or more approved antibiotics inallergies using inhalational administration; a topical dosage form to address unchecked eczema flare-ups by preventing the formation of infectious biofilmstreatment for patients with lupus; a treatment for mast-cell derived cancers and theanaphylaxis; and a treatment for lung diseases resulting clogging of sweat ducts which trigger symptoms. To the Company’s knowledge, it is the first product candidate intended to prevent the symptom triggering flare-ups rather than simply treating symptoms when they occur.

On May 26, 2017, the Company entered into a sublicense agreement with Chelexa, as amended on August 22, 2018 and August 29, 2018, pursuant to which Chelexa granted the Company an exclusive sublicense to make, use, have made, import, offer for sale, and sell products based upon or involving the use of (i) topical compositions comprising a zinc chelator and gentamicin and (ii) zinc chelators to inhibit biofilm formation (the “BioLexa Platform” or “BioLexa”), which rights were originally granted to Chelexa pursuant to an exclusive license agreement with the University of Cincinnati. In addition, Chelexa granted the Company the right to issue exclusive and nonexclusive sublicenses (with the right to further sublicense to third parties) to make, use, have made, import, offer for sale, and sell products based upon the BioLexa Platform.

Company’s IPO

On February 15, 2019, the Company announced the pricing of its initial public offering (the “IPO”) of 1,250,000 shares of its common stock at an initial offering price to the public of $5.60 per share.  In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 187,500 shares of common stock at the initial public offering price, less the underwriting discount, to cover over-allotments (the “Green-shoe”), if any. The underwriters did not exercise any portion of the Green-shoe. Therefore, the Company issued 1,250,000 shares of common stock and received net proceeds of $5.8 million from the IPO.

The Company’s common stock commenced trading on The Nasdaq Capital Market, on February 15, 2019 under the ticker symbol “HOTH”. The IPO closed on February 20, 2019.

On February 14, 2019, the Company entered into an underwriting agreement with Laidlaw & Co. (UK) Ltd. (“Laidlaw”) pursuant to which the Company paid Laidlaw a fee in the amount of 7% of the gross proceeds of the IPO, or $490,000.bacterial infections. The Company is also reimbursed Laidlawpotentially developing a COVID-19 treatment as well as a diagnostic device for certain out-of-pocket expenses, including the fees and disbursementsdetection of their counsel, up to an aggregate of $0.2 million. In addition, Laidlaw received five-year warrants to purchase 50,000 shares of common stock of the Company at an exercise price of $7.00 per share.viruses via a mobile device.

Liquidity and capital resources

The Company has incurred substantial operating losses since inception and expectsAccounting 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 incur significant operating losses forperform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the foreseeable future and may never become profitable. As of March 31, 2019,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 Company had cash of approximately $5.2 million, working capital of approximately $5.2 million and an accumulated deficit of approximately $5.3 million.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 wouldmay result in dilution to its existing stockholders and any future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

The proceeds from the Company’s initial public offering and the current cash and cash equivalents areis sufficient to fund operations for at least the next 12 months; however,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 presentationPresentation 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 and notes should be read in conjunction with the audited consolidated financial statements and notes forthereto included in the year ended December 31, 2018.Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 16, 2021.

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 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 the valuation of preferred and common stock, 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, 20182020 as filed with the Securities and Exchange Commission (“SEC”)SEC on April 1, 2019.March 16, 2021.

Restricted Cash

In November 2016, the Financial Accounting Standards Board (“FASB”) issuedAccounting Standards Update(“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which clarifies the presentation of restricted cash in the statements of cash flows. Under ASU 2016-18, restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted ASU 2016-18 during the three months ended March 31, 2019 on a retrospective basis. The following istable provides a summary of the Company’s cash and restricted cash total as presented in the condensed consolidated statements of cash flows for the three months ended March 31, 2019:2020:

The $0.2 million restricted cash was deposited into a third-party escrow account in order to provide a source of funding for certain indemnification obligations the Company had pursuant to its Qualified Independent Underwriter Engagement Agreement. On May 29, 2020, the $0.2 million restricted cash in the escrow account was returned to the Company.

Stock-based compensationFair Value of Financial Instruments

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. Stock-based awards with graded-vesting schedules are recognizedCompany’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 straight-line basis overliability in an orderly transaction between market participants at the requisite service period for each separately vesting portionmeasurement 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 award. The Company recordsfollowing three categories for disclosure purposes:

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In some circumstances, the expense for stock-based compensation awards subjectinputs used to performance-based milestone vesting over the remaining service period when management determines that achievementmeasure fair value might be categorized within different levels of the milestonefair value hierarchy. In those instances, the fair value measurement is probable. Management evaluates whencategorized in its entirety in the achievement of a performance-based milestone is probablefair value hierarchy based on the expected satisfaction oflowest level input that is significant to the performance conditionsfair value measurement.

The following table presents the Company’s assets and liabilities that are measured at each reporting date. All stock-based compensation costs are recorded in generalfair value at March 31, 2021 and administrative or research and development costs in the statements of operations based upon the underlying employees’ or non-employees’ roles within the Company.December 31, 2020:

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:

Recent accounting pronouncements

In February 2016,December 2019, the FASB issued ASU No. 2016-02,2019-12, Leases“Income Taxes (Topic 842)740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which supersedes FASB ASCis intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 840, Leases (Topic 840)740 and provides principles for the recognition, measurement, presentationalso clarifies and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar toamends existing guidance for operating leases. The standardto improve consistent application. This guidance is effective for annualfiscal years, and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company does not have any long-term leases, therefore the adoption of this standard on January 1, 2019 did not have an impact on the Company’s condensed financial position and results of operations.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 simplifies several aspects of the accounting for non-employee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for public business entities forwithin those fiscal years, beginning after December 15, 2018, including interim periods within that fiscal year.2020, with early adoption permitted. The Company adopted ASU 2018-07 onNo. 2019-12 effective January 1, 2019.  Subsequent to2021, and the adoption of ASU 2018-07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair value for each stock award.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532,Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective on November 5, 2018. The Company included the required presentation of changes in stockholders’ equity in this Form 10-Q. The adoption of this standard on January 1, 2019 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 impacteffect on the Company’s condensed consolidated financial position and results of operations.statements.

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 3-License agreement

Chelexa BioSciences, Inc.agreements

The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during three months ended March 31, 2021 and 2020:

The George Washington University

During the three months ended March 31, 2021, the Company is subject to total milestone paymentsrecorded an expense of $3.5 million, royalty payments and has agreed to fund all development and commercialization costsapproximately $31,000 related to the licensed products.warrants granted to The George Washington University pursuant to a patent license agreement.

University of Maryland and Isoprene Pharmaceuticals, Inc.

OnDuring the three months ended March 8, 2019,31, 2021, the Company paid approximately $4,000 for patent expense reimbursement.

North Carolina State University

During the three months ended March 31, 2021, the Company paid $30,000 for a license fee and approximately $19,000 for patent expense reimbursement.

University of Maryland, BaltimoreCincinnati

During the three months ended March 31, 2021, the Company paid $5,000 for the yearly minimum annual royalty fee and approximately $5,000 for patent expense reimbursement. As of March 31, 2021, the Company accrued $17,500 for an upfront license payment.

Virginia Commonwealth University

On May 18, 2020 (the “VCU Effective Date”), the Company entered into an Exclusive License Agreement (the “VCU License Agreement”) with the Virginia Commonwealth University Intellectual Property Foundation (“UMD”VCU”). Pursuant to the VCU License Agreement, VCU granted the Company an exclusive, royalty bearing license to a novel peptide developed by researchers at VCU that may be used to slow the transmission of SARS-CoV-2 (the “VCU Licensed Patent”) and a non-exclusive royalty bearing, worldwide license with respect to the Licensed Technical Information Patents (as defined in the VCU License Agreement) to make, have made, use, offer to sell, sell and import the Licensed Products (as defined in the VCU License Agreement) and perform the Licensed Services (as defined in the VCU License Agreement). The VCU License Agreement commenced on the VCU Effective Date and shall continue until the expiration of the last to expire VCU Licensed Patent unless terminated earlier pursuant to the terms of the agreement. Pursuant to the VCU License Agreement, the Company shall pay VCU: (i) an upfront license issue fee, (ii) running royalty payments at a low single digit percentage of Net Sales (as defined in the VCU License Agreement), (iii) annual maintenance fees commencing on the first anniversary of the VCU Effective Date, (iv) annual minimum payments ranging from the mid five figures to low six figures commencing on the second anniversary of the VCU Effective Date and (v) milestone payments ranging from the mid five figures to low six figures. In addition, the Company has agreed to reimburse VCU for certain patent filing and prosecution costs.

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

On June 29, 2020, the Company entered into a Sponsored Project Agreement (the “VCU Sponsored Project Agreement”) with VCU for the development of a potential COVID-19 treatment using the license to a novel peptide granted to the Company by VCU. On April 28, 2021, the Company and VCU entered into an amendment to the VCU Sponsored Project Agreement pursuant to which the term of the VCU Sponsored Project Agreement was extended such that it shall terminate on November 9, 2021, unless terminated earlier pursuant to the terms thereof.

As of March 31, 2021, the Company accrued $285,000 for five years of annual minimum payments and $30,000 for annual maintenance fees.

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, 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:

Note 6-Investment in HaloVax

On March 23, 2020, the Company entered into a commercial evaluation sublicenseDevelopment and option agreement.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 considerationaddition, pursuant to the terms of the rights grantedDevelopment 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. The Company accounts for the foregoing investments under the agreement, the Company paid an initial option and material access fee of $5,000equity method. There was no significant change in HaloVax’s operations from March 23, 2020 to UMD and $5,000March 31, 2021.

Hoth Therapeutics, Inc.

Notes to Isoprene.Condensed Consolidated Financial Statements

(Unaudited)

Note 4-Stockholders’7-Stockholders’ Equity

PreferredCommon Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock. This preferred stock may be issued in one or more series, and shall have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be determined at the time of issuance by its board of directors without further action by shareholders. As of March 31, 2019, 5,000,000 shares of the Company’s preferred stock has been designated as Series A Preferred Stock. At the time of the IPO, 3,102,480 shares of Series A Preferred Stock which were previously issued were converted into common stock and 1,897,520 shares of Series A Preferred Stock remained authorized.

Common SharesSecurities Purchase Agreements

On February 15, 2019,January 5, 2021, the Company announcedentered into a securities purchase agreement with certain accredited investors pursuant to which the pricingCompany offered and sold to the investors an aggregate of its initial public offering of 1,250,0002,475,248 shares of its common stock and warrants to purchase up to 1,237,624 shares of common stock in a private placement for aggregate net proceeds to the Company of $4.6 million, after deducting estimated offering expenses payable by the Company. The combined purchase price for each share of common stock and accompanying warrant to purchase one half of a share of common stock was $2.02. The closing of the offering occurred on January 7, 2021. Each warrant is exercisable for a period of five years from the issuance date at an initial offeringexercise price of $2.25 per share, subject to adjustment, and may be exercised on a cashless basis. In addition, pursuant to the publicterms of $5.60 per share. Thethe offering, the Company issued The Benchmark Company, LLC (“Benchmark”) warrants to purchase up to 185,644 shares of the Company’s common stock. Benchmark’s warrants are exercisable for a period of five years from the closing date of the offering at an aggregateexercise price of 1,250,000$2.25 per share, subject to adjustment, and may be exercised on a cashless basis.

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 6,826,962 shares of common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 767,975 shares of common stock and receivedwarrants (the “Common Stock Warrants”) to purchase up to 7,594,937 shares of common stock in a private placement for aggregate net proceeds to the Company of $5.8$13.5 million, after deducting estimated offering expenses payable by the Company. The combined purchase price for each share of common stock and accompanying warrant was $1.975. The closing of the offering occurred on March 10, 2021. Each Common Stock Warrant is exercisable for a period of three years from the IPO.issuance date at an exercise price of $1.86 per share, subject to adjustment, and may be exercised on a cashless basis. Each Pre-Funded Warrant is exercisable until exercised in full at an exercise price of $0.001 per share and may be exercised by means of a cashless exercise. In addition, pursuant to the terms of the offering, the Company issued H.C. Wainwright & Co., LLC warrants (“Wainwright Warrants”) to purchase up to 379,747 shares of the Company’s common stock. The Wainwright Warrants are exercisable for a period of three years from the issuance date at an exercise price of $2.4688 per share, subject to adjustment, and may be exercised by on a cashless basis.

20192018 Equity GrantsIncentive 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.

Restricted Stock Awards

A summary of the Company’s restricted stock awards activitiesgranted under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) during the three months ended March 31, 20192021 is as follows:

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of March 31, 2019, the Company had2021, approximately $11,000$6,000 of unrecognized stock-based compensation expense which wasis related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards is approximately 1.141.94 years at March 31, 2019.2021.

Stock Options

OnA summary of option activity under the Company’s stock option plan for three months ended March 6, 2019, the Company granted 50,000 options to purchase common stock of the Company to its CFO pursuant to the 2018 Plan. The aggregate grant date fair value of these options was approximately $0.2 million. The stock options vested in full upon grant.31, 2021 is presented below:

Stock Based Compensation

Stock-based compensation expense for the three months ended March 31, 20192021 and 20182020 was approximately $0.2 million and $15,000, respectively, and was comprised of the following:as follows:

In addition, the Company recorded $0Employee related stock-based compensation is recognized as “compensation and $11,000 of stock issued for researchrelated expenses” and non-employee related stock-based compensation is recognized as “professional fees” or “research and development services for- licenses acquired” in the three months ended March 31, 2019condensed consolidated statements of operations and 2018, respectively.comprehensive loss.

Warrant ActivityWarrants

A summary of warrant activity for the three months ended March 31, 20192021 is presented below:as follows:

On February 20, 2019, Laidlaw received five-year warrants to purchase 50,000 shares of the Company’s common stock at an exercise price of $7.00 per share. These warrants are not exercisable prior to August 13, 2019.

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

Hoth Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5-Commitments8-Commitments and contingencies

Office lease

The Company leases office space that commenced on July 15, 2017, for approximately $2,000$2,500 a month. Rent expense for the three months ended March 31, 20192021 and 20182020 was approximately $7,000 and $6,000,$8,000, respectively. The term of the lease expires on July 31, 2019. In accordance with ASC 842, this lease meets the definition of a short term lease and accordingly,Company is not subjecta party to capitalization.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.

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 other than disclosed.

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, 2018.2020 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 focusedto initially focus on targeted therapeuticsdeveloping new generation therapies for dermatological disorders. We believe that our pipeline has the potential to improve the quality of life for patients suffering from conditions such asindications including atopic dermatitis also(also known as eczema.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.

Our primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted usDermatological Disorders

The BioLexa Platform

We have obtained an exclusive sublicenselicense from the University of Cincinnati to make, use, its BioLexa Platform (as defined herein),have made, import, offer for sale, and sell products based upon or involving the use of a proprietary, patented, drug compound platform developed at the University of Cincinnati. The license enables us to develop the platform(the “BioLexa Platform” or “BioLexa”) for any indications in humans. Our initial focus will be on the treatment of eczema through the application of a topical cream. Although our initial focus will be on the treatment of eczema, we intend to develop a second topical cream which, upon application, is intended to reduce post-procedure infections, accelerate healing and improve clinical outcomes for patients undergoing aesthetic dermatology procedures. In addition, we intend to conduct a pilot study on the efficacy of BioLexa to accelerate diabetic wound healing.eczema. The BioLexa Platform 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 which trigger symptoms. It is the first product candidate intended to prevent the symptom triggering flare-ups rather than simply treating symptoms when they occur.

On May 26, 2017, we entered into a sublicense agreement with Chelexa, as amended on August 22, 2018 and August 29, 2018, pursuant to which Chelexa granted us an exclusive sublicense to make, use, have made, import, offer for sale, and sell products based upon or involving the use of (i) topical compositions comprising a zinc chelator and gentamicin and (ii) zinc chelators to inhibit biofilm formation (the “BioLexa Platform” or “BioLexa”), which rights were originally granted to Chelexa pursuant to an exclusive license agreement with the University of Cincinnati. In addition, Chelexa granted us the right to issue exclusive and nonexclusive sublicenses (with the right to further sublicense to third parties) to make, use, have made, import, offer for sale, and sell products based upon the BioLexa Platform.

ducts. We intend to initially use the BioLexa Platform 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. Eczema is a disease that results in inflammation of the skin and is characterized by rash, red skin, and itchiness. Eczema is also referred to as atopic dermatitis. We are concentrating our effort and resourcesintend to develop the BioLexa Platform utilizing our novel formulation and approach for these two markets.

The BioLexa Platform has achieved positive results in its initial clinical studies conducted at the University of Miami. BioLexa’s formulation is a new topical dosage form “repurposing” the antibiotic, enabling it to be developed for use in patients following a specialthe Section 505(b)(2) regulatory pathway codified in Section 505(b)(2) of the FDA rules. Section 505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act was enacted to enable sponsors to seek New Drug Application (“NDA”) approval for novel repurposed drugs without the need for such sponsors to undertake time consuming and expensive pre-clinical safety studies and Phase 1 safety studies. Proceeding under this regulatory pathway, we will be able torules which permits us rely upon all of the publicly available safety and toxicology data with respect to gentamicin and zinc chelator in our New Drug Application (“NDA”) submission to the FDA submissions. We will be requiredfor marketing approval. Based on our meetings with the FDA, we are conducting our first clinical trial for BioLexa in Australia in order to conduct a Phase 2 studyenroll both adults and adolescents to show the safety of the combination in humans and after such Phase 2 study will be required to proceed to Phase 3 pivotal clinical trials. We believe that this path will dramatically reduce the requiredsupport future clinical development effort, costs and risks as compared to what would be required of us ifbefore conducting trials on pediatric patients.

HT-001

On February 1, 2020, we were required to conduct pre-clinical safety, toxicology and animal studies togetherentered into a patent license agreement with Phase 1 human safety trials required for new chemical entities which are not eligible to be reviewedThe 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 Section 505(b)(2) regulatory pathway.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 estimate that by usingintend to develop HT-001 for use in patients following the Section 505(b)(2) regulatory pathway that the clinical development process may be five to six years shorter than is required for a new chemical entity, andof the FDA approval process may be sixrules which permits us to nine months shorter than the typical eighteen month period, which we believe may resultrely upon publicly available data in lower development costs and shorter development time. As of the date hereof, we have not submitted anour NDA submission to the FDA. In September 2018, we attended the first of a planned series ofFDA for marketing approval. Based on our meetings with the FDA, we plan to reviewconduct our first clinical trial for HT-001 in the requirementsUnited States after completing the required safety and toxicology studies.

On February 23, 2021, we filed a provisional patent application with the United States Patent and Trademark Office for submissionthe use of the active ingredient of HT-001 to treat and activation of an investigational newprevent Alzheimer’s disease and other neuroinflammatory diseases. We intend to develop this drug application (“IND”) with respectunder the name HT-ALZ pursuant to the BioLexa Platform for use505(b)(2) regulatory pathway of the FDA rules which permits us to rely upon publicly available data in eczema. In preparation for such pre-IND meeting, we prepared and presentedour NDA submission to the FDA our proposed Phase 2 clinical trial planfor 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 eczemadermatological conditions or diseases, referred to as HT-003.

In December 2019, we entered into a research collaboration agreement with Weill Cornell Medicine for the completion of pre-clinical studies investigating the mechanism of action of HT-003 that was renewed in patients overJanuary 2021 as a result of positive preclinical results, and on December 22, 2020, we entered into an option agreement to expand the agetherapeutic indication of one year old. As partthe sublicensed retinoic acid metabolism blocking agent (“RAMBAs”) from Isoprene. The option agreement includes the investigation of our pre-IND meeting,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 FDA provided us with general guidanceUnited States and Canada initially with respect to specific animal studies, dosing schedules and suggested human safety studies before we commence clinical trialstherapeutic uses related to lupus in pediatric or adult patients. We are also exploring the feasibility, cost and timings advantages of conducting an initial Phase 2 proof of concept clinical trial in a small number of pediatric patients. The objective of this study would be to evaluate the safety and potential efficacy of BioLexa compared to the cream base or vehicle that contains no active ingredients. This Phase 2 proof of concept clinical trial feasibility study may provide us with highly useful information regarding potential safety and efficacy of the BioLexa Platform and assist us in developing appropriate sample sizeshumans.

Genetic Marker for the two registration, or regulatory, trials required for FDA approval. We are currently investigating multiple potential venues for conducting such trial both in and outstand of the U.S. We have engaged Camargo Pharmaceutical Services, LLC (“Camargo”) to assist us with the FDA process required for Section 505(b)(2) applications and with the evaluation of potential clinical trial venues for the proof of concept study should we determine to undertake such study. Specifically, Camargo has provided and will continue to provide advice and guidance relative to the IND preparation phase for the BioLexa Platform. Camargo will assist us with the refinement of our non-clinical, clinical, clinical pharmacology and biopharmaceutics strategy incorporating the preliminary feedback we received from the FDA during our pre-IND meeting.Food Allergies

We believe that the key elements for our market success include:

In addition to our sublicense agreement with Chelexa,On May 18, 2018, we entered into an exclusive license agreement with the University of Cincinnati for a patented, novel genetic marker for food allergies. The genetic marker licensed by us from the University of Cincinnati (i) may be used to (i) identify at risk infants in predicting food allergies, including peanut and milk allergies, (ii) may be used to identify a person’s predisposition to an allergic reaction thereby avoiding such reaction and (iii) may also determine an individual’s propensity to develop atopic dermatitis, such as eczema. We intend to utilize the genetic marker in the future for purposes of determining an individual’s propensity to develop eczema as well as to identify and treat allergies in at-risk infants.

In orderRespiratory Products

HT-004

On November 20, 2019, we entered into a license agreement with North Carolina State University (“NC State”) pursuant to generate revenuewhich 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 our product candidates, webacterial infections. We will need to sell our product candidates either through distribution partnerships or through our own sales efforts. Prior to selling our product candidates, we will need to receive FDA approvalinitially target treatment of our NDA for eachserious bacterial infections of the lung, such as hospital-acquired pneumonia and ventilator-associated pneumonia. Given the indication, that we intend to treat. The first indication we are seeking approvaldevelop HT-006 for inhalational administration.

Cancer Treatments

HT-KIT

We have obtained from NC State 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 the BioLexa Platform for treating eczema.being developed as HT-KIT. We intend to submit our NDAinitially target mast cell neoplasms for suchdevelopment 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.

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 endtransmission of 2021SARS-CoV-2 (the “VCU Peptide”) and a non-exclusive royalty bearing, worldwide license with approvalrespect 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 with VCU for the development of such NDA anticipateda potential COVID-19 treatment using the VCU Peptide.

VaxCelerate SARS-CoV-2 Vaccine

On March 23, 2020, we entered into Royalty and Development Agreement with Voltron Therapeutics, Inc.  (“Voltron”) pursuant to be in 2022; however, no assuranceswhich 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 (“GW Patent License Agreement”) with GW pursuant to which GW granted us an exclusive, worldwide, royalty bearing license to certain intellectual property that can be given thatused 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 receive approval of the NDA in a timely manner, if at all.  select target analytes for further development.

Components of Our Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

Operating Costs and Expenses

Research and Development Expenses

For the three months ended March 31, 2019, research and development expenses were approximately $0.1 million, of which $10,000 was related to license acquired and approximately $0.1 million was related to other research and development expenses.

During the three months ended March 31, 2018,2021, we incurred research and development expenses wereof approximately $0.2$1.6 million, of which $0.1 as compared to $0.7 million during the three months ended March 31, 2020. The $0.9 million increase was relatedprimarily attributed to the acquisitionincreased number of a license from Chelexa Biosciences, Inc. Pursuant to the terms of the sublicense agreement, we issued Chelexa 0.2 million shares of our common stock valued at $0.1 million. In addition, we incurred approximately $41,000 of expense related to other research and development expenses.activities undertaken by us.

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

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

For the three months ended March 31, 2019, general and administrative expenses were approximately $0.7 million, which primarily consisted of approximately $0.3 million related to payroll expenses and stock based compensation, and approximately $0.3 million for professional fees.

During the three months ended March 31, 2018,2021, we incurred general and administrative expenses were $0.4of approximately $2.6 million whichas compared to $1.1 million during the three months ended March 31, 2020. The $1.5 million increase was primarily consistedattributed to an increase in compensation and related expenses as a result of $94,000options granted to our officers and directors. Specifically, during the three months ended March 31, 2021, we incurred $1.1 million in stock-based compensation expense related to payroll expenses, $15,000 relatedemployee stock option awards as we granted options to the issuancepurchase an aggregate of 100,000623,000 shares of our common stock to one employee,our officers and $0.2 million for professional fees.directors.

We anticipate that our general and administrative expenses will increase in future periods, reflecting continued and increasing costs associated with:

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 March 31, 2019,2021, we had approximately $5.2$19.3 million in cash, marketable securities of approximately $1.1 million, current liabilities of approximately $0.8 million and an accumulated deficit of approximately $5.3$23.7 million.

We have funded our operations from proceeds fromentered 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 saleachievement of equity and debt securities. We will require significant additional capitalcertain development and/or commercialization events, we may also be required to make the investments we needcertain: (i) minimum royalty payments, ranging from middle to execute its longer-term business plan. Our abilityhigh five figures, (ii) sales-based royalties and running royalties, ranging from low single digits to successfully raise sufficient funds through the salelow double digits; and (iii) milestone payments, of debt or equity securities when needed is subjectup to many risks and uncertainties and, even if we were successful, future equity issuances would resultapproximately $21 million (if all milestones in dilution to its existing stockholders and any future debt securities may contain covenants that limit our operations or ability to enter into certain transactions.

The proceeds from our initial public offering and the current cash and cash equivalents are sufficient to fund operations for at least the next 12 months; however, we will need to raise significant additional capital to continue to fund our operations and the clinical trials for BioLexa. We may seek to sell common stock, preferred stock or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. In addition, we may seek to raise cash through collaborative agreements or from government grants. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights.

The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development program. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate expenses including some or all of our planned development, including our clinical trials.current agreements are achieved).

Cash Flows from Operating Activities

For the three months ended March 31, 2019,2021, net cash used in operations was $0.8approximately $2.7 million, which primarily resulted from a net loss of $0.8 million.approximately $4.3 million, partially offset by changes in operating assets and liabilities of approximately $0.4 million and approximately $1.1 million stock-based compensation.

For the three months ended March 31, 2018,2020, net cash used in operations was $0.4approximately $1.6 million, which primarily resulted from a net loss of $0.5approximately $1.8 million, partially offset by $0.1 million non-cash researchchanges in operating assets and development expense related to a license acquisition.liabilities of approximately $0.2 million.

Cash Flows from Investing Activities

For the three months ended March 31, 2019,2021, net cash used inprovided by investing activities was $10,000,approximately $1.0 million, which was primarily related to the purchase of marketable securities of $1.0 million.

For the three months ended March 31, 2020, net cash provided by investing activities was approximately $0.1 million, which was related to the sale of marketable securities of $0.3 million, partially offset by the purchase of research and development licenses.licenses of approximately $0.4 million and the purchase of an investment in a joint venture of $0.3 million.

Cash Flows from Financing Activities

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

For the three months ended March 31, 2018, there was no investing activities.

Cash Flows from Financing Activities

For the three months ended March 31, 2019,2020, net cash provided by financing activities was $5.9 million, including $0.2 million restricted cash, from the net proceeds in IPO.approximately $4.2 million. The $0.2 million restricted cash has been deposited into a third party escrow account in order to provide a source of funding for certain indemnification obligations we have pursuant to our Qualified Independent Underwriter Engagement Agreement.

For the three months ended March 31, 2018, net cash provided by financing activities was $1.2primarily resulted from approximately $4.2 million which reflects thein net proceeds from investors in exchange for the issuance of 13.77 units of our securities.

On February 20, 2019, we closed the IPO pursuant to which we issued 1,250,000 shares of our common stock for net proceeds of approximately $5.8 million, after deducting underwriting discounts and commissions and offering expenses.warrants.

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

As of March 31, 2019,2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

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 of 1933, as amended (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.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act 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 229.10(f)(1).12b-2 of the Exchange Act.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintainOur principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures,” asprocedures” (as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e) under) as of March 31, 2021, the Securities Exchange Actend of 1934 (the “Exchange Act”)the period covered by this Quarterly Report on Form 10-Q, have concluded that are designed to ensureour disclosure controls and procedures were effective such that the information required to be disclosed by a companyus in the reports that it files or submitsfiled under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is(ii) accumulated and communicated to our management, including our principal executive officer and principal financial officers,officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2019, our disclosure controls and procedures were effective.

Changes in Internal Control

There werehave been no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Qour 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 only reasonableabsolute assurance that all control issues and instances of achieving the desired control objectives.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.

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.

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).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.

On February 20, 2019, weJanuary 29, 2021, the Board of Directors of the Company issuedLaidlaw & Company (UK) Ltd. a warrant officers and directors options to purchase up to 50,000632,000 shares of ourthe Company’s common stock pursuant to the Company’s 2018 Equity Incentive Plan at an exercise price of $2.11 per share for services rendered in connection with our initial public offering.  services.

During the three months ended March 31, 2021, the Company issued an aggregate of 2,082 shares of the Company’s common stock, which shares were subject to a vesting schedule, to a member of the Company’s Board of Directors for services.

The foregoing issuance wasissuances were exempt from registration

under Section 4(a)(2) of the Securities Act.

On February 20, 2019, we completed the initial public offering of our common stock pursuant to which we issued and sold 1,250,000 shares of our common stock at a price to the public of $5.60 per share.

We received net proceeds of $5.8 million, after deducting underwriting discounts and commissions and offering expenses borne by us. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy and for payments made to Laidlaw & Co. (UK) Ltd. for services rendered by them in connection with the offering ($490,000 of underwriting discounts and commissions and $200,000 for reimbursement of out-of-pocket expenses). Laidlaw & Co. (UK) Ltd. acted as sole book-running manager for the offering. The Benchmark Company acted as qualified independent underwriter.

There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus related to the offering, dated February 14, 2019 as filed with the SEC.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

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.

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