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Item 5. Market for Registrant’s Common Equity

2022-03-30 compared with 2021-03-16 · 13 added, 344 removed, 8 unchanged (98% of the section changed)

MARKET FOR REGISTRANT’S COMMON

EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On February 15, 2019, our common stock began

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

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

common stock.

On February 15, 2019, our common stock began trading

on The Nasdaq Capital Market under the symbol “HOTH.” Prior to that time, there was no public market for our common stock.

As of March 28, 2022, there were 139 shareholders

of record of our common stock.

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

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

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

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

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

This number of

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

Dividend Policy

1 unchanged sentence

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

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

Any future determination

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

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

factors that our board of directors deems relevant.

We intend to retain

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

Any future determination to pay dividends

will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial

condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors

deems relevant.

Recent Sales of Unregistered Securities

On July 21, 2020, the Board of Directors issued

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

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

From October to December 2020, the

Company issued an aggregate of 2,082 shares of the Company’s common stock, which shares were subject to a vesting

schedule, to members of the Company’s Board of Directors for services rendered.

The foregoing offers, sales and issuances were

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

SELECTED FINANCIAL DATA

As a smaller reporting company, we are not

required to provide the information required by this item.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

You should read the following discussion

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

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

In addition to historical information, this discussion and

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

Our actual results may differ materially

from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified

below, and those discussed in the section titled “Risk Factors”

included elsewhere in this Annual Report on Form 10-K.

All amounts in this report are in U.S.

dollars, unless otherwise noted.

We are a clinical-stage biopharmaceutical company

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

that our pipeline has the potential to improve the quality of life for patients suffering from indications including atopic dermatitis

(also known as eczema), chronic wounds, psoriasis, asthma and acne.

Since our formation, we have expanded our business to

also focus on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer;

a treatment for asthma and allergies using inhalational administration;

(iii) a topical treatment for patients with lupus;

a treatment for mast-cell derived cancers and anaphylaxis;

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

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

via a mobile device.

Dermatological Disorders

The BioLexa Platform

We have obtained an

exclusive license from the University of Cincinnati to make, use, have made, import, offer for sale, and sell products based upon

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

It combines an FDA-approved zinc chelator with one or more approved antibiotics in a topical dosage form to address unchecked eczema

flare-ups by preventing the formation of infectious biofilms and the resulting clogging of sweat ducts.

We intend to initially

use the BioLexa Platform to develop two different topical cream products:

(i) a product to treat eczema and (ii) a product that

reduces post-procedure infections, accelerates healing and improves clinical outcomes for patients undergoing aesthetic dermatology

We intend to develop the BioLexa Platform for use in patients following the Section 505(b)(2) regulatory pathway of

the FDA rules which permits us rely upon publicly available data with respect to gentamicin and zinc chelator in our NDA submission

to the FDA for marketing approval.

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

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

On February 1, 2020, we entered into a patent

license agreement with GW pursuant to which GW granted us a license to certain patent rights to, among other things, make, use,

offer and sell certain licensed products throughout the world with respect to HT-001 which we intend to potentially use for treating

dermatological side effects from EGFR inhibitors, and potentially other drugs used for the treatment of cancer.

On July 30, 2020, we entered into the Isoprene

Sublicense Agreement with Isoprene pursuant to which Isoprene granted us an exclusive sublicense to certain intellectual property

(i) to make, have made, use, sell, offer to sell and import certain licensed products, (ii) in connection therewith, to use certain

inventions and licensed materials and (iii) to practice certain patent rights for the treatment of dermatological conditions or

diseases, referred to as HT-003.

In December 2019, we entered into a research

collaboration agreement with Weill Cornell Medicine for the completion of pre-clinical studies investigating the mechanism of action

of HT-003 that was renewed in January 2021 as a result of positive preclinical results, and on December 22, 2020, we entered into

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

The option agreement includes

the investigation of RAMBAs for treatment of inflammatory bowel diseases, including Crohn’s disease and ulcerative colitis.

HT-005 Z-Pods™

On August 19, 2019, we entered into a sublicense

agreement with Zylö

pursuant to which Zylö

granted us an exclusive sublicense to certain licensed patent rights

and certain licensed technology to, among other things, develop, make and sell certain licensed products and to practice certain

licensed technology in the United States and Canada initially with respect to therapeutic uses related to lupus in humans.

Genetic Marker for Food Allergies

On May 18, 2018, we entered into an exclusive

license agreement with the University of Cincinnati for a patented, novel genetic marker for food allergies.

The genetic marker

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

a person’s predisposition to an allergic reaction and (iii) determine an individual’s propensity to develop atopic

dermatitis, such as eczema.

We intend to utilize the genetic marker in the future for purposes of determining an individual’s

propensity to develop eczema as well as to identify and treat allergies in at-risk infants.

Respiratory Products

On November 20, 2019, we entered into a license

agreement with NC State pursuant to which NC State granted us an exclusive license to, among other things, develop, make, use,

offer and sell certain licensed products throughout the world with respect to HT-004 for treating allergic diseases.

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

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

commercial evaluation license agreement with USAMRDC, as amended, pursuant to which USAMRDC granted us a non-exclusive commercial

evaluation license to HT-006 for the treatment of lung diseases resulting from bacterial infections.

We will initially target treatment

of serious bacterial infections of the lung, such as HAP and VAP.

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

administration.

Cancer Treatments

We have obtained from NC State an exclusive,

worldwide, royalty bearing license to certain intellectual property to, among other things, discover, develop, make, have made,

use and sell certain licensed products and sell, use and practice certain licensed services with respect to cancer and anaphylaxis;

this is being developed as HT-KIT.

We intend to initially target mast cell neoplasms for development of HT-KIT, which is a rare,

aggressive cancer with poor prognosis.

In addition, we intend pursue the anaphylaxis indication for HT-KIT in parallel to cancer

COVID-19 Products

On May 18, 2020, we entered into an Exclusive

License Agreement with the VCU pursuant to which VCU granted us an exclusive, royalty bearing license to HT-002, a novel peptide

developed by researchers at VCU that may be used to slow the transmission of SARS-CoV-2 and a non-exclusive royalty bearing,

worldwide license with respect to certain licensed technical information patents to make, have made, use, offer to sell, sell and

import certain licensed products and perform certain licensed services.

On June 29, 2020, we entered into a Sponsored Project Agreement

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

VaxCelerate SARS-CoV-2 Vaccine

On March 23, 2020, we entered into the Voltron

Agreement with Voltron pursuant to which we formed a joint venture entity named HaloVax to jointly develop potential product candidates

for the prevention of COVID-19 based upon certain technology that had been exclusively licensed by Voltron from Mass Gen.

The SARS-CoV-2

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

offers two unique elements to combat SARS-CoV-2:

a fixed immune adjuvant and variable immune targeting, the combination which is

designed to illicit a robust, protective immune response.

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

On August 7, 2020, we entered into the GW Patent

License Agreement with GW pursuant to which GW granted us an exclusive, worldwide, royalty bearing license to certain intellectual

property that can be used to develop a device designed to detect the presence of SARS-CoV-2.

Specifically, the GW Patent License

Agreement permits us to make, have made, use, import, offer for sale and sell certain licensed products in the field of virus sensing

and detection.

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

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

Results of Operations

Comparison of Our Results of Operations for the Years Ended December

31, 2020 and 2019

Costs and Expenses

Research and Development Expenses

For the year ended December 31, 2020, research

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

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

For the year ended December 31, 2019, research

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

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

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

We expect our research and development activities

to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing

costs associated with the following:

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

fees related to in-licensed products and technology;

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

the cost of acquiring and manufacturing clinical trial materials;

costs associated with non-clinical activities and regulatory approvals.

Compensation, Professional Fees, Rent and Other (“General

and Administrative Expenses”)

For the year ended December 31, 2020, General

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

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

for other expenses.

For the year ended December 31, 2019, General

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

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

We anticipate that our general and administrative

expenses will increase in future periods, reflecting continued and increasing costs associated with:

support of our research and development activities;

stock compensation granted to key employees and non-employees;

support of business development activities;

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

Liquidity and Capital Resources

We have incurred substantial operating losses

since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable.

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

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

We have entered into certain license,

sublicense, sponsored research and option agreements with third parties.

Pursuant to such agreements, we may be required make

(i) license maintenance fee payments;

(ii) out-of-pocket expense payments, including, but not limited to, payments related

to intellectual property and research related expenses;

(iii) development and commercialization expense payments;

and quarterly minimum payments;

(v) diligence expense payments;

and (vi) revenue interest payments.

In addition, subject to the

achievement of certain development and/or commercialization events, we may also be required to make certain:

(i) minimum royalty

payments, ranging from middle to high five figures, (ii) sales-based royalties and running royalties, ranging from low single

digits to low double digits;

and (iii) milestone payments, of up to approximately $21 million (if all milestones in all of our

current agreements are achieved).

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

Cash Flows from Operating Activities

For the year ended December 31, 2020, net cash

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

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

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

For the year ended December 31, 2019, net cash

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

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

$0.2 million.

Cash Flows from Investing Activities

For the year ended December 31, 2020, net cash

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

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

of approximately $0.4 million, partially

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

For the year ended December 31, 2019, net cash

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

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

Cash Flows from Financing Activities

For the year ended December 31, 2020, net cash

provided by financing activities was approximately $8.7 million.

The cash provided by financing activities primarily resulted from

approximately $8.7 million in net proceeds from the issuance of common stock and warrants.

For the year ended December 31, 2019, net cash

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

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

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

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

20, 2019, we closed the IPO pursuant to which we issued 1,250,000 shares of our common stock for net proceeds of approximately

$5.8 million, after deducting underwriting discounts and commissions and offering expenses.

The $0.2 million restricted cash had

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

we had pursuant to our Qualified Independent Underwriter Engagement Agreement.

Our ultimate success is dependent on our ability

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

We will require significant

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

plan to support new technologies and help advance innovation.

Absent generation of sufficient revenue from the execution of our

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

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

a publicly-traded company or from operations.

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

terms, if at all.

We plan to pursue our plans with respect to

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

requiring additional capital from third party sources.

We currently do not expect to generate any revenue.

Sheet Arrangements

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

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

Critical Accounting

Policies and Significant Judgments and Estimates

Our management’s discussion and analysis

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

in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The preparation of these consolidated financial

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

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

the reporting period.

In accordance with U.S.

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

The most significant

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

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

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

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

Actual results may differ from these estimates

under different assumptions or conditions.

We define our critical accounting policies

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

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

we apply those principles.

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

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

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

We expense stock-based compensation to employees

and non-employees over the requisite service period based on the estimated grant-date fair value of the awards.

Stock-based awards

with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting

portion of the award.

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

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

Management evaluates

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

at each reporting date.

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

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

or non-employees’

Income taxes are recorded in accordance with

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

using an asset and liability approach.

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

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

Deferred tax assets and liabilities

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

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

Valuation allowances are provided, if based upon

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

We account for uncertain tax positions in accordance

with the provisions of ASC 740.

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

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

The determination as to whether

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

of the available facts and circumstances.

Significant Accounting Policies

See Note 2 to

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

On April 5, 2012, the JOBS Act was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company”

can take advantage of the extended transition

period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards.

In other words,

an “emerging growth company”

can delay the adoption of certain accounting standards until those standards would otherwise

apply to private companies.

We have chosen to take advantage of the extended

transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards

until those standards would otherwise apply to private companies provided under the JOBS Act.

As a result, our consolidated financial

statements may not be comparable to those of companies that comply with public company effective dates for complying with new or

revised accounting standards.

Subject to certain conditions set forth in

the JOBS Act, as an “emerging growth company,”

we intend to rely on certain of these exemptions, including, without

limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant

to Section 404(b) of the Sarbanes-Oxley Act of 2002 and (ii) complying with any requirement that may be adopted by the Public Company

Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional

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

We will remain an “emerging

growth company”

until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of

$1.07 billion or more;

(ii) the last day of our fiscal year following the fifth anniversary of the date of the IPO;

(iii) the date

on which we have issued more than $1 billion in nonconvertible debt during the previous three years;

or (iv) the date on which

we are deemed to be a large accelerated filer under the rules of the SEC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

As a smaller reporting company, we are not

required to provide the information required by this item.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity