What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-16 compared with 2020-03-02 · 338 added, 324 removed, 14 unchanged (98% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

February 15, 2019, our common stock began trading on The Nasdaq Capital Market under the symbol “HOTH.”

Prior to that

time, there was no public market for our common stock.

of February 28, 2020, there were 156 stockholders of record of our common stock.

The actual number of holders of our common stock

is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held

in street name by brokers or held by other nominees.

This number of holders of record also does not include stockholders whose

shares may be held in trust by other entities.

have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our

common stock in the foreseeable future.

We intend to retain all available funds and any future earnings to fund the development

and expansion of our business.

Any future determination to pay dividends will be at the discretion of our board of directors and

will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual

restrictions, restrictions imposed by applicable law and other factors that our board of directors deems relevant.

Sales of Unregistered Securities

January 2019 until December 2019, the Company issued an aggregate of 8,328 shares of the Company’s common stock, which shares

are subject to a vesting schedule, to a member of the Company’s Board for services rendered.

February 20, 2019, the Company issued Laidlaw & Company (UK) Ltd.

a warrant to purchase up to 50,000 shares of common

stock for services rendered in connection with the Company’s initial public offering.

On April 17, 2019, the Company entered

into a Master Service Agreement with a consultant.

In consideration for services provided by the consultant, the Company issued

the consultant a two year warrant to purchase up to 50,000 shares of the Company’s common stock at an exercise price of

$0.01 per share.

On May 22, 2019, the Company and consultant agreed to terminate the Master Service Agreement and number of shares

of the Company’s common stock issuable upon exercise of the consultant’s warrant was reduced to 16,333.

In June 2019,

the Company issued 16,333 shares of common stock upon exercise of the consultant’s warrant.

September 26, 2019, the Company issued 10,000 and 30,000 shares of common stock to the Benchmark Company, LLC and FON Consulting,

LLC, respectively, for services rendered.

December 24, 2019, the Company issued its officers, directors and an advisor options to purchase an aggregate of 475,000 shares

of common stock at an exercise price of $5.26 per share for services rendered.

foregoing offers, sales and issuances were exempt from registration under Section 4(a)(2) of the Securities Act and/or Rule 506

of Regulation D thereunder.

MARKET FOR REGISTRANT’S COMMON

EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On February 15, 2019, our common stock began

trading on The Nasdaq Capital Market under the symbol “HOTH.”

Prior to that time, there was no public market for our

common stock.

As of March 11, 2021, there were 157 shareholders

of record of our common stock.

The actual number of holders of our common stock is greater than this number of record holders,

and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.

This number of holders of record also does not include shareholders whose shares may be held in trust by other entities.

Dividend Policy

We have never paid or declared any cash dividends

on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

to retain all available funds and any future earnings to fund the development and expansion of our business.

Any future determination

to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results

of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other

factors that our board of directors deems relevant.

Recent Sales of Unregistered Securities

On July 21, 2020, the Board of Directors issued

officers and directors options to purchase up to 200,000 shares of the Company’s common stock pursuant to the Company’s

2018 equity incentive plan at an exercise price of $3.05 per share for services rendered.

From October to December 2020, the

Company issued an aggregate of 2,082 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 rendered.

The foregoing offers, sales and issuances were

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

SELECTED FINANCIAL DATA

a smaller reporting company, we are not required to provide the information required by this item.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS

should read the following discussion and analysis of our financial condition and plan of operations together with and our consolidated

financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.

In addition to historical information,

this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

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”

elsewhere in this Annual Report on Form 10-K.

As a smaller reporting company, we are not

required to provide the information required by this item.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

You should read the following discussion

and analysis of our financial condition and results of operations together with and our consolidated financial statements and the

related notes appearing elsewhere in this Annual Report on Form 10-K.

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 elsewhere in this Annual Report on Form 10-K.

All amounts in this report are in U.S.

dollars, unless otherwise noted.

We are a clinical-stage biopharmaceutical

company incorporated in May 2017 focused 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

We are a clinical-stage biopharmaceutical company

and were formed in May 2017 to initially focus on developing new generation therapies for dermatological disorders.

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.

primary asset is a sublicense agreement with Chelexa which we entered into on May 26, 2017, as amended on August 22, 2018 and

August 29, 2018, pursuant to which Chelexa has granted us an exclusive sublicense to make, use, have made, import, offer for sale,

and sell products based upon or involving the BioLexa Platform, which rights were originally granted to Chelexa pursuant to an

exclusive license agreement with the University of Cincinnati.

The license enables us to develop the platform for any indications

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

In addition, we conducted an initial pilot study on the efficacy of BioLexa to accelerate diabetic wound healing and

intend to conduct additional studies with respect to the regenerative effects of the BioLexa Platform in the context of chronic

diabetic ulcers, with and without substantial bacterial burden.

The BioLexa Platform combines an 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.

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 resources to develop

the BioLexa Platform, utilizing our novel formulation and approach for these two markets.

BioLexa Platform has achieved positive results in its initial pre-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 special regulatory pathway codified in Section 505(b)(2) of the FDA rules.

Section 505(b)(2) of the FDCA was enacted

to enable sponsors to seek 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 to rely upon all of the publicly available safety and toxicology data with respect to gentamicin and zinc chelator in our

FDA submissions.

We will be required to conduct a Phase 2 study 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 required clinical development effort, costs and risks as compared to what would be required of us if we were required

to conduct pre-clinical safety, toxicology and animal studies together with Phase 1 human safety trials required for new chemical

entities which are not eligible to be reviewed pursuant to the Section 505(b)(2) regulatory pathway.

We estimate that by using

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, and the FDA approval process may be six to nine months shorter than the typical eighteen month period,

which we believe may result in lower development costs and shorter development time.

As of the date hereof, we have not submitted

an NDA to the FDA.

In September 2018, we attended the first of a planned series of meetings with the FDA to review the requirements

for submission and activation of an IND with respect to the BioLexa Platform for use in eczema.

In preparation for such pre-IND

meeting, we prepared and presented to the FDA our proposed Phase 2 clinical trial plan for the treatment of eczema in patients

over the age of one year old.

As part of our pre-IND meeting, the FDA provided us with general guidance with respect to specific

animal studies, dosing schedules and suggested human safety studies before we commence clinical trials in pediatric or adult patients.

We are currently investigating multiple potential venues for conducting such trial both in and outside of the U.S.

We have engaged

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.

believe that the key elements for our market success with respect to BioLexa include:

proprietary formulation of two FDA-approved drugs to treat bacterial proliferation reduces development time and costs by giving

us the ability to rely on safety and efficacy data from the two approved drugs;

proprietary formulation is not a topical corticosteroid, and may not be subject to the same FDA black box warning issues as

most commonly prescribed treatments currently in use;

recent peer-reviewed publication titled “

Staphylococcal Bacteria May Cause Eczema, Study Reveals ”, published

Allen, highlights that staph -induced biofilms are the root cause of flare-ups in eczema.

product candidate has been demonstrated to prevent the formation of these biofilms with the promise of delaying or completely

arresting flare-ups, rather than merely treating symptoms of a flare-up already underway.

addition to our sublicense agreement with Chelexa, we entered into the following agreements:

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

may be used to (i) identify at risk infants in predicting food allergies, including peanut

and milk allergies, (ii) identify a person’s predisposition to an allergic reaction,

thereby avoiding such reaction and (iii) determine an individual’s propensity to

develop AD, such as eczema.

We intend to utilize the genetic marker for purposes of determining

an individual’s propensity to develop eczema as well as to identify and treat allergies

in at-risk infants.

Sublicense Agreement with Zylö

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;

a treatment for asthma and allergies using inhalational administration;

(iii) a topical treatment for patients with lupus;

a treatment for mast-cell derived cancers and anaphylaxis;

and (v) a treatment for lung diseases resulting from bacterial infections.

We are also focused on potentially developing a COVID-19 treatment as well as a diagnostic device for the detection of SARS-CoV-2

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 BioLexa Platform which is a proprietary, patented, drug compound platform for the treatment of eczema.

It combines an 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 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

We intend to develop the BioLexa Platform 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 NDA submission

to the FDA for marketing approval.

Based on our meetings with the FDA, we plan to conduct our first clinical trial for BioLexa

in Australia in order to enroll both adult and adolescents to support future clinical development before conducting trials on pediatric

On February 1, 2020, we entered into a patent

license agreement with 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 EGFR inhibitors, and potentially other drugs used for the treatment of cancer.

On July 30, 2020, we entered into the Isoprene

Sublicense Agreement with 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 Weill Cornell Medicine 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 preclinical results, and on December 22, 2020, we entered into

an option agreement to expand the therapeutic indication of the sublicensed RAMBAs from Isoprene.

The option 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

pursuant to which Zylö

granted us an exclusive

sublicense to the Licensed Patent Rights (as defined in the Sublicense Agreement) and

the Licensed Technology (as defined in the Sublicense Agreement) to, among other things,

develop, make and sell the Licensed Products (as defined in the Sublicense Agreement)

and to practice the Licensed Technology in the United States and Canada for any and all

therapeutic uses related to lupus in human beings, subject to the Field Expansion Rights

(as defined in the Sublicense Agreement).

license agreement with NCSU pursuant to which NCSU granted us an exclusive license to,

among other things, develop, make, use, offer and sell certain licensed products throughout

the world with respect to NCSU’s exon skipping approach for treating allergic diseases.

patent license agreement with 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 aprepitant as used in treating side effects from

drugs used for the treatment of cancer.

order to generate revenue from our product candidates, 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 approval of

our NDA for each indication that we intend to treat.

The first indication we are seeking approval for is the BioLexa Platform

for treating eczema.

We intend to submit our NDA for such indication by the end of 2021 with approval of such NDA anticipated

to be in 2022;

however, no assurances can be given that we will receive approval of the NDA in a timely manner, if at all.

of Operations

of Our Results of Operations for the Years Ended December 31, 2019 and 2018

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.

Genetic Marker for Food Allergies

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 may be used to (i) identify at risk infants in predicting food allergies, including peanut and milk allergies, (ii) identify

a person’s predisposition to an allergic reaction and (iii) 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.

Respiratory Products

On November 20, 2019, we entered into a license

agreement with 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.

currently under investigation for the treatment of asthma and allergies using inhalational administration.

On December 22, 2020, we entered into a non-exclusive

commercial evaluation license agreement with 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 HAP and VAP.

Given the indication, we intend to develop HT-006 for inhalational

administration.

Cancer Treatments

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 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

COVID-19 Products

On May 18, 2020, we entered into an Exclusive

License Agreement with the 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 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

with VCU for the development of a potential COVID-19 treatment using the VCU Peptide.

VaxCelerate SARS-CoV-2 Vaccine

On March 23, 2020, we entered into the Voltron

Agreement with Voltron pursuant to which we formed a joint venture entity named 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 Mass Gen.

The SARS-CoV-2

vaccine is being developed using VaxCelerate, a self-assembling vaccine platform licensed from Mass Gen by HaloVax.

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.

On-the-Go Sars-Cov-2 Testing Device

On August 7, 2020, we entered into the 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 used to develop a device designed to detect the presence of SARS-CoV-2.

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.

On September 17, 2020, we entered into a sponsored research agreement with GW relating to the development of a diagnostic

device for the detection of SARS-CoV-2 via a mobile device as an aid in the diagnosis of the COVID-19 infection.

Results of Operations

Comparison of Our Results of Operations for the Years Ended December

31, 2020 and 2019

Costs and Expenses

and Development Expenses

the year ended December 31, 2019, research and development expenses were approximately $2.1 million which primarily consisted

of $50,000 related to the Zylö

Sublicense Agreement, $10,000 related to a license acquired from the University of Maryland

and Isoprene Pharmaceuticals Inc., $25,000 related to a license acquired from the North Carolina State University, and approximately

$2.0 million related to other research and development expenses.

the year ended December 31, 2018, research and development expenses were approximately $1.0 million, of which approximately $0.1

million was related to license acquired, $0.1 million was related to the issuance of 213,166 shares of our common stock pursuant

to the sublicense agreement with Chelexa and $0.8 million was related to other research and development expenses.

expect our research and development activities to increase as we develop our existing product candidate 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 and milestone payments related to in-licensed products and technology;

incurred under agreements with CROs, investigative sites and consultants that conduct our clinical trials and a substantial

portion of our pre-clinical activities;

cost of acquiring and manufacturing clinical trial materials;

associated with non-clinical activities, and regulatory approvals.

and Administrative Expenses

the year ended December 31, 2019, general and administrative expenses were approximately $5.6 million, which primarily consisted

of approximately $2.9 million related to payroll expenses and stock-based compensation, approximately $2.1 million for professional

fees and $0.6 million for other expenses.

the year ended December 31, 2018, general and administrative expenses were approximately $1.5 million, which primarily consisted

of approximately $0.4 million related to payroll expenses, approximately $0.1 million related to the issuance of 145,970 shares

of our common stock to two employees and two directors and approximately $0.7 million for professional fees.

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

associated with:

of our research and development activities;

compensation granted to key employees and non-employees;

of business development activities;

professional fees and other costs associated with the regulatory requirements and increased compliance associated with being

a public reporting company.

and Capital Resources

have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the

foreseeable future and may never become profitable.

As of December 31, 2019, we had approximately $1.7 million in cash, marketable

securities of $0.8 million, current liabilities of $0.4 million and an accumulated deficit of approximately $12.2 million.

Flows from Operating Activities

the year ended December 31, 2019, net cash used in operations was approximately $4.9 million, which primarily resulted from

a net loss of approximately $7.7 million, partially offset by approximately $2.5 million stock-based compensation and changes

in operating assets and liabilities of approximately $0.2 million.

the year ended December 31, 2018, net cash used in operations was $2.1 million, which primarily resulted from a net loss

of $2.5 million, partially offset by $0.1 million stock-based compensation expense and $0.1 million non-cash research and development

expense related with license acquisition.

Flows from Investing Activities

For the year ended December 31, 2019, net cash used in investing

activities was approximately $0.9 million, which was related to the purchase of marketable securities of $0.8 million and the

purchase of research and development licenses of $0.9 million.

the year ended December 31, 2018, there was no investing activities.

Flows from Financing Activities

the year ended December 31, 2019, net cash provided by financing activities was approximately $7.5 million, including approximately

$0.2 million restricted cash.

The cash provided by financing activities primarily resulted from approximately $5.8 million in

net proceeds from the Company’s initial public offering (the “IPO”) and approximately $1.6 million in net proceeds

from a private offering of an aggregate of 407,474 units with each unit consisting of one share of the Company’s common

stock and a warrant to purchase one-half share of the Company’s common stock.

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.

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 the Company has pursuant to its Qualified

Independent Underwriter Engagement Agreement.

the year ended December 31, 2018, net cash provided by financing activities was $1.2 million, which is the net proceeds raised

from investors in consideration for the issuance of 13.77 units (the “Units”).

Each Unit consisted of 100,000 shares

of Series A Preferred Stock and a warrant to purchase 25% of the shares of common stock issuable upon conversion of the Series

A Preferred Stock.

ultimate success is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet our obligations

on a timely basis.

We will require significant amounts of capital to sustain operations, and we will need to make the investments

we need to execute our longer-term business plan to support new technologies and help advance innovation.

Absent generation

of sufficient revenue from the execution of our long-term business plan, we will need to obtain debt or equity financing, especially

if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases

in expense levels resulting from being a publicly-traded company or from operations.

Such additional debt or equity financing

may not be available to us on favorable terms, if at all.

plan to pursue our plans with respect to the research and development of our pre-clinical products which will require resources

beyond those that we currently have, ultimately requiring additional capital from third party sources.

We currently do not expect

to generate any revenue and our independent registered public accounting firm has included in its opinion for the year ended December

31, 2019 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern within one

year from the date of this filing.

The consolidated financial statements have been prepared assuming that we will continue

as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification

of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Research and Development Expenses

For the year ended December 31, 2020, research

and development expenses were approximately $2.9 million, of which approximately $0.6 million was related to licenses acquired

and approximately $2.3 million was related to other research and development expenses.

For the year ended December 31, 2019, research

and development expenses were approximately $2.1 million which primarily consisted of $50,000 related to the Zylö

Agreement, $10,000 related to a license acquired from UMB and Isoprene, $25,000 related to a license acquired from the NC State,

and approximately $2.0 million related to other research and development expenses.

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 CROs, 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;

costs associated with non-clinical activities and regulatory approvals.

Compensation, Professional Fees, Rent and Other (“General

and Administrative Expenses”)

For the year ended December 31, 2020, General

and Administrative Expenses were approximately $4.4 million, which primarily consisted of approximately $1.5 million related to

payroll expenses and stock-based compensation, approximately $2.5 million for professional fees and approximately $0.5 million

for other expenses.

For the year ended December 31, 2019, General

and Administrative Expenses were approximately $5.6 million, which primarily consisted of approximately $2.9 million related to

payroll expenses and stock-based compensation, approximately $2.1 million for professional fees and $0.6 million for other expenses.

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;

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 may never become profitable.

As of December 31, 2020, we had approximately $2.6 million in cash, marketable securities of $2.1 million, current liabilities

of $0.3 million and an accumulated deficit of approximately $19.4 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

(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;

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).

See Note 3 to the consolidated financial statements for discussion of our agreements with third

Cash Flows from Operating Activities

For the year ended December 31, 2020, net cash

used in operations was approximately $6.1 million, which primarily resulted from a net loss of approximately $7.2 million and changes

in operating assets and liabilities of approximately $0.1 million, partially offset by approximately $0.5 million research and

development expense related to license acquisitions and $0.7 million of stock-based compensation.

For the year ended December 31, 2019, net cash

used in operations was approximately $4.9 million, which primarily resulted from a net loss of approximately $7.7 million, partially

offset by approximately $2.5 million of stock-based compensation and changes in operating assets and liabilities of approximately

$0.2 million.

Cash Flows from Investing Activities

For the year ended December 31, 2020, net cash

used in investing activities was approximately $1.8 million, which was primarily related to the purchase of marketable securities

of approximately $2.3 million and purchase of investments in HaloVax, LLC and Zylö

of approximately $0.4 million, partially

offset by the sale of marketable securities of approximately $1.1 million.

For the year ended December 31, 2019, net cash

used in investing activities was approximately $0.9 million, which was related to the purchase of marketable securities of $0.8

million and the purchase of research and development licenses of $0.1 million.

Cash Flows from Financing Activities

For the year ended December 31, 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.

For the year ended December 31, 2019, net cash

provided by financing activities was approximately $7.5 million, including approximately $0.2 million restricted cash.

provided by financing activities primarily resulted from approximately $5.8 million in net proceeds from our initial public offering

(the “IPO”) and approximately $1.6 million in net proceeds from a private offering of an aggregate of 407,474 units

with each unit consisting of one share of our common stock and a warrant to purchase one-half share of our common stock.

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.

The $0.2 million restricted cash had

been deposited into a third-party escrow account in order to provide a source of funding for certain indemnification obligations

we had pursuant to our Qualified Independent Underwriter Engagement Agreement.

Our ultimate success is dependent on our ability

to obtain additional financing and generate sufficient cash flow to meet our obligations on a timely basis.

We will require significant

amounts of capital to sustain operations, and we will need to make the investments we need to execute our longer-term business

plan to support new technologies and help advance innovation.

Absent generation of sufficient revenue from the execution of our

long-term business plan, we will need to obtain debt or equity financing, especially if we experience downturns in our business

that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being

a publicly-traded company or from operations.

Such additional debt or equity financing may not be available to us on favorable

terms, if at all.

We plan to pursue our plans with respect to

the research and development of our pre-clinical products which will require resources beyond those that we currently have, ultimately

requiring additional capital from third party sources.

We currently do not expect to generate any revenue.

Sheet Arrangements

of December 31, 2019 and 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation

S-K or any commitments or contractual obligations.

Accounting Policies and Significant Judgments and Estimates

management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial

statements, which have been prepared in accordance with U.S.

As of December 31, 2020 and 2019, we did not

have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K or any commitments or contractual obligations.

Critical Accounting

Policies and Significant Judgments and Estimates

Our management’s discussion and analysis

of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared

in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect

the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance

sheet and the reported amounts of expenses during the reporting period.

The preparation of these consolidated financial

statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities,

disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during

the reporting period.

In accordance with U.S.

GAAP, we evaluate our estimates

and judgments on an ongoing basis.

The most significant estimates relate to the valuation of preferred and common stock, the valuation

of stock options and the valuation allowance of deferred tax assets resulting from net operating losses.

We base our estimates

and assumptions on current facts, our limited historical experience and various other factors that we believe are reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities

that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or

define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments

about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations,

as well as the specific manner in which we apply those principles.

While our significant accounting policies are more fully described

in Note 2 to our consolidated financial statements appearing elsewhere in Annual Report on Form 10-K, we believe the following

are the critical accounting policies used in the preparation of our consolidated financial statements that require significant

estimates and judgments:

expense 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 recognized on a straight-line basis over the requisite

service period for each separately vesting portion of the award.

We record the expense for stock-based compensation awards subject

to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone

Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction

of the performance conditions at each reporting date.

All stock-based compensation costs are recorded in general and administrative

or research and development costs in the statements of operations based upon the underlying employees’

GAAP, we evaluate our estimates and judgments on an ongoing basis.

The most significant

estimates relate to the valuation of stock options and the valuation allowance of deferred tax assets resulting from net operating

We base our estimates and assumptions on current facts, our limited historical experience and various other factors that

we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates

under different assumptions or conditions.

We define our critical accounting policies

as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and

are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which

we apply those principles.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial

statements appearing elsewhere in Annual Report on Form 10-K, we believe the following are the critical accounting policies used

in the preparation of our consolidated financial statements that require significant estimates and judgments:

We expense 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 recognized on a straight-line basis over the requisite service period for each separately vesting

portion of the award.

We record the expense for stock-based compensation awards subject to performance-based milestone vesting

over the remaining service period when management determines that achievement of the milestone is probable.

Management evaluates

when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions

at each reporting date.

All stock-based compensation costs are recorded in general and administrative or research and development

costs in the statements of operations based upon the underlying employees’

or non-employees’

taxes are recorded in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, or ASC 740, which

provides for deferred taxes using an asset and liability approach.

We recognize deferred tax assets and liabilities for the expected

future tax consequences of events that have been included in our consolidated financial statements or tax returns.

assets and liabilities are determined based on the difference between our financial statement and tax bases of assets and liabilities

using enacted tax rates in effect for the year in which the differences are expected to reverse.

Valuation allowances are provided,

if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not

account for uncertain tax positions in accordance with the provisions of ASC 740.

When uncertain tax positions exist, we recognize

the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by

the taxing authority.

The determination as to whether the tax benefit will more likely than not be realized is based upon the

technical merits of the tax position as well as consideration of the available facts and circumstances.

Accounting Pronouncements

Note 2 to the consolidated financial statements for a discussion of recent accounting standards and pronouncements.

April 5, 2012, the JOBS Act was enacted.

Income taxes are recorded in accordance with

Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”) which provides for deferred taxes

using an asset and liability approach.

We recognize deferred tax assets and liabilities for the expected future tax consequences

of events that have been included in our consolidated financial statements or tax returns.

Deferred tax assets and liabilities

are determined based on the difference between our financial statement and tax bases of assets and liabilities using enacted tax

rates in effect for the year in which the differences are expected to reverse.

Valuation allowances are provided, if based upon

the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We account for uncertain tax positions in accordance

with the provisions of ASC 740.

When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent

that the benefit would more likely than not be realized assuming examination by the taxing authority.

The determination as to whether

the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration

of the available facts and circumstances.

Significant Accounting Policies

See Note 2 to

the consolidated financial statements for a discussion of recent accounting policies.

On April 5, 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.

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 consolidated 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.

are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,”

to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report

on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and

(ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”)

regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the

audit and the consolidated financial statements, known as the auditor discussion and analysis.

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 consolidated 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 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;

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 the IPO;

(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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

a smaller reporting company, we are not required to provide the information required by this item.

(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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

As a smaller reporting company, we are not

required to provide the information required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity