What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-16 compared with 2020-03-02 · 754 added, 594 removed, 412 unchanged (77% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Hoth Therapeutics,

Consolidated Financial

of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2019 and 2018

Statements of Operations for the years ended December 31, 2019 and 2018

Statements of Changes in Stockholders’

FINANCIAL STATEMENTS AND SUPPLEMENTARY

Hoth Therapeutics, Inc.

Consolidated Financial Statements

Report of Independent Registered

Public Accounting Firm

Consolidated Balance Sheets

as of December 31, 2020 and 2019

Consolidated Statements

of Operations and Comprehensive Loss for the years ended December 31, 2020 and 2019

Consolidated Statements

of Changes in Stockholders’

Equity for the years ended December 31, 2020 and 2019

Statements of Cash Flows for the years ended December 31, 2019 and 2018

to Consolidated Financial Statements

Report of Independent

Registered Public Accounting Firm

Consolidated Statements

of Cash Flows for the years ended December 31, 2020 and 2019

Notes to Consolidated Financial

Report of Independent Registered Public

Accounting Firm

To the Stockholders and the Board of Directors of

Hoth Therapeutics, Inc.

Opinion on the Consolidated

Financial Statements

Opinion on the Consolidated Financial

We have audited the accompanying consolidated

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States of America.

Going Concern

The accompanying consolidated financial

statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated

financial statements, the Company has suffered recurring losses from operations and does not expect to generate revenue and as

such, there is substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters

are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements

Thee consolidated financial statements

are the responsibility of the Company’s management.

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/s/ WithumSmith+Brown, PC

We have served as the Company’s

auditor since 2018.

We have served as the Company’s auditor since 2018.

New York, New York

March 16, 2021

Hoth Therapeutics,

Hoth Therapeutics, Inc.

Consolidated Balance Sheets

Current assets

Marketable securities

Marketable equity securities, at fair value

Prepaid expenses

1 unchanged sentence

Total current assets

Note receivable

Property and equipment, net

Investment in joint venture

Restricted cash

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Accrued expenses

Accrued license fee - current portion

Total current liabilities

Accrued license fee

Total liabilities

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Series A Convertible Preferred Stock, $0.0001 par

value, 1,897,250 and 5,000,000 shares authorized, 0 and 3,102,480 shares issued and outstanding at December 31, 2019 and

2018, respectively

value, 1,897,250 and 5,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2020 and 2019, respectively

Common stock, $0.0001 par value, 75,000,000 shares

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(19,413,458 )

(12,215,642 )

Accumulated other comprehensive loss

Total stockholders’

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part of these consolidated financial statements.

Hoth Therapeutics,

Hoth Therapeutics, Inc.

Consolidated Statements of Operations

Ended December 31,

and Comprehensive Loss

For the years ended

Operating costs and expenses

Research and development

Research and development - licenses acquired

Research and development - licenses acquired (including stock-based compensation)

Compensation and related expenses (including stock-based compensation)

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Loss from operations

Other income (expenses)

Other income, net

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$ (7,704,636 )

Other comprehensive loss

Foreign currency translation adjustment

Total comprehensive loss

$ (7,213,167 )

$ (7,704,636 )

Net loss per share applicable to common stockholders - basic and diluted

Weighted average number of common shares outstanding, basic and diluted

Net loss per share, basic and diluted

The accompanying notes are an integral

part of these consolidated financial statements.

Hoth Therapeutics,

Hoth Therapeutics, Inc.

Consolidated Statements of Changes in

Stockholders’

Convertible Preferred Stock

Additional Paid-in

Cumulative Translation

Total Stockholders’

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$ (4,511,006 )

Issuance of Series A Convertible Preferred Stock

and warrants for cash in an offering (net of offering costs of $190,180)

Warrant value related to Issuance of Series A Convertible

Preferred Stock

Stock-based compensation

Stock issued for research and development

Stock issued for acquired license

Repurchase of restricted stock to pay for employee

withholding taxes

Balance at December 31, 2018

$ (4,511,006 )

Conversion of preferred stock to common stock upon

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$ (12,215,642 )

Issuance of common stock and warrants (net of offering

costs of $806,243)

Issuance of common stock (net of offering costs

Cancellation of common stock

Warrant exercise

Stock-based compensation

Cumulative translation adjustment

Balance at December 31, 2020

$ (19,413,458 )

The accompanying notes are an integral

part of these consolidated financial statements.

Hoth Therapeutics,

Hoth Therapeutics, Inc.

Consolidated Statements of Cash Flows

Years Ended Ended December

Cash flows from operating activities

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Research and development-acquired license, expensed

Stock issued for research and development

Stock-based compensation

Realized loss on marketable securities

Unrealized gain on marketable securities

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Prepaid expenses

Accrued salaries and benefits

Accounts payable

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Cash flows from investing activities

Purchase of marketable securities

Purchase of investments in joint venture

Purchase of research and development licenses

Purchase of marketable securities

Purchase of convertible promissory note in Isoprene

Sale of marketable securities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of Series A Convertible Preferred Stock and warrants

for cash in an offering, net

Proceeds from issuance of common stock in the IPO, net of offering cost

Proceeds from issuance common stock and warrants, net of offering cost

Proceeds from issuance common stock, net of offering cost

Proceeds from exercise of warrants

Payment of employee withholdings for vested restricted

Net cash provided by financing activities

Net increase (decrease) in cash

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Non-cash investing and financing activities

Conversion of preferred stock to common stock upon completion of the IPO

Common stock issued for acquired license

Cancellation and retirement of common stock

Cashless warrant exercise

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part of these consolidated financial statements.

Hoth Therapeutics,

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

Note 1—Organization and description of business

Note 1—Organization and description of business operations

Hoth Therapeutics, Inc.

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 asset is a sublicense agreement with Chelexa Biosciences,

(“Chelexa”) pursuant to which Chelexa has granted the Company an exclusive sublicense to use its BioLexa Platform

(as defined herein), a proprietary, patented, drug compound platform developed at the University of Cincinnati.

The license enables

the Company to develop the platform for all indications in humans.

The Company’s initial focus will be on the treatment

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.

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.

During the year ended December 31, 2019,

the Company also entered into agreements with the George Washington University, the University of Maryland Baltimore and Isoprene

Pharmaceuticals, Inc., North Carolina State University and Zylö

Therapeutics, Inc..

These agreements are further described

in Note 3 of these financial statements.

Amendment to Articles of Incorporation

In December 2018, the Company’s

board of directors and stockholders approved a 1-for-4 reverse stock split of the Company’s issued and outstanding shares

of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible

preferred stock (see Note 6).

Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated

financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split

and adjustment of the convertible preferred stock conversion ratios.

Initial Public Offering

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.

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.

(“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.

These costs were reflected net of the $5.8 million of

proceeds from the IPO.

The Company also reimbursed Laidlaw for certain out-of-pocket expenses, including the fees and disbursements

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.

(together with

its wholly-owned subsidiary, Hoth Therapeutics Australia Pty Ltd., the “Company”) was incorporated under the laws

of the State of Nevada on May 16, 2017.

The Company is a clinical-stage biopharmaceutical company which was formed to initially

focus on developing new generation therapies for dermatological disorders including atopic dermatitis (also known as eczema),

chronic wounds, psoriasis, asthma and acne.

Since its formation, the Company expanded its business to also focus on developing

a topical formulation for treating side effects from drugs used for the treatment of cancer;

a treatment for asthma and allergies

using inhalational administration;

a topical treatment for patients with lupus;

a treatment for mast-cell derived cancers and

and a treatment for lung diseases resulting from bacterial infections.

The Company is 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.

Liquidity and capital resources

Accounting Standards Update, or (“ASU”),

2014-15, Presentation of Financial Statements - Going Concern, requires management to evaluate the Company’s ability

to continue as a going concern one year beyond the filing date of the given financial statements.

This evaluation requires management

to perform two steps.

First, management must evaluate whether there are conditions and events that raise substantial doubt about

the entity’s ability to continue as a going concern.

Second, if management concludes that substantial doubt is raised, management

is required to consider whether it has plans in place to alleviate that doubt.

Disclosures in the notes to the consolidated financial

statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt

that was raised.

The Company’s ultimate success is

dependent on its ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely

The Company’s business will require significant amounts of capital to sustain operations and the Company

will need to make the investments it needs to execute its longer-term business plan to support new technologies and help

advance innovation.

Absent generation of sufficient revenue from the execution of the Company’s long-term business

plan, the Company will need to obtain debt or equity financing, especially if the Company experiences downturns in its business

that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting

from being a publicly-traded company or operations.

Such additional debt or equity financing may not be available to the Company

on favorable terms, if at all.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

The Company plans to pursue its plans

regarding research and development which will require resources beyond those currently available, including third party capital.

During this time, the Company does not expect to generate revenue as such there is substantial doubt about the Company’s

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 the Company 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.

Accounting Standards Update (“ASU”)

2014-15, Presentation of Financial Statements - Going Concern , requires management to evaluate the Company’s

ability to continue as a going concern one year beyond the filing date of the given financial statements.

This evaluation requires

management to perform two steps.

First, management must evaluate whether there are conditions and events that raise substantial

doubt about the entity’s ability to continue as a going concern.

Second, if management concludes that substantial doubt

is raised, management is required to consider whether it has plans in place to alleviate that doubt.

Disclosures in the notes

to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans

alleviate the substantial doubt that was raised.

The Company has funded its operations

from proceeds from the sale of equity and debt securities.

The Company will require significant additional capital to make the

investments it needs to execute its longer-term business plan.

The Company’s ability to successfully raise sufficient funds

through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if it were successful,

future equity issuances would result in dilution to its existing stockholders and future debt securities may contain covenants

that limit the Company’s operations or ability to enter into certain transactions.

The Company’s current cash is sufficient

to fund operations for at least the next 12 months from the date that these financial statements are available to be issued.

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

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incorporated under the laws of the State of Victoria in Australia on June 5, 2019.

All intercompany balances and transactions

have been eliminated.

All significant intercompany balances and transactions

have been eliminated in consolidation.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

The preparation of consolidated financial

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The most significant estimates in the Company’s 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.

The Company operates in one operating segment and, accordingly,

no segment disclosures have been presented herein.

financial statements relate to stock-based compensation and the valuation allowance of deferred tax assets resulting from net

operating losses.

These estimates and assumptions are based on current facts, historical experience and various other factors

believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results

may differ materially and adversely from these estimates.

To the extent there are material differences between the estimates and

actual results, the Company’s future results of operations will be affected.

Cash and cash equivalents

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investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents.

There were no cash

equivalents as of December 31, 2019 and 2018.

There were no cash equivalents

as of December 31, 2020 and 2019.

Restricted cash

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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 when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows.

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 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 year ended December 31, 2019 on a retrospective basis.

The following is a

summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for the

year ended December 31, 2019:

The following

is a summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for

the years ended December 31, 2020 and 2019:

Restricted cash

Total cash and restricted cash

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 $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

has 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.

Marketable securities

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sheet risk of loss.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

offering costs

Deferred offering costs, which primarily

consist of direct, incremental professional fees incurred in connection with the Company’s IPO as well as other private

equity offerings are capitalized as current assets on the consolidated balance sheet.

Upon the closing of the offerings, the deferred

offering costs are offset against the offering proceeds.

Approximately $30,000 and $200,000 of such offering costs were accrued

but unpaid at December 31, 2019 and 2018, respectively.

consist of direct, incremental professional fees incurred in connection with the Company’s initial public offering (“IPO”)

as well as other private equity offerings are capitalized as current assets on the consolidated balance sheet.

Upon the closing

of the offerings, the deferred offering costs are offset against the offering proceeds.

Approximately $0 and $30,000 of such offering

costs were accrued but unpaid at December 31, 2020 and 2019, respectively.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

Investment in joint venture

Ownership interests in entities for which

the Company has significant influence that are not consolidated are accounted for as equity method investments.

SEC Staff Announcement:

Accounting for Limited Partnership Investments (codified in Accounting Standards Codification (“ASC”) 323-30-S99-1)

guidance requires the use of the equity method unless the investor’s interest “is so minor that the limited partner

may have virtually no influence over partnership operating and financial policies.”

The SEC staff’s position is that

investments in limited partnerships of greater than 3% to 5% are considered more than minor and, therefore, should be accounted

for using the equity method or fair value option.

Investments accounted for using the equity method may be reported on a lag up

to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity

method as of the current reporting date.

The determination of whether an investee’s results are recorded on a lag is made

on an investment-by-investment basis.

This investment in joint venture is further described in Note of 7 these consolidated financial

and development costs

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value measurement

FASB Accounting Standards Codification

(“ASC”) 820, Fair Value Measurements , provides guidance on the development and disclosure of fair value

measurements.

Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would

use in pricing an asset or a liability.

FASB ASC 820, Fair Value Measurements ,

provides guidance on the development and disclosure of fair value measurements.

Under this accounting guidance, fair value is

defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that

should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair

value measurements in one of the following three categories for disclosure purposes:

prices in active markets for identical assets or liabilities.

other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow

methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant

judgment or estimation.

Quoted prices in active markets for

identical assets or liabilities.

Inputs other than Level 1 prices for similar assets

or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little

or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques,

as well as instruments for which the determination of fair value requires significant judgment or estimation.

In some circumstances, the inputs used

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the fair value measurement.

The following table presents the Company’s assets and

liabilities that are measured at fair value at December 31, 2019:

The following table presents the Company’s

assets and liabilities that are measured at fair value at December 31, 2020 and 2019:

Fair value measured at December

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Quoted prices in active markets

Significant other observable inputs

other observable inputs

Significant unobservable inputs

Marketable securities - mutual funds

Preferred Stock

The Company applies the accounting standards

for distinguishing liabilities from equity when determining the classification and measurement of its convertible preferred stock.

Convertible preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value.

Conditionally redeemable convertible preferred stock (including preferred stock that feature redemption rights that are either

within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s

control) are classified as temporary equity.

At all other times, convertible preferred stock are classified as stockholders’

The Company accounts for convertible preferred

stock with detachable warrants in accordance with ASC 470:

Debt and allocated proceeds received to the convertible

preferred stock and detachable warrants based on relative fair values.

The Company evaluated the classification of its convertible

preferred stock and warrants and determined that such instruments meet the criteria for equity classification.

The Company recorded

the related issuance costs and value ascribed to the warrants as a reduction of the convertible preferred stock as a component

of additional paid in capital.

The Company has also evaluated its convertible

preferred stock and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration

of embedded derivatives requiring bifurcation.

The issuance of the convertible preferred stock could generate a beneficial conversion

feature, which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor

or in the money at inception because the conversion option has an effective strike price that is less than the market price of

the underlying stock at the commitment date.

Fair value measured at December

Total at December 31,

Quoted prices in active markets

other observable inputs

Significant unobservable inputs

Marketable securities - mutual funds

Hoth Therapeutics, Inc.

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at the date of grant and expire up to ten years from the date of grant.

These options generally vest over a one to five

Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used

in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties

and the application of management’s judgment.

Term - The expected term of options represents the period that the Company’s stock-based awards are expected to

be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading

Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U.

Treasury zero-coupon

issues with an equivalent remaining term.

Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash

dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by Accounting Standards Update

(“ASU”) 2016-09.

Ultimately, the actual expenses recognized over the vesting period will be for those shares that

Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a

significant history of forfeitures.

These options generally vest over a one to five year period.

The Company estimates the fair value of

stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based

awards represent management’s best estimates and involve inherent uncertainties and the application of management’s

Expected Term

- The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding

based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Expected Volatility

- The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest

Rate - The Company bases the risk-free interest rate on the implied yield available on U.

Treasury zero-coupon issues with

an equivalent remaining term.

Expected Dividend

- The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in

the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Effective January 1, 2017, the Company

elected to account for forfeited awards as they occur, as permitted by ASU 2016-09.

Ultimately, the actual expenses recognized

over the vesting period will be for those shares that vested.

Prior to making this election, the Company estimated a forfeiture

rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Income taxes are recorded in accordance

with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have

been included in the consolidated financial statements or tax returns.

Deferred tax assets and liabilities are determined based

on the difference between the 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.

with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included

in the consolidated financial statements or tax returns.

Deferred tax assets and liabilities are determined based on the difference

between the 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.

The Company accounts for uncertain tax

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Potentially dilutive securities

Series A Convertible Preferred Stock (Common Stock Equivalent)

Non-vested restricted stock units

accounting pronouncements

In February 2016, the FASB issued ASU

2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition,

measurement, presentation and disclosure of leases for both lessees and lessors.

The new standard requires lessees to apply a

dual approach, classifying virtually all 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 to existing guidance for operating leases.

is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance.

January 1, 2019, the Company adopted ASU No.

2016-02, and the adoption did not have a material impact on its consolidated financial

statements and related disclosures due to the short-term nature of its operating leases.

Non-vested restricted stock awards

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

In May 2017, the FASB issued ASU 2017-09,

Recent accounting pronouncements

In February 2016, the FASB issued ASU

2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles

for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.

The new standard requires

lessees to apply a dual approach, classifying virtually all 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.

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 to existing guidance for operating

The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted

upon issuance.

On January 1, 2019, the Company adopted ASU No.

2016-02, and the adoption did not have a material impact on its

consolidated financial statements and related disclosures due to the short-term nature of its operating leases.

In June 2018, the FASB issued ASU 2018-07,

Compensation—Stock Compensation (Topic 718):

Scope of Modification Accounting , (“ASU 2017-09”), which

clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification.

new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the

award (as equity or liability) changes as a result of the change in terms or conditions.

It is effective prospectively for the

annual period ending December 31, 2018 and interim periods within that annual period.

The Company adopted ASU 2017-09 on January

1, 2018, and the adoption did not have a material impact on its consolidated financial statements and disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock

Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”).

ASU 2018-07 simplifies

several aspects of the accounting for nonemployee 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 for fiscal years beginning after December 15, 2018,

including interim periods within that fiscal year.

On January 1, 2019, the Company adopted ASU 2018-07, and the adoption did not

have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13,

“Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ,”

which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst

or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

This guidance is effective for fiscal years,

and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted upon issuance of

The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial

Improvements to Nonemployee Share-Based Payment Accounting (“ASU

2018-07”).

ASU 2018-07 simplifies several aspects of the accounting for nonemployee 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 for fiscal years beginning

after December 15, 2018, including interim periods within that fiscal year.

On January 1, 2019, the Company adopted ASU 2018-07,

and the adoption did not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU

2 unchanged sentences

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions

to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with

early adoption permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements

and related disclosures.

ASU 2019-12 removes certain exceptions to

the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance

is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption

The Company adopted ASU No.

2019-12 effective January 1, 2021, and the adoption did not have a material impact on its

consolidated financial statements.

Note 3—License agreements

1 unchanged sentence

research and development expenses for licenses acquired during the years ended December 31, 2020 and 2019:

the Years Ended

For the years ended December 31,

Chelexa Biosciences, Inc.

and the University of Cincinnati

The George Washington University

University of Maryland and Isoprene Pharmaceuticals,

University of Maryland and Isoprene Pharmaceuticals, Inc.

North Carolina State University

University of Cincinnati

Army Medical Research and Development Command

Virginia Commonwealth University

Therapeutics, Inc.

BioSciences, Inc.

Chelexa Biosciences, Inc.

and the University

of Cincinnati

On May 14, 2020, 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.

The term of such agreement will expire on the later of April 16, 2034

and the last to expire patent in the patent rights granted to the Company (the “Term”).

The Company shall, in its

sole discretion, have the first right of refusal to renew the Term.

The Company is subject to total milestone payments of $3.5

million royalty payments and has agreed to fund all development and commercialization costs related to the licensed products.

an Assignment and Assumption Agreement (the “Assignment Agreement”) with Chelexa Biosciences, Inc.

(“Chelexa”)

pursuant to which Chelexa assigned to the Company its rights and obligations in and liabilities under its license agreement with

the University of Cincinnati dated February 27, 2013, as amended (the “University of Cincinnati License Agreement”).

In consideration for the assignment, the Company agreed to forgive all amounts due to it by Chelexa and to pay to Chelexa certain

royalty payments.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

In connection with the Assignment Agreement,

on May 14, 2020, the Company entered into a novation agreement (the “Novation Agreement”) with Chelexa and the University

of Cincinnati pursuant to which the parties agreed that the Company would be substituted in place of Chelexa with respect to the

rights and obligations of Chelexa set forth in the University of Cincinnati License Agreement.

In connection with the Assignment Agreement,

on May 14, 2020, the Company entered into a royalty agreement (the “Royalty Agreement”) with Chelexa pursuant to which

the Company shall pay Chelexa sales-based royalties at percentages which range from mid to high single digits, with high sales

volumes being subject to lower royalty rates and total milestone payments of $3.5 million.

Pursuant to the University of Cincinnati

License Agreement, the Company was granted an exclusive license 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”).

In addition, the University of Cincinnati

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.

The term of such agreement

will expire on the later of April 16, 2034 and the last to expire patent in the patent rights granted to the Company (the “Term”).

The Company shall, in its sole discretion, have the first right of refusal to renew the Term.

The Company is subject to total

milestone payments of $6,000, royalty payments, annual license maintenance fees, and has agreed to pay the University of Cincinnati

for certain out-of-pocket expenses including, but not limited to, payments for patent prosecution.

During the year ended December 31, 2020

the Company recorded an expense of approximately $0.1 million related to the issuance of 213,166 shares of its common stock pursuant

to the sublicense agreement with Chelexa.

There were no expenses incurred for the year ended December 31, 2019.

the Company paid $5,000 for the annual license maintenance fee and $5,000 for the yearly minimum annual royalty fee.

George Washington University

Effective as of June 1, 2019, the Company

and The George Washington University (“GWU”) entered into a sponsored research agreement (the “Sponsored Research

Agreement”), as amended on July 29, 2019, with respect to the exploration of the potential use of Aprepitant for topical

and/or systemic therapy to counter the dermatological related side-effects of Erlotinib therapy in cancer patients.

the terms of the Sponsored Research Agreement, GWU granted the Company a non-exclusive, license to certain of GWU’s intellectual

The Company has agreed to pay GWU for all costs incurred in connection with the research;

provided, however, such costs

shall not exceed approximately $0.3 million.

The Sponsored Research Agreement shall terminate on June 30, 2020 unless extended

by the parties.

The Sponsored Research Agreement may be terminated by either party upon 30 days written notice.

and The George Washington University (“GW”) entered into a sponsored research agreement (the “Sponsored Research

Agreement”), as amended on July 29, 2019 and May 29, 2020, with respect to the exploration of the potential use of HT-001

for topical and/or systemic therapy to counter the dermatological related side-effects of Erlotinib therapy in cancer patients.

Pursuant to the terms of the Sponsored Research Agreement, GW granted the Company a non-exclusive license to certain of GW’s

intellectual property.

The Company has agreed to pay GW for all costs incurred in connection with the research;

provided, however,

such costs shall not exceed approximately $0.5 million.

The Sponsored Research Agreement shall terminate on June 30, 2021.

Sponsored Research Agreement may be terminated by either party upon 30 days written notice.

On June 28, 2019 (the “Effective

Date”), the Company and GWU entered into a research option agreement (the “Research Option Agreement”) pursuant

to which GWU granted the Company an option (the “Option”) until April 30, 2020 to acquire an exclusive license to certain

products made or used by the Company (the “GWU Licensed Product”) that involve certain patents owned by GWU (the “Licensed

Date”), the Company and GW entered into a research option agreement (the “Research Option Agreement”) pursuant

to which GW granted the Company an option (the “Option”) until April 30, 2020 to acquire an exclusive license to certain

products made or used by the Company (the “GW Licensed Product”) that involve certain patents owned by GW (the “Licensed

Patents”).

On February 1, 2020, the Company exercised the Option and entered into a patent license agreement with GWU.

the Effective Date, the Company paid GWU $2,500, and on February 27, 2020, the Company paid GWU $10,000 as a license initiation

Until the first commercial sale of the GWU Licensed Product, the Company shall pay (i) $75,000 per year for the development

and commercialization of the GWU Licensed Product, (ii) $2,000 for license maintenance fees on the first anniversary of the Effective

Date and (iii) $5,000 for license maintenance fees commencing on the second anniversary of the Effective Date and thereafter.

the Company shall be required to pay GWU a sublicense fee equal to a certain percentage of the sum of payments plus the fair market

value of all other consideration of any kind received by the Company from sublicensees during each quarter as follows:

a 40% sublicense

fee until the first anniversary of the Effective Date, a 30% sublicense fee until the third anniversary of the Effective Date and

a 20% sublicense fee after the third anniversary of the Effective Date;

provided, however, such sublicense fee shall exclude certain

fees paid to the Company such as certain royalties, equity investments, loan proceeds and sponsored research funding.

the execution of a definitive license agreement with GWU, the Company shall also pay GWU milestone payments of up to an aggregate

of $90,000 and sales based royalties at a low single digit percentage, subject to certain minimum royalty requirements.

during each Option Exercise Period and Renewal Period (as defined in the Research Option Agreement) the Company shall pay GWU,

on a quarterly basis, for all costs and expenses related to the GWU Licensed Patents (the “Patent Costs”).

In July 2019, after the signing of the

Research Option Agreement, the Company recorded an expense of $2,500 for the option fee.

of Maryland and Isoprene Pharmaceuticals, Inc.

On February 1, 2020, the Company exercised the Option and entered into a patent license agreement (the “Patent

License Agreement”) with GW.

On the Effective Date, the Company paid GW $2,500, and on February 27, 2020, the Company paid

GW $10,000 as a license initiation fee.

Until the first commercial sale of the GW Licensed Product, the Company shall pay (i)

$75,000 per year for the development and commercialization of the GW Licensed Product, (ii) $2,000 for license maintenance fees

on the first anniversary of the Effective Date and (iii) $5,000 for license maintenance fees commencing on the second anniversary

of the Effective Date and thereafter.

Furthermore, the Company shall be required to pay GW a sublicense fee equal to a certain

percentage of the sum of payments plus the fair market value of all other consideration of any kind received by the Company from

sublicensees during each quarter as follows:

a 40% sublicense fee until the first anniversary of the Effective Date, a 30% sublicense

fee until the third anniversary of the Effective Date and a 20% sublicense fee after the third anniversary of the Effective Date;

provided, however, such sublicense fee shall exclude certain fees paid to the Company such as certain royalties, equity investments,

loan proceeds and sponsored research funding.

The Company shall also pay GW milestone payments of up to an aggregate of $90,000

and sales-based royalties at a low single digit percentage, subject to certain minimum royalty requirements.

In addition, during

each Option Exercise Period and Renewal Period (as defined in the Research Option Agreement) the Company shall pay GW, on a quarterly

basis, for all costs and expenses related to the Licensed Patents.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

On August 7, 2020 (the “GW Effective

Date”), the Company entered into a Patent License Agreement (the “GW Patent License Agreement”) with the GW.

Pursuant to the GW Patent License Agreement, GW granted the Company 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 the Company to make, have made, use, import, offer for sale and sell Licensed Products (as defined

in the GW Patent License Agreement) in the field of virus sensing and detection.

The GW Patent License Agreement shall commence

on the GW Effective Date and shall continue until the later of:

(a) the expiration or abandonment of the last patent to expire

or become abandoned of the Patent Rights (as defined in the GW Patent License Agreement);

or (b) ten years after the first Sale

(as defined in the GW Patent License Agreement) of the first Licensed Product if no patent has issued from the Patent Rights,

unless terminated earlier pursuant to the terms of the agreement.

Pursuant to the GW Patent License Agreement, the Company shall

(i) an upfront license initiation fee, (ii) annual maintenance fees commencing on the first anniversary of the GW Effective

Date, (iii) milestone payments ranging from the low to mid five figures, (iv) running royalty payments at a middle single digit

percentage of Net Sales (as defined in the GW License Agreement), (iv) quarterly minimum payments ranging from the low four figures

for the first four quarters after the first sale to low five figures commencing three years after the first sale and (v) an annual

diligence fee of high five figures.

In addition, the Company has agreed to reimburse GW for certain past and future patent filing

and prosecution costs.

On September 17, 2020, the Company entered

into a Sponsored Research Agreement (the “Agreement”) with GW effective as of September 1, 2020 (the “Agreement

Effective Date”).

The Agreement relates 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.

The Agreement commences on the Agreement Effective Date and

terminates on July 31, 2021 unless such term is extended or terminated by the parties.

Pursuant to the Agreement, the Company

shall pay GW up to a mid-six figure fee for all research costs.

During the year ended December 31, 2020

the Company paid $10,000 for license initiation fee, $10,000 for option exercise fee and approximately $15,000 patent related

The Company also recorded an expense of approximately $134,000 related with warrants granted to GW pursuant to Patent

License Agreement.

University of Maryland and Isoprene

Pharmaceuticals, Inc.

On March 8, 2019, the Company entered

into a commercial evaluation sublicense and option agreement with the University of Maryland, Baltimore (“UMD”) and

Isoprene Pharmaceuticals, Inc.

into a commercial evaluation sublicense and option agreement (the “Commercial Evaluation Sublicense and Option Agreement”)

with the University of Maryland, Baltimore (“UMB”) and Isoprene Pharmaceuticals, Inc.

(“Isoprene”).

Pursuant to the agreement, the Company paid an initial option and material

access fee of $5,000 to UMD and $5,000 to Isoprene.

In the event that Isoprene enters into a master license agreement with UMD

(the “MLA”), UMD shall permit Isoprene to grant an exclusive option to the Company to negotiate and obtain an exclusive

sublicensable, worldwide royalty-bearing license to the subject technology (the “Isoprene-Hoth Option”);

however, in the event Isoprene does not enter into the MLA, UMD may grant the Company an option to negotiate and obtain an exclusive

sublicensable, worldwide royalty-bearing license to the subject technology (the “UMD-Hoth Option”).

If the Company

exercises the Isoprene-Hoth Option, it shall pay Isoprene an option exercise fee of $20,000.

If the Company exercises the UMD-Hoth

Option, it shall pay UMD an option exercise fee of $20,000.

In March 2019, the Company recorded an

expense of an aggregate of $10,000 for the initial option and materials access fee.

to the agreement, the Company paid an initial option and material access fee of $5,000 to UMB and $5,000 to Isoprene.

that Isoprene enters into a master license agreement with UMB (the “MLA”), UMB shall permit Isoprene to grant an exclusive

option to the Company to negotiate and obtain an exclusive sublicensable, worldwide royalty-bearing license to the subject technology

(the “Isoprene-Hoth Option”);

provided, however, in the event Isoprene does not enter into the MLA, UMB may grant

the Company an option to negotiate and obtain an exclusive sublicensable, worldwide royalty-bearing license to the subject technology

(the “UMB-Hoth Option”).

If the Company exercises the Isoprene-Hoth Option, it shall pay Isoprene an option exercise

fee of $20,000.

If the Company exercises the UMB-Hoth Option, it shall pay UMB an option exercise fee of $20,000.

On July 30, 2020 (the “Isoprene

Effective Date”), the Company entered into a Sublicense Agreement (the “Isoprene Sublicense Agreement”) with

Isoprene pursuant to the Commercial Evaluation Sublicense and Option Agreement.

Pursuant to the Isoprene Sublicense Agreement,

Isoprene granted the Company 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 the Patent Rights (as defined in the Isoprene Sublicense Agreement) for the treatment of dermatological conditions

The Isoprene Sublicense Agreement will continue on a country-by-country basis until the expiration of the last to

expire of the Patent Rights in such country, unless earlier terminated pursuant to the Isoprene Sublicense Agreement (the “Isoprene

Term”).

Pursuant to the Isoprene Sublicense Agreement, the Company shall pay Isoprene, among other things, (i) a license

fee, (ii) a royalty rate at a middle single digit percentage, (iii) milestone payments of up to $1,375,000 and (iv) revenue interest

at a low single digit percentage based on the net revenue of covered products sold by Isoprene during the Isoprene Term.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

In March 2019, the Company recorded an

expense of an aggregate of $10,000 for the initial option and materials access fee.

During the year ended 2020, the Company paid

a total of $30,000 for the license fee.

At December 31, 2020, the Company accrued a $5,000 for an upfront license payment.

On December 2, 2020, Hoth Therapeutics,

(the “Company”) entered into an option agreement (the “Option Agreement”) with Isoprene Pharmaceutics,

(“Isoprene”), pursuant to which the Company will have an exclusive option, until June 2, 2021, to negotiate an

exclusive, royalty-bearing and limited term license with respect to certain previously sublicensed intellectual property for the

diagnosis and treatment of inflammatory bowel diseases, including Crohn’s disease and ulcerative colitis.

This Option Agreement

is based upon, and potentially expands, the fields of use in which the Company can license certain Isoprene intellectual property

that is the subject of the Company’s existing Sublicense Agreement, dated July 30, 2020, with Isoprene, and the Master License

Agreement, dated July 8, 2020, by and between Isoprene and the University of Maryland, Baltimore.

During the year ended December 31, 2020

the Company paid $10,000 for license fee and $20,000 for the option exercise fee.

As of December 31, 2020, the Company accrued

a $5,000 for an upfront license payment.

Carolina State University

On November 20, 2019 (the “NCSU

Effective Date”), the Company entered into a license agreement with North Carolina State University (“NCSU”)

pursuant to which NCSU granted the Company 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.

term of the license agreement shall commence on the NCSU Effective Date and shall continue until the date of the expiration of

the last to expire patent right granted pursuant to the license agreement unless terminated earlier pursuant to the terms of the

Pursuant to the terms of the license agreement, the Company paid NCSU a one-time license fee $25,000 and is also required

to pay (i) sales based royalties at a low single digit percentage, (ii) minimum royalties ranging from $0 to $50,000 and (iii)

milestone payments of up to $585,000.

In December 2019, the Company recorded

an expense of $25,000 for the license fee.

of Cincinnati

On November 20, 2019 (the “NC State

Effective Date”), the Company entered into a license agreement with North Carolina State University (“NC State”)

pursuant to which NC State granted the Company 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.

The term of the license

agreement shall commence on the NC State Effective Date and shall continue until the date of the expiration of the last to expire

patent right granted pursuant to the license agreement unless terminated earlier pursuant to the terms of the agreement.

to the terms of the license agreement, the Company paid NC State a one-time license fee $25,000 and is also required to pay (i)

sales-based royalties at a low single digit percentage, (ii) minimum royalties ranging from $0 to $50,000 and (iii) milestone

payments of up to $585,000.

University of Cincinnati

On May 18, 2018, the Company entered into

6 unchanged sentences

Pursuant to the terms of the exclusive

license agreement, the Company agreed to pay the University of Cincinnati a one-time initial fee of $5,000 within 30 days of the

date of the exclusive license agreement in addition to an annual license fee of $5,000 initially due and payable within 30 days

of the one year anniversary of the exclusive license agreement and every year thereafter.

In addition, the Company agreed to pay

the University of Cincinnati a yearly annual license maintenance fee of $2,500 and a yearly minimum annual royalty of $5,000 and

milestone payments of up to $120,000.

The exclusive license agreement will continue until the later of (i) the date upon which

a valid claim pursuant to the terms of the exclusive license agreement expires or (ii) 10 years after the first commercial sale

or unless earlier terminated pursuant to the terms of the exclusive license agreement.

In August 2018 and July 2019, respectively,

the Company recorded an expense of $2,500 for annual license maintenance fee and $5,000 for yearly minimum annual royalty fee,

respectively.

license agreement, the Company paid the University of Cincinnati a minimum annual royalty fee of $5,000 and has agreed to pay

the University of Cincinnati an annual license fee of $5,000 initially due and payable within 30 days of the one year anniversary

of the exclusive license agreement and every year thereafter and milestone payments of up to $120,000.

The exclusive license agreement

will continue until the later of (i) the date upon which a valid claim pursuant to the terms of the exclusive license agreement

expires or (ii) ten years after the first commercial sale or unless earlier terminated pursuant to the terms of the exclusive

license agreement.

During the year ended December 31, 2020,

the Company paid a total of $2,500 for the annual license maintenance fee, $5,000 for the yearly minimum annual royalty fee and

approximately $2,000 for patent expense reimbursement.

As of December 31, 2020, the Company accrued a $17,500 for an upfront license

Army Medical Research and Development

On December 11, 2020, the Company entered

into a commercial evaluation license agreement with U.S.

Army Medical Research and Development Command (“USAMRDC”).

This agreement was amended on January 12, 2021 to clarify that the license entered into is with Walter Reed Army Institute of

Research, a subsidiary of USAMRDC.

As of December 31, 2020, the Company accrued

a $2,000 for an upfront license payment.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

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 (“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.

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.

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.

The VCU Sponsored Project Agreement shall

terminate on January 9, 2021, unless earlier terminated pursuant to the terms thereof.

In May 2020, the Company paid the signing

fee of $50,000 upon execution of the VCU License Agreement.

The Company also accrued $285,000 for five years of annual minimum

payments and $30,000 for annual maintenance fees.

Therapeutics Inc.

20 unchanged sentences

the Company paid Zylö

(i) an upfront license fee of $50,000;

(ii) sales-based royalties at percentages which range from high

single digits to low double digits, with low sales volumes being subject to lower royalty rates;

and total milestone payments

of up to $13.5 million.

In addition, within 45 days of the Company’s next equity financing pursuant to which the Company

receives gross proceeds of at least $1 million, the Company shall purchase equity securities of Zylö

in an amount equal to

In May 2019 and September 2019, the Company

recorded an expense of $10,000 and $40,000, respectively, for upfront license fee.

Note 4—Related Party

A director of the Company, is also the

Executive Chairman of Chelexa.

During the year ended December 31, 2019, that director received $30,000 in cash compensation for

services provided as a board member of the Company and $5,000 cash compensation for his services as a member of the Company’s

Scientific Advisory Board.

The Company also granted him options to purchase up to 35,000 of the Company’s common stock pursuant

to the Company’s 2018 Equity Incentive Plan.

During the year ended December 31, 2018, that director received $30,000 in

cash compensation for services provided as a board member of the Company and $10,000 cash compensation for his services as a member

of the Company’s Scientific Advisory Board.

He also received a stock grant for 12,500 shares of common stock for his services

as a member of the Company’s Scientific Advisory Board.

an upfront license fee of $50,000 and is required to pay Zylö

(i) sales-based royalties at percentages

which range from high single digits to low double digits, with low sales volumes being subject to lower royalty rates;

total milestone payments of up to $13.5 million.

In addition, in connection with the Company’s March 2020 underwritten public

offering of shares of its common stock, on May 4, 2020, the Company purchased 30,000 shares of Zylö’s Class B common

stock for $60,000.

Effective January 1, 2018, the Company adopted ASU 2016-01 concerning recognition and measurement of financial

assets and financial liabilities.

In adopting this new guidance, the Company has made an accounting policy election to adopt an

adjusted cost method measurement alternative for its investment in Zylö.

Note 4—Note Receivable

Pursuant to Isoprene Sublicense Agreement

dated July 30, 2020, 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

(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”

first sale of Isoprene’s convertible preferred 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 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.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

A director of the Company, is also the

Chief Executive Officer, Principal Accounting and Financial Officer and a member of the board of directors of Spherix Incorporated.

During the year ended December 31, 2019, that director received $30,000 in cash compensation for services provided as a board

member of the Company.

The Company also granted such director options to purchase up to 35,000 shares of the Company’s common

stock pursuant to the Company’s 2018 Equity Incentive Plan.

During the year ended December 31, 2018, that director received

$42,000 in cash compensation and the Company issued such director 12,500 shares of common stock for services rendered as a member

Note 5—Related Party

A former director of the Company, is also

the Executive Chairman of Chelexa.

During the year ended December 31, 2020, that director received $22,500 in cash compensation

for services provided as a member of the Company’s board of directors.

On September 30, 2020, this director resigned as

a member of the Company’s board of directors.

Options issued to him expired on December 30, 2020.

During the year ended

December 31, 2019, that director received $30,000 in cash compensation for services provided as a board member and $5,000 cash

compensation for his services as a member of the Company’s Scientific Advisory Board.

The Company also granted him options

to purchase up to 35,000 of the Company’s common stock pursuant to the Company’s 2018 Equity Incentive Plan.

A former director of the Company, is also

the Chief Executive Officer, Principal Accounting and Financial Officer and a member of the board of directors of AIkido Pharma

During the year ended December 31, 2020, that director received $8,736 in cash compensation for services provided as a member

of the Company’s board of directors.

Investments in Marketable Securities

On April 15, 2020, this director resigned as a member of the Company’s board

of directors.

Options issued to him expired on July 15, 2020.

During the year ended December 31, 2019, that director received

$30,000 in cash compensation for services provided as a board member.

The Company also granted such director options to purchase

up to 35,000 shares of the Company’s common stock pursuant to the Company’s 2018 Equity Incentive Plan.

Note 6—Investments in Marketable

The realized gain or loss, unrealized

gain or loss, and dividend income related to marketable securities for the year ended December 31, 2019 and 2018, which are recorded

gain or loss, and dividend income related to marketable securities for the years ended December 31, 2020 and 2019, which are recorded

as a component of other income (expenses) on the consolidated statements of operations, are as follows:

For the years ended December 31,

Unrealized gain (loss)

Unrealized gain

Realized loss

Dividend income

Interest income

Note 7—Investment in HaloVax

On March 23, 2020, the Company entered

into a Development and Royalty Agreement (the “Development and Royalty Agreement”) with Voltron Therapeutics, Inc.

(“Voltron”) to form a joint venture entity named HaloVax, LLC (“HaloVax”) to jointly develop potential

product candidates for the prevention of COVID-19 based upon certain technology that had been exclusively licensed by Voltron

from The General Hospital Corporation (d/b/a Massachusetts General Hospital).

Pursuant to the Development and Royalty Agreement,

the Company is entitled to receive sales-based royalties.

In addition, pursuant to the terms of the Development and Royalty Agreement,

on March 23, 2020, the Company and HaloVax entered into a Membership Interest Purchase Agreement pursuant to which the Company

purchased 5% of HaloVax’s outstanding membership interests for $250,000 on March 27, 2020 (the “Initial Closing Date”)

and had the option to purchase up to an additional 25% of HaloVax’s membership interests (for $3,000,000 (inclusive of the

$250,000)), which option expired 30 days after the Initial Closing Date.

On May 28, 2020, the Company entered into a membership

interest purchase agreement to purchase 1% of HaloVax’s outstanding membership interest for a purchase price of $100,000.

The Company accounts for the foregoing investments under the equity method.

There was no significant change in HaloVax’s

operations from March 23, 2020 to December 31, 2020.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

Note 8—Stockholders’

Preferred Stock

The Company is authorized to issue up to

10,000,000 shares of preferred 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,

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Convertible Preferred Stock of which 3,102,480 shares which were previously issued were converted into common stock at the time

of the Company’s initial public offering.

During the year ended December 31, 2018, the Company raised $1.2 million (net of

offering costs) in cash from investors in exchange for the issuance of 13.77 units.

of the Company’s IPO.

The shares of Series A Convertible Preferred

Stock are not mandatorily redeemable and does not embody an unconditional obligation to settle in a variable number of equity

Stock are not mandatorily redeemable and do not embody an unconditional obligation to settle in a variable number of equity shares.

As such, the shares of Series A Convertible Preferred Stock are classified as permanent equity on the balance sheets.

The holders’

contingent redemption right in the event of certain deemed liquidation events does not preclude permanent equity

classification.

Further, the shares of Series A Convertible Preferred Stock are considered an equity-like host for purposes of

assessing embedded derivative features for potential bifurcation.

The embedded conversion feature is considered to be clearly

and closely related to the associated convertible preferred stock host instrument and therefore was not bifurcated from the equity

The Company had 1,897,520 and 5,000,000

shares of Series A Convertible Preferred Stock authorized as of December 31, 2019 and 2018, respectively, 0 and 3,102,480 shares

outstanding as of December 31, 2019 and 2018, respectively.

contingent redemption right in the event of certain deemed liquidation events does not preclude permanent equity classification.

Further, the shares of Series A Convertible Preferred Stock are considered an equity-like host for purposes of assessing embedded

derivative features for potential bifurcation.

The embedded conversion feature is considered to be clearly and closely related

to the associated convertible preferred stock host instrument and therefore was not bifurcated from the equity host.

Common Shares

On February 15, 2019, the Company announced

the pricing of its initial public offering of 1,250,000 shares of its common stock at an initial offering price to the public

of $5.60 per share.

The Company issued an aggregate of 1,250,000 shares of common stock and received net proceeds of $5.8 million

from the IPO.

the pricing of its IPO of 1,250,000 shares of its common stock at an initial offering price to the public of $5.60 per share.

The Company issued an aggregate of 1,250,000 shares of common stock and received net proceeds of $5.8 million from the IPO.

On January 15, 2020, pursuant to the termination

and general release agreement between the Company and FON Consulting LLC dated January 7, 2020, 15,000 of the shares of common

stock originally issued to FON Consulting LLC were cancelled.

On February 5, 2020, the Company issued

12,500 shares of common stock upon exercise of warrants issued to an investor on January 19, 2018, which resulted in gross proceeds

On March 6, 2020, the Company issued 25,000

shares of common stock upon exercise of warrants issued to an investor on December 14, 2017, which resulted in gross proceeds

On May 18, 2020, the Company issued 6,250

shares of common stock upon exercise of warrants issued to an investor on February 2, 2018, which resulted in gross proceeds of

On June 3, 2020, the Company issued 12,500

shares of common stock upon exercise of warrants issued to an investor on November 20, 2017, which resulted in gross proceeds

During the year ended December 31, 2020,

the Company issued an aggregate of 9,984 shares of the Company’s common stock to members of the Company’s Board for

services rendered.

Public Offering of Securities

On March 24, 2020 (the “UA Effective

Date”), the Company entered into an underwriting agreement with Laidlaw & Company (UK) Ltd.

(“Laidlaw”),

the representative of the underwriters, relating to a best efforts underwritten public offering of 1,449,275 shares (the “Shares”)

of the Company’s common stock at a public offering price of $3.45 per Share.

The Company received net proceeds of approximately

$4.2 million, after deducting the underwriting discount and offering expenses.

In connection with the offering, on March

26, 2020, the Company issued Laidlaw warrants to purchase up to 72,464 shares of the Company’s common stock.

are exercisable for a period of five years from the UA Effective Date at a price per share equal to $4.14, subject to adjustment,

and may be exercised on a cashless basis.

The Company reimbursed Laidlaw for certain of its out-of-pocket expenses incurred in

connection with the offering.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

On May 21, 2020, the Company entered into

an underwriting agreement with The Benchmark Company, LLC (“Benchmark”), as representative of the several underwriters,

relating to the public offering of 1,818,182 shares of the Company’s common stock at a price to the public of $2.75 per

The Company received net proceeds of approximately $4.5 million, after deducting the underwriting discount and offering

In connection with the offering, on May

27, 2020 (the “Benchmark Issue Date”), the Company issued Benchmark warrants to purchase up to 90,909 shares of the

Company’s common stock.

The warrants are exercisable for a period of five years commencing six months from the Benchmark

Issue Date at a price per share equal to $2.75, subject to adjustment, and may be exercised on a cashless basis.

Private Placement of Securities

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(the “Purchase Agreements”) with certain accredited investors (the “Investors”) pursuant to which it sold

units (the “Units”) for aggregate gross proceeds of $2,037,120, exclusive of placement agent commission and fees and

offering and transaction expenses (the “Offering”).

Each Unit was sold at an offering price of $5.00 per Unit and

consisted of (i) one share of the Company’s common stock and (ii) a warrant (the “Warrant”) to purchase one-half

share of common stock.

units (the “Units”) for aggregate gross proceeds of $2,037,120, exclusive of placement agent commission

and fees and offering and transaction expenses (the “Offering”).

Each Unit was sold at an offering price of $5.00

per Unit and consisted of (i) one share of the Company’s common stock and (ii) a warrant (the “2019 Warrant”)

to purchase one-half share of common stock.

Each Warrant is exercisable for a period

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limitation may be increased by the holder up to, but not exceeding, 9.99%.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

In addition, pursuant to the terms of

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Warrants should be accounted as a component of stockholders’

For the warrants issued on August 16, 2019, the Company

estimated the relative fair value of the warrants at $0.8 million using the Black-Scholes option pricing model using the following

primary assumptions:

fair value of common stock underlying the warrants ranges from $2.55 to $4.33, expected life ranges from 2.0

to 5.0 years, volatility rate ranges from 107.30% to 110.08%, risk-free interest rate ranges from 1.42% to 1.48% and expected dividend

During the year ended December 31, 2018,

the Company raised $1.2 million (net of offering costs) in cash from investors in exchange for the issuance of 13.77 units.

For the warrants issued during the year

ended December 31, 2018, the Company has determined that the warrants should be accounted as a component of stockholders’

On the issuance date, the Company estimated the relative fair value of the warrants at $0.1 million using the Black-Scholes

option pricing model using the following primary assumptions:

fair value of common stock underlying the warrants is $0.16, expected

life of 7.0 years, volatility rate of 75.0%, risk-free interest rate of 1.83% and expected dividend rate of 0%.

Based on the warrant’s

relative fair value to the fair value of the Series A Preferred Stock, approximately $0.2 million of the $1.2 million of aggregate

fair value was allocated to the warrants, creating a corresponding preferred stock discount in the same amount.

For the 2019 Warrants issued on August 16, 2019, the

Company estimated the relative fair value of the warrants at $0.8 million using the Black-Scholes option pricing model using the

following primary assumptions:

fair value of common stock underlying the warrants ranges from $2.55 to $4.33, expected life ranges

from 2.0 to 5.0 years, volatility rate ranges from 107.30% to 110.08%, risk-free interest rate ranges from 1.42% to 1.48% and

expected dividend rate of 0%.

2018 Equity Incentive Plan

The Company’s 2018 Equity Incentive

Plan (the “2018 Plan”) was adopted by its board of directors on May 4, 2018 and by its shareholders on May 4, 2018.

Plan (the “2018 Plan”) was adopted by the Company’s board of directors on May 4, 2018 and by its shareholders

on May 4, 2018.

The Company has reserved 1,000,000 shares of common stock for issuance pursuant to the 2018 Plan.

2018 Activity

In January 2018, the Company granted an

employee 25,000 shares of common stock with a $15,000 fair value.

On March 23, 2018, the Company granted

12,500 shares of common stock of the Company to a member of the Company’s Scientific Advisory Board.

The fair value of the

stock award was $11,000.

On May 4, 2018, the Company granted 12,500

shares of common stock of the Company under the 2018 Plan to a member of the Company’s Scientific Advisory Board.

value of the stock award was $12,500.

On May 4, 2018, the Company granted the

same employee 5,000 shares of common stock under the 2018 Plan with a $5,000 fair value.

The Company’s Chief Executive Officer

and co-founder was issued 87,500 shares of common stock for a value of $87,500.

On August 15, 2018, the Company bought back 31,513

shares from the employees who were issued common stock as part of the 2018 Plan to pay for payroll taxes.

The fair value of the

shares was $31,513.

Immediately after the buyback of the 31,513 shares such shares were immediately cancelled.

During the year ended December 31, 2018,

the Company issued a total of 25,000 shares of common stock under the 2018 Plan to two directors for a value of $25,000.

Restricted Stock Awards

During the year ended December 31, 2019,

the Company issued 10,000 and 30,000 shares of restricted common stock with a total fair value of approximately $0.2 million to

The Benchmark Company, LLC and FON Consulting, LLC, respectively, consultants to the Company.

On January 7, 2020, the Company

entered into a termination and general release agreement with FON Consulting, LLC pursuant to which 15,000 shares of restricted

common stock originally granted to FON Consulting, LLC were cancelled.

During the year ended December 31, 2018,

37,500 shares of restricted stock awards with a fair value of approximately $38,000 were granted.

12,500 shares of these restricted

stock awards were vested immediately and 25,000 shares of these restricted stock awards were vested in 1/36 increments in monthly

installments beginning August 3, 2018.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

Restricted Stock Awards

A summary of the Company’s restricted

stock awards granted under the 2018 Plan during the years ended December 31, 2020 and 2019 is as follows:

Number of Units

Number of Restricted Stock

Weighted Average Grant Day

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Stock Options

On March 6, 2019, the Company granted

options to purchase up to 50,000 shares of the Company’s common stock 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.

On December 24, 2019, the Company granted

a total of options to purchase up to an aggregate of 475,000 shares of the Company’s common stock to directors and advisors

pursuant to the 2018 Plan.

The aggregate grant date fair value of these options was approximately $2.0 million.

The stock options

vested in full upon grant.

The fair value of options granted in 2020

and 2019 was estimated using the following assumptions:

For the Years Ended

the years ended December 31,

Exercise price

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114.2%-114.5%

111.2%-112.1%

Risk-free rate of interest

A summary of option activity under the

Company’s stock option plan for year ended December 31, 2019 and 2018 is presented below:

Company’s stock option plan for years ended December 31, 2020 and 2019 is presented below:

Number of Shares

5 unchanged sentences

Employee options issued

Non - employee options issued

Outstanding as of December 31, 2020

5 unchanged sentences

years ended December 31, 2020 and 2019 was approximately $0.7 million and $2.5 million, respectively, and comprised of the following:

For the Years Ended

Employee common stock awards

Directors common stock awards

For the years ended December 31,

Employee stock option awards

Non-employee stock option awards

Employee restricted stock awards

Non-employee restricted stock awards

Non-employee warrant awards

Non-employee stock warrant awards

Employee and director related stock-based

1 unchanged sentence

in professional fees on the consolidated statements of operations.

In addition, the Company recorded $0 and

$36,000 of stock issued for research and development services for the year ended December 31, 2019 and 2018, respectively.

Pursuant to the Patent License Agreement

between the Company and GW dated February 1, 2020, on February 27, 2020 (the “February Warrant Date of Issuance”),

the Company issued GW ten year warrants (the “February Warrants”) to purchase up to 22,988 shares of the Company’s

common stock at an exercise price of $4.35 per share.

The February Warrants vest as follows:

20% on the February Warrant Date

of Issuance and the balance, or 80% of the February Warrants, vest in four equal annual installments of 20% on each anniversary

of the February Warrant Date of Issuance.

Pursuant to the GW Patent License Agreement

between the Company and GW dated August 7, 2020, on August 10, 2020 (the “August Warrant Date of Issuance”), the Company

issued GW ten year warrants (the “August Warrants”) to purchase up to 72,463 shares of the Company’s common

stock at an exercise price of $2.76 per share.

The August Warrants vest as follows:

20% on the August Warrant Date of Issuance

and the balance, or 80% of the August Warrants, shall vest in four equal annual installments of 20% on each anniversary of the

August Warrant Date of Issuance.

In connection with the public offering

of securities discussed above, the Company granted to Laidlaw and Benchmark warrants to purchase up to 72,464 and 90,909 shares

of the Company’s common stock, respectively.

A summary of warrant activity for the

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Number of Warrants

Weighted Average Exercise

Weighted Average

Total Intrinsic Value

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Warrants exercisable as of December 31, 2020

2019 Activity

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.

warrants were not exercisable prior to August 13, 2019.

On April 17, 2019, the Company entered

into a Master Service Agreement (the “MSA”) with a consultant (the “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 (the “Consultant Warrant”).

On May 22, 2019,

the Company and Consultant agreed to terminate the MSA and number of shares of the Company’s common stock issuable upon

exercise of the Consultant Warrant was reduced to 16,333.

On June 27, 2019, the Company issued 16,333 shares of common stock upon

exercise of the Consultant Warrant which resulted in gross proceeds of approximately $163.

On April 16, 2019, the Company issued

176,272 shares of common stock upon the cashless exercise of warrants to purchase up to 215,747 shares of common stock.

warrants were issued by the Company to Laidlaw pursuant to the terms of its engagement letter with Laidlaw with respect to the

private placement of its securities from October 2017 through December 2017.

On June 6, 2019, the Company issued 47,605

shares of common stock upon the cashless exercise of warrants to purchase up to 57,750 shares of common stock.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

On August 16, 2019, in connection with

the Offering, the Company issued Warrants to purchase up to 203,709 shares of the Company’s common stock at an exercise

price of $8.00 per whole share.

In addition, pursuant to the terms of the Offering, the Company issued Laidlaw the Placement Agent

Warrants to purchase up to 61,113 shares of the Company’s common stock.

The Placement Agent Warrants are exercisable for

a period of five years from the Closing Date at an exercise price of $5.00 per share.

2018 Activity

During the year ended December 31, 2018,

the Company issued seven-year warrants to purchase 344,125 shares of the Company’s common stock at an exercise price of

$1.00 per share to investors.

The Company has determined that the warrants

should be accounted as a component of stockholders’

Note 9—Commitments and contingencies

Rent expense for the years ended December

31, 2019 and 2018 was approximately $32,000 and $28,000, respectively.

The Company is not a party to a lease that is in excess

of 12 months.

The Company leases office space for approximately

$2,500 a month.

Rent expense for the years ended December 31, 2020 and 2019 was approximately $25,000 and $32,000, respectively.

The Company is not a party to a lease that is in excess of 12 months.

The Company is not a party to any material

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of the provision for taxes:

of December 31,

Total current

Total deferred

in valuation allowance

provision for income taxes

As of December 31,

Total current provision

Total deferred benefit

Change in valuation allowance

Total provision for income taxes

At December 31, 2020 and 2019, the tax

effects of the temporary differences and carryforwards that give rise to deferred tax assets consist of the following:

of December 31,

As of December 31,

Deferred tax assets:

Net operating

loss carryforward

Net operating loss carryforward

License acquired

Stock Compensation

1 unchanged sentence

Deferred income tax assets liabilities:

Depreciation fixed assets

Total deferred income tax liabilities

1 unchanged sentence

Valuation allowance

asset, net of allowance

Deferred tax asset, net of allowance

Hoth Therapeutics, Inc.

2 unchanged sentences

tax rates and the Company’s effective tax rate for the year ended December 31, 2020 and 2019 is as follows:

For the Years ended

Years Ended December 31,

Statutory federal income tax rate

State taxes, net of federal tax benefit

Return to Provision

Return to Provison

Change in valuation allowance

4 unchanged sentences

As of December 31, 2020, the Company has

net operating loss carryforwards of approximately $9.4 million available to reduce future taxable income, if any, for Federal and

state income tax purposes.

Approximately $1.5 million of Federal net operating losses can be carried forward to future tax years

and expire in 2037.

The Federal net operating loss generated during the year ended December 31, 2018 and 2019 of approximately

net operating loss carryforwards of approximately $15.9 million available to reduce future taxable income, if any, for Federal

and state income tax purposes.

Approximately $1.5 million of Federal net operating losses can be carried forward to future tax

years and expire in 2037.

The Federal net operating loss generated during the years ended December 31, 2018 and 2019 of approximately

$14.4 million can be carried forward indefinitely.

11 unchanged sentences

remain open for examination by the Federal and state tax authorities from the date of utilization of the net operating loss.

Note 10—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.

Hoth Therapeutics, Inc.

Notes to Consolidated Financial Statements

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 FDA 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 reduce our ability to access capital either at all or on favorable terms.

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 12—Subsequent Events

The Company evaluates events that have

occurred after the balance sheet date but before the consolidated financial statements are issued.

Pursuant to the Patent License Agreement

between the Company and GWU, on February 1, 2020, the Company issued GWU warrants to purchase up to 22,988 shares of the Company’s

common stock at an exercise price of $4.35 per share.

The warrants vest as follows:

20% upon the date of issuance and the balance,

or 80% of the warrants shall vest in four equal annual installments of 20% on each anniversary of the initial issuance date.

On February 5, 2020, the Company issued

12,500 shares of common stock upon exercise of the warrants originally granted to an investor on January 19, 2018, which resulted

in gross proceeds of $12,500.

From January 1, 2020 until February

29, 2020, the Company issued an aggregate of 1,388 shares of the Company’s common stock to a member of the

Company’s Board for services rendered.

Effective as of February 28, 2020, Vadim

Mats resigned as a member of the Company’s Audit Committee.

Effective as of February 28, 2020, the Board appointed Graig

Springer as a member of the Company’s Board.

In addition, effective as of February 28, 2020, the Board appointed Graig Springer

as a member of the Company’s Audit Committee to fill the vacancy created by the resignation of Vadim Mats.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE

The compensation committee of the board

of directors increased the number of shares reserved pursuant to the Company’s 2018 Plan by 671,926 shares effective as

of January 1, 2021 such that as of January 1, 2021, the Company had an aggregate of 1,671,926 shares of common stock reserved

for issuance pursuant to the 2018 Plan.

On January 5, 2021, the Company entered

into a Securities Purchase Agreement with certain accredited investors identified on the signature pages thereto (the “Purchasers”)

pursuant to which the Company offered and sold to the Purchasers an aggregate of 2,475,248 shares of its common stock and warrants

to purchase up to 1,237,624 shares of common stock in a private placement for aggregate gross proceeds to the Company of $5 million,

before deducting estimated offering expenses payable by the Company.

The combined purchase price for each share of common stock

and accompanying warrant to purchase 0.5 of a share of common stock was $2.02.

The closing of the offering occurred on January

7, 2021.Each warrant is immediately exercisable for a period of five years at an exercise price of $2.25 per Warrant Share, subject

to adjustment, and may be exercised on a cashless basis.

In addition, pursuant to the terms of the offering, the Company issued

Benchmark Company, LLC warrants to purchase up to 185,644 shares of common stock.

Benchmark’s warrants are exercisable for

a period of five years from the closing date of the offering at an exercise price of $2.25 per share, subject to adjustment.

On February 25, 2021, the Company entered

into an exclusive, worldwide, royalty bearing license with NC State pursuant to which NC State granted the Company 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.

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

purchaser 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 warrants (the “Common Stock Warrants”) to purchase up to 7,594,937 shares

of common stock.

in a private placement for aggregate gross proceeds to the Company of $15 million, before deducting estimated

offering expenses payable by the Company.

The combined purchase price for each share of common stock and accompanying warrant was

The closing of the offering occurred on March 10, 2021.

Each warrant is immediately exercisable for a period of five years

at an exercise price of $2.25 per warrant 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

In addition, pursuant to the terms of the offering, the Company issued H.C.

Wainwright & Co., LLC warrants

to purchase up to 379,747 shares of common stock.

The 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 means of a cashless exercise.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND

FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data