Rocket One Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Hoth Therapeutics, Inc. Consolidated Financial Statements TABLE OF CONTENTS Page No. Consolidated Financial Statements F-1 Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-3 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-6 Notes to Consolidated Financial Statements F-7 F- 1 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 We have audited the accompanying consolidated balance sheets of Hoth Therapeutics, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /S/ WithumSmith+Brown, PC We have served as the Company's auditor since 2018. New York, New York March 29, 2022 PCAOB ID No. 100 F- 2 Hoth Therapeutics, Inc. Consolidated Balance Sheets December 31, December 31, 2021 2020 ASSETS Current assets Cash $ 8,538,270 $ 2,629,670 Marketable equity securities, at fair value 1,892,837 2,063,236 Prepaid expenses 93,972 89,836 Note receivable - current 50,000 - Total current assets 10,575,079 4,782,742 Note receivable - 50,000 Investment in joint venture at fair value 410,000 410,000 Total assets $ 10,985,079 $ 5,242,742 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 360,964 $ 129,469 Accrued expenses 426,823 128,180 Accrued license fee - current portion 80,000 54,500 Total current liabilities 867,787 312,149 Accrued license fee - less current portion 235,000 285,000 Total liabilities 1,102,787 597,149 Commitments and contingencies - - Stockholders’ equity Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2021 and 2020, respectively - - Series A Convertible Preferred Stock, $ 0.0001 par value, 5,000,000 shares designated; 0 shares issued and outstanding at December 31, 2021 and 2020 - - Common stock, $ 0.0001 par value, 75,000,000 shares authorized, 23,974,546 and 13,438,535 shares issued and outstanding at December 31, 2021 and 2020, respectively 2,398 1,343 Additional paid-in-capital 43,589,471 24,073,059 Accumulated deficit ( 33,727,163 ) ( 19,413,458 ) Accumulated other comprehensive gain (loss) 17,586 ( 15,351 ) Total stockholders’ equity 9,882,292 4,645,593 Total liabilities and stockholders’ equity $ 10,985,079 $ 5,242,742 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Hoth Therapeutics, Inc. Consolidated Statements of Operations and Comprehensive Loss For the years ended December 31, 2021 2020 Operating costs and expenses Research and development $ 7,354,708 $ 2,281,363 Research and development - licenses acquired (including stock-based compensation) 174,782 607,562 Compensation and related expenses (including stock-based compensation) 3,036,034 1,454,478 Professional fees (including stock-based compensation) 2,703,837 2,478,493 Rent 46,871 25,871 Other general and administrative expenses 785,208 454,207 Total operating expenses 14,101,440 7,301,974 Loss from operations ( 14,101,440 ) ( 7,301,974 ) Other income (expenses) Other income (expenses), net ( 212,265 ) 104,158 Total other income (expenses) ( 212,265 ) 104,158 Net loss $ ( 14,313,705 ) $ ( 7,197,816 ) Other comprehensive gain (loss) Foreign currency translation adjustment 32,937 ( 15,351 ) Total comprehensive loss $ ( 14,280,768 ) $ ( 7,213,167 ) Net loss per share applicable to common stockholders - basic and diluted $ ( 0.64 ) $ ( 0.58 ) Weighted average number of common shares outstanding, basic and diluted 22,330,093 12,362,833 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Hoth Therapeutics, Inc. Consolidated Statements of Changes in Stockholders’ Equity Common Stock Additional Paid-in Accumulated Cumulative Translation Total Stockholders’ Shares Amount Capital Deficit Adjustment Equity Balance at December 31, 2019 10,119,844 $ 1,012 $ 14,610,638 $ ( 12,215,642 ) $ - $ 2,396,008 Issuance of common stock and warrants (net of offering costs of $ 806,243 ) 1,449,275 145 4,193,611 - - 4,193,756 Issuance of common stock (net of offering costs of $ 525,000 ) 1,818,182 182 4,474,818 - - 4,475,000 Cancellation of common stock ( 15,000 ) ( 2 ) 2 - - - Warrant exercise 56,250 6 56,244 - - 56,250 Stock-based compensation 9,984 - 737,746 - - 737,746 Cumulative translation adjustment - - - - ( 15,351 ) ( 15,351 ) Net loss - - - ( 7,197,816 ) - ( 7,197,816 ) Balance at December 31, 2020 13,438,535 $ 1,343 $ 24,073,059 $ ( 19,413,458 ) $ ( 15,351 ) $ 4,645,593 Issuance of common stock, common stock warrants and prefunded warrants (net of offering costs of $ 1,591,600 ) 6,826,962 683 13,406,949 - - 13,407,632 Issuance of common stock and warrants (net of offering costs of $ 572,500 ) 2,475,248 248 4,427,253 - - 4,427,501 Warrant exercise 1,126,720 113 359,400 - - 359,513 Stock-based compensation 107,081 11 1,322,810 - - 1,322,821 Cumulative translation adjustment - - - - 32,937 32,937 Net loss - - - ( 14,313,705 ) - ( 14,313,705 ) Balance at December 31, 2021 23,974,546 $ 2,398 $ 43,589,471 $ ( 33,727,163 ) $ 17,586 $ 9,882,292 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Hoth Therapeutics, Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2021 2020 Cash flows from operating activities Net loss $ ( 14,313,705 ) $ ( 7,197,816 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense - 1,043 Research and development-acquired license, expensed 92,470 506,957 Stock-based compensation 1,322,821 737,746 Realized loss (gain) on marketable securities 41,808 1,177 Unrealized loss (gain) on marketable securities 176,974 ( 50,553 ) Loss on foreign currency exchange 59,583 - Changes in assets and liabilities: Prepaid expenses ( 5,420 ) 20,236 Accounts payable 535,340 ( 151,988 ) Net cash used in operating activities ( 12,090,129 ) ( 6,133,198 ) Cash flows from investing activities Purchase of investments in joint venture - ( 410,000 ) Purchase of research and development licenses ( 116,970 ) ( 167,457 ) Purchase of marketable securities ( 2,556,135 ) ( 2,300,015 ) Purchase of convertible promissory note in Isoprene - ( 50,000 ) Sale of marketable securities 2,507,750 1,089,819 Net cash used in investing activities ( 165,355 ) ( 1,837,653 ) Cash flows from financing activities Proceeds from issuance common stock, common stock warrants and prefunded warrants, net of offering cost 13,407,632 - Proceeds from issuance common stock and warrants, net of offering cost 4,427,501 4,193,756 Proceeds from issuance common stock, net of offering cost - 4,475,000 Proceeds from exercise of warrants 359,513 56,250 Net cash provided by financing activities 18,194,646 8,725,006 Effect of exchange rate changes on cash and cash equivalents ( 30,562 ) ( 15,351 ) Net change in cash 5,939,162 754,155 Cash, beginning of period 2,629,670 1,890,866 Cash, end of period $ 8,538,270 $ 2,629,670 Non-cash investing and financing activities Cancellation and retirement of common stock $ - $ 2 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Hoth Therapeutics, Inc. Notes to Consolidated Financial Statements Note 1—Organization and description of business operations Hoth Therapeutics, Inc. (together with its wholly-owned subsidiary, Hoth Therapeutics Australia Pty Ltd., the “Company”) was incorporated under the laws of the State of Nevada on May 16, 2017. The Company is a clinical-stage biopharmaceutical company focused on developing new generation therapies for unmet medical needs. The Company is focused on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer; (ii) a treatment for mast-cell derived cancers and anaphylaxis; and (iii) a treatment and/or prevention for Alzheimer’s or other neuroinflammatory diseases. The Company also has preclinical assets being developed for (i) atopic dermatitis (also known as eczema); (ii) a treatment for asthma and allergies using inhalational administration; (iii) a treatment for lung diseases resulting from bacterial infections; and (iv) a treatment for inflammatory bowel diseases. In addition, the Company is developing a diagnostic device via a mobile device. The Company also has interests in certain other assets being developed by third parties (See Note 6 for a discussion of the Company’s agreement with Zylö Therapeutics, Inc. and Voltron Therapeutics, Inc.). Liquidity and capital resources Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern , requires management to evaluate the Company’s ability to continue as a going concern one year beyond the filing date of the given financial statements. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised. The Company has funded its operations from proceeds from the sale of equity and debt securities. The Company will require significant additional capital to make the investments it needs to execute its longer-term business plan. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if it were successful, future equity issuances 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. However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, grants or other arrangements to develop and seek regulatory approvals for the Company’s existing and new product candidates. If such funding is not available, or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative infrastructure may be curtailed. Note 2—Significant accounting policies Basis of presentation and principles of consolidation The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary, Hoth Therapeutics Australia Pty Ltd, which was incorporated under the laws of the State of Victoria in Australia on June 5, 2019. All significant intercompany balances and transactions have been eliminated in consolidation. F- 7 Emerging growth company As an emerging growth company, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act of 1933, as amended, registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. The most significant estimates in the Company’s consolidated financial statements relate to stock-based compensation and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Cash and cash equivalents The Company considers all highly liquid 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, 2021 and 2020. Marketable securities Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of a mutual fund which is valued at a quoted market price. Concentrations of credit risk and off-balance sheet risk Cash is a financial instrument that is potentially subject to concentrations of credit risk. The Company’s cash is deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash is held. The Company has no financial instruments with off-balance sheet risk of loss. F- 8 Fair Value of Financial Instruments Financial Accounting Standards Board (“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. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Fair value option – Note receivable The guidance in ASC 825, Financial Instruments , provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in the Company’s consolidated balance sheets from those instruments using another accounting method. 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 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 6 these consolidated financial statements. Research and development costs Research and development costs, including acquired in-process research and development expenses for which there is no alternative future use, are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Stock-based compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock 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 year period . The Company accounts for forfeited awards as they occur. 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 judgment. F- 9 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.S. 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. Income taxes Income taxes are recorded in accordance 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 positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes 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. Net loss per share Net loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during the period. Since the Company had a net loss in the periods presented, basic and diluted net loss per common share are the same. The following were excluded from the computation of diluted shares outstanding due to the losses for each period presented, as they would have had an anti-dilutive impact on the Company’s net loss: As of December 31, Potentially dilutive securities 2021 2020 Warrants 10,070,764 1,235,266 Options 1,321,212 689,212 Non-vested restricted stock awards 2,801 9,882 Total 11,394,777 1,934,360 Recent accounting pronouncements In December 2019, FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 effective January 1, 2021, and the adoption did not have a material impact on its consolidated financial statements. F- 10 Note 3—License agreements The following summarizes the Company’s research and development expenses for licenses acquired during the years ended December 31, 2021 and 2020: For the years ended December 31, 2021 2020 The George Washington University $ 99,782 $ 169,012 Chelexa Biosciences, Inc. and the University of Cincinnati - 10,000 University of Maryland and Isoprene Pharmaceuticals, Inc. 15,000 35,000 North Carolina State University 30,000 - Virginia Commonwealth University 30,000 365,000 University of Cincinnati - 26,550 U.S. Army Medical Research and Development Command - 2,000 $ 174,782 $ 607,562 The George Washington University On February 1, 2020 (“GW the Effective Date”), the Company entered into a patent license agreement with GW pursuant to which GW granted the Company 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. On the GW 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 HT-001, the Company shall pay (i) $75,000 per year for the development and commercialization of HT-001, (ii) $2,000 for license maintenance fees on the first anniversary of the GW Effective Date and (iii) $5,000 for license maintenance fees commencing on the second anniversary of the GW 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 GW Effective Date, a 30% sublicense fee until the third anniversary of the GW Effective Date and a 20% sublicense fee after the third anniversary of the GW 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. Effective as of June 1, 2019, the Company and GW entered into a sponsored research agreement (the “Sponsored Research Agreement”), as amended on July 29, 2019, May 29, 2020 and September 7, 2021, 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. The Sponsored Research Agreement shall terminate on May 31, 2022 unless terminated earlier pursuant to the terms of the agreement. On August 7, 2020 (the “GW Second Effective Date”), the Company entered into a second Patent License Agreement (the “GW Second Patent License Agreement”) with GW pursuant to which GW granted the Company an exclusive, worldwide, royalty bearing license to certain intellectual property that can be used to develop a breath based diagnostic device. The GW Second Patent License Agreement permits the Company to make, have made, use, import, offer for sale and sell Licensed Products (as defined in the GW Second Patent License Agreement) in the field of virus sensing and detection. The term of the GW Second Patent License Agreement 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 Second Patent License Agreement); or (b) ten years after the first Sale (as defined in the GW Second 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 Second Patent License Agreement, the Company shall pay GW: (i) an upfront license initiation fee, (ii) annual maintenance fees commencing on the first anniversary of the GW Second 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 Second Patent 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. F- 11 On September 17, 2020, the Company entered into a second Sponsored Research Agreement (the “Second Agreement”) with GW effective as of September 1, 2020 (the “Second Agreement Effective Date”). The Second 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 Second Agreement was terminated on February 26, 2021. 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 expense. The Company also recorded an expense of approximately $ 134,000 related with warrants granted to GW pursuant to the GW Patent License Agreement and GW Second Patent License Agreement. During the year ended December 31, 2021, the Company recorded an expense of approximately $ 0.1 million for related to warrants granted to GW pursuant to the GW Patent License Agreement and the Second GW Patent License Agreement. Chelexa Biosciences, Inc. and the University of Cincinnati On May 14, 2020, the Company entered into 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. 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, 2021, the Company paid $ 2,500 for the annual license maintenance fee and $ 5,000 for the yearly minimum annual royalty fee. F- 12 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 $ 7,500 for an upfront license payment. The payment was made in 2021. University of Maryland and Isoprene Pharmaceuticals, Inc. On July 30, 2020 (the “Isoprene Effective Date”), the Company entered into a Sublicense Agreement (the “Isoprene Sublicense Agreement”) with Isoprene Pharmaceuticals, Inc. (“Isoprene”). 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 or diseases. 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. On December 2, 2020, the Company entered into an option agreement (the “Option Agreement”) with Isoprene, pursuant to which the Company had 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, which option was exercised on July 2, 2021.This Option Agreement is based upon and 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 the 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. During the year ended December 31, 2021, the Company paid $ 15,000 for the license fee. North Carolina State University On February 25, 2021 (the “Effective Date”), the Company entered into a License Agreement (the “License Agreement”) with North Carolina State University (“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. The License Agreement commenced on the Effective Date and continues until the later of (i) the date of expiration of the last to expire patents rights licensed pursuant to such agreement, including any renewals or extensions thereof and (ii) expiration of any market exclusivity period granted for a licensed product by the applicable regulatory agency. During the year ended December 31, 2021, the Company paid $ 30,000 for the license fee. Virginia Commonwealth University On May 18, 2020 (the “VCU Effective Date”), the Company entered into an Exclusive License Agreement (the “VCU License Agreement”) with the Virginia Commonwealth University Intellectual Property Foundation (“VCU”). Pursuant to the VCU License Agreement, VCU granted the Company an exclusive, royalty bearing license to a novel peptide developed by researchers at VCU that may be used to slow the transmission of SARS-CoV-2 (the “VCU Licensed Patent”) and a non-exclusive royalty bearing, worldwide license with respect to the Licensed Technical Information Patents (as defined in the VCU License Agreement) to make, have made, use, offer to sell, sell and import the Licensed Products (as defined in the VCU License Agreement) and perform the Licensed Services (as defined in the VCU License Agreement). The VCU License Agreement commenced on the VCU Effective Date and shall continue until the expiration of the last to expire VCU Licensed Patent unless terminated earlier pursuant to the terms of the agreement. Pursuant to the VCU License Agreement, the Company shall pay VCU: (i) an upfront license issue fee, (ii) running royalty payments at a low single digit percentage of Net Sales (as defined in the VCU License Agreement), (iii) annual maintenance fees commencing on the first anniversary of the VCU Effective Date, (iv) annual minimum payments ranging from the mid five figures to low six figures commencing on the second anniversary of the VCU Effective Date and (v) milestone payments ranging from the mid five figures to low six figures. In addition, the Company has agreed to reimburse VCU for certain patent filing and prosecution costs. F- 13 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 was amended on April 28, 2021 to extend the period of research and to add an additional scope of investigation to include the variants of SARS-CoV-2. In May 2020, the Company paid the signing fee of $ 50,000 upon execution of the VCU License Agreement. During the year ended December 31, 2021, the Company paid $ 30,000 for annual maintenance fees. As of December 31, 2021 and 2020, the Company accrued $ 285,000 for five years of annual minimum payments and $ 30,000 for annual maintenance fees. The University of Cincinnati On May 18, 2018, the Company entered into an exclusive license agreement with the University of Cincinnati for a patented, novel genetic marker for food allergies. The genetic marker licensed by the Company from the University of Cincinnati may be used to (i) identify at risk infants in predicting food allergies, including peanut and milk allergies, (ii) identify a person’s predisposition to an allergic reaction, thereby avoiding such reaction and (iii) determine an individual’s propensity to develop atopic dermatitis, such as eczema. Pursuant to the terms of the exclusive license agreement, the Company paid the University of Cincinnati a minimum annual royalty fee of $ 5,000 and 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 was terminated by the Company on October 22, 2021. During the year ended December 31, 2021, the Company paid $ 5,000 for the annual license maintenance fee and $ 5,000 for the yearly minimum annual royalty fee. During the year ended December 31, 2020, the Company paid a total of $ 5,000 for the annual license maintenance fee, $ 5,000 for the yearly minimum annual royalty. As of December 31, 2020, the Company accrued a $ 10,500 for an upfront license payment. The payment was made in 2021. U.S. Army Medical Research and Development Command 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. The payment was made in January 2021. 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 lower of: (i) the highest lawful rate permitted under applicable law and (ii) 6% per annum. The Isoprene Note may not be prepaid without the prior written consent of the Company. In the event a Qualified Financing (as defined below) occurs before the Isoprene Note is repaid in full or the conversion of such note pursuant to a Change of Control (as defined in the Isoprene Note) transaction, the Isoprene Note may be converted into such number of convertible preferred stock issued in the Qualified Financing equal to the balance of such note divided by the Capped Conversion Price (as defined below). “Qualified Financing” means the first sale of Isoprene’s convertible preferred 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. F- 14 Note 5—Investments in Marketable Securities The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the years ended December 31, 2021 and 2020, 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, 2021 2020 Unrealized gain $ ( 176,974 ) $ 50,553 Realized loss ( 41,808 ) ( 1,177 ) Dividend income 66,101 31,152 Interest income - 8 $ ( 152,683 ) $ 80,536 Note 6—Fair Value of Financial Assets and Liabilities The following table presents the Company’s assets and liabilities that are measured at fair value at December 31, 2021 and 2020: Fair value measured at December 31, 2021 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2021 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 1,892,837 $ 1,892,837 $ - $ - Investment in joint venture $ 410,000 $ - $ - $ 410,000 Note receivable - current $ 50,000 $ - $ - $ 50,000 Fair value measured at December 31, 2020 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2020 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 2,063,236 $ 2,063,236 $ - $ - Investment in joint venture $ 410,000 - - $ 410,000 Note receivable $ 50,000 - - $ 50,000 Investment in joint venture The Company has elected to measure the investment in joint venture using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the consolidated statements of operations. F- 15 The value at which the Company’s investment in joint venture is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market conditions and those characteristics specific to the underlying investments. 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. No change in fair value occurred during the year ended December 31, 2021 and 2020. Investment in Zylö In connection with the Company’s March 2020 underwritten public offering of shares of its common stock, on May 4, 2020, the Company purchased 120,000 shares of Zylö’s Class B common stock for $ 60,000 . No change in fair value occurred during the year ended December 31, 2021 and 2020. On December 8, 2021, the Company entered into a third amendment (the “Zylö Amendment”) to the Exclusive Sublicense Agreement with Zylö originally dated August 19, 2019 pursuant to which the Company licensed its novel cannabinoid therapeutic, HT-005 for lupus patients, back to Zylö. Pursuant to the Zylö Amendment, on December 6, 2021 Zylö issued the Company 100,000 shares of its Class B common stock. In addition, pursuant to the Zylö Amendment, within 90 days following a sale by Zylö of all of its assets and rights related to HT-005 to a third party (a “Sale”), Zylö shall pay the Company a low single digit percent of the net proceeds received by it attributable to HT-005 in the United States and Canada and their respective territories (collectively, the “Territory”) for the purposes of therapeutic uses related to lupus in humans (the “Field”). After the Sale, any and all rights of the Company pursuant to the Exclusive Sublicense Agreement, including all amendments thereto, shall terminate. Furthermore, pursuant to the Zylö Amendment, following the date of the first commercial sale of HT-005 in the Territory, in the Field, Zylö shall pay the Company (i) a low single digit percent of the Net Sales (as defined in the Exclusive Sublicense Agreement) of HT-005 in the event HT-005 is sold in the Territory and (ii) a low double digit percent of any royalty that Zylö receives through the sublicense to a third party based on Net Sales of HT-005 in the Territory which payments shall continue in each country in the Territory until expiration of the last-to-expire Valid Claim (as defined in the Exclusive Sublicense Agreement). Note receivable As of December 31, 2021, the fair value of the Isoprene Note was measured at $ 50,000 , taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. Note 7—Stockholders’ Equity 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, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be determined at the time of issuance by the Company’s board of directors without further action by the Company’s shareholders. As of December 31, 2021, 5,000,000 shares of the Company’s preferred stock has been designated as Series A Convertible Preferred Stock. The shares of Series A Convertible Preferred 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 host. F- 16 Common Shares 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 of $ 12,500 . 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 of $ 25,000 . 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 $ 6,250 . 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 of $ 12,500 . 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. The warrants 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. 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 share. The Company received net proceeds of approximately $ 4.5 million, after deducting the underwriting discount and offering expenses. 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. Securities Purchase Agreements On January 5, 2021, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which the Company offered and sold to the investors an aggregate of 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 net proceeds to the Company of $ 4.6 million, after deducting estimated offering expenses payable by the Company. The combined purchase price for each share of common stock and accompanying warrant to purchase one half of a share of common stock was $ 2.02 . The closing of the offering occurred on January 7, 2021. Each warrant is exercisable for a period of five years from the issuance date at an exercise price of $ 2.25 per share, subject to adjustment, and may be exercised on a cashless basis. In addition, pursuant to the terms of the offering, the Company issued The Benchmark Company, LLC (“Benchmark”) warrants to purchase up to 185,644 shares of the Company’s common stock. Benchmark’s warrants are exercisable for a period of five years from the closing date of the offering at an exercise price of $ 2.25 per share, subject to adjustment, and may be exercised on a cashless basis. F- 17 On March 8, 2021, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which it offered and sold to the investors 6,826,962 shares of common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 767,975 shares of common stock and warrants (the “Common Stock Warrants”) to purchase up to 7,594,937 shares of common stock in a private placement for aggregate net proceeds to the Company of $ 13.5 million, after deducting estimated offering expenses payable by the Company. The combined purchase price for each share of common stock and accompanying warrant was $ 1.975 . The closing of the offering occurred on March 10, 2021. Each Common Stock Warrant is exercisable for a period of three years from the issuance date at an exercise price of $ 1.86 per share, subject to adjustment, and may be exercised on a cashless basis. Each Pre-Funded Warrant is exercisable until exercised in full at an exercise price of $ 0.001 per share and may be exercised by means of a cashless exercise. In addition, pursuant to the terms of the offering, the Company issued H.C. Wainwright & Co., LLC warrants (“Wainwright Warrants”) to purchase up to 379,747 shares of the Company’s common stock. The Wainwright Warrants are exercisable for a period of three years from the issuance date at an exercise price of $ 2.4688 per share, subject to adjustment, and may be exercised by on a cashless basis. 2018 Equity Incentive Plan The compensation committee of the board of directors increased the number of shares reserved pursuant to the Company’s 2018 Equity Incentive Plan (“2018 Plan”) by 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 June 24, 2021, at the annual shareholder meeting, shareholders of the Company approved an amendment to the 2018 Plan to further increase the number of shares reserved for issuance thereunder from 1,671,926 shares to 3,671,926 shares. Restricted Stock Awards A summary of the Company’s restricted stock awards granted under the 2018 Plan during the years ended December 31, 2021 and 2020 is as follows: Number of Restricted Stock Awards Weighted Average Grant Day Fair Value Nonvested at December 31, 2019 13,200 $ 0.25 Granted 6,666 3.00 Vested ( 9,984 ) 0.49 Nonvested at December 31, 2020 9,882 $ 1.86 Granted 100,000 1.24 Vested ( 107,081 ) 1.23 Nonvested at December 31, 2021 2,801 $ 3.00 As of December 31, 2021, there is approximately $ 2,000 of unrecognized stock-based compensation expense related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards is approximately 0.63 years at December 31, 2021. Stock Options During the year ended December 31, 2021, pursuant to and subject to the available number of shares reserved under the 2018 Plan, the Company issued an aggregate of 632,000 options to the Company’s directors. The aggregate grant date fair value of these options was approximately $ 1.1 million. F- 18 During the year ended December 31, 2020, pursuant to and subject to the available number of shares reserved under the 2018 Plan, the Company issued an aggregate of 200,000 options to the Company’s directors. The aggregate grant date fair value of these options was approximately $ 0.5 million. The Company also issued 49,212 options to purchase common stock of the Company to a third party for consulting services. The aggregate grant date fair value of these options was approximately $ 0.1 million. The fair value of options granted in 2021 and 2020 was estimated using the following assumptions: For the years ended December 31, 2021 2020 Exercise price $ 2.11 $ 2.54 - 3.05 Term (years) 10.0 9.52 - 9.56 Expected stock price volatility 119.2 % 114.2 % - 114.5 % Risk-free rate of interest 0.42 % 0.3 % A summary of option activity under the Company’s stock option plan for the years ended December 31, 2021 and 2020 is presented below: Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2019 525,000 $ 5.32 $ 457,250 9.4 Employee options issued 200,000 3.05 - 8.8 Non - employee options issued 49,212 2.54 - 9.5 Forfeited ( 85,000 ) - - - Outstanding as of December 31, 2020 689,212 $ 4.52 $ - 8.8 Employee options issued 632,000 2.11 - 9.3 Outstanding as of December 31, 2021 1,321,212 $ 3.37 $ - 8.6 Options vested and exercisable as of December 31, 2021 1,321,212 $ 3.37 $ - 8.6 Stock-based compensation associated with the amortization of stock option expense was approximately $ 1.1 million and $ 0.6 for the year ended December 31, 2021 and 2020, respectively. All stock compensation associated with the amortization of employee stock option expense was recorded as a component of compensation and related expense in the statement of operations. All stock compensation associated with the amortization of nonemployee stock option expense was recorded as a component of professional fees in the statement of operations. Estimated future stock-based compensation expense relating to unvested stock options is approximately $ 0 . Stock Based Compensation Stock-based compensation expense for the years ended December 31, 2021 and 2020 was as follows: For the years ended December 31, 2021 2020 Employee stock option awards $ 1,092,429 $ 487,963 Non-employee stock option awards - 100,104 Employee restricted stock awards 6,611 15,510 Non-employee restricted stock awards 124,000 - Non-employee stock warrant awards 99,782 134,169 $ 1,322,821 $ 737,746 F- 19 Employee and director related stock-based compensation was included in compensation and related expenses, and non-employee related stock-based compensation was included in professional fees and research and development related with licenses acquisition in the consolidated statements of operations and comprehensive loss. Warrants 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, 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 years ended December 31, 2021 and 2020 is presented below: Number of Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2019 1,032,692 $ 2.91 $ 3,725,745 4.2 Issued 258,824 3.28 - 4.9 Exercised ( 56,250 ) 1.00 - - Outstanding as of December 31, 2020 1,235,266 $ 3.07 $ 696,334 3.4 Issued 10,165,927 1.80 - 2.3 Expired ( 203,709 ) 8.00 - - Exercised ( 1,126,720 ) 0.32 - - Outstanding as of December 31, 2021 10,070,764 $ 1.99 $ - 2.3 Warrants exercisable as of December 31, 2021 10,013,495 $ 1.99 $ - 2.5 The Company has determined that the warrants should be accounted as a component of stockholders’ equity. Note 8—Commitments and contingencies Office lease The Company leases office space for approximately $ 4,500 a month. Rent expense for the years ended December 31, 2021 and 2020 was approximately $ 47,000 and $ 25,000 , respectively. The Company is not a party to a lease that is in excess of 12 months. Litigation The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. F- 20 Note 9—Income taxes The table below presents the components of the provision for taxes: The Company’s provision is driven by refundable tax credits generated by its subsidiary in Australia. As of December 31, 2021 2020 Current U.S. Federal $ - $ - U.S. State - - US. Foreign ( 548,660 ) - Total current provision ( 548,660 ) - Deferred U.S. Federal - - U.S. State - - US. Foreign - - Total deferred benefit - - Change in valuation allowance ( 548,660 ) - Total provision for income taxes $ - $ - At December 31, 2021 and 2020, the tax effects of the temporary differences and carryforwards that give rise to deferred tax assets consist of the following: As of December 31, 2021 2020 Net operating loss carryforwards $ 6,752,718 $ 3,336,268 Research and development credits 444,866 - Equity based compensation 590,050 549,387 Licenses acquired 341,171 139,487 Depreciation 72 63 Accruals and other temporary differences 155,816 - Gross deferred tax assets 8,284,693 4,025,205 Depreciation - - Accruals and other temporary differences - - Less valuation allowance ( 8,284,693 ) ( 4,025,205 ) Net deferred taxes $ - $ - A reconciliation of the statutory income tax rates and the Company’s effective tax rate for the year ended December 31, 2021 and 2020 is as follows: Years Ended December 31, 2021 2020 Tax provision at statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 8.2 % - Permanent items ( 1.8 )% ( 0.3 )% Credits 6.7 % - Equity compensation ( 2.4 )% - Rate changes 2.4 % - Foreign rate differential - - Other ( 0.3 )% - Increase/(decrease) in valuation reserve ( 30.0 )% ( 20.7 )% Total 3.80 % - The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax assets. As of December 31, 2021, the Company has net operating loss carryforwards of approximately $ 26.7 million and 22.4 million available to reduce future taxable income, if any, for Federal and state income tax purposes, respectively. 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 after December 31, 2017 of approximately $ 25.2 million can be carried forward indefinitely; however, the deduction for net operating losses incurred in tax years beginning after December 31, 2017 is limited to 80 % of annual taxable income. F- 21 As of December 31, 2021, the Company has research and development credits of approximately $ 0.4 million and $ 0 available to reduce future income taxes, if any, for Federal and state income tax purposes, respectively. The Federal credits expire if not utilized by 2041. The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state tax provisions, due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has not conducted an analysis of an ownership change under Section 382 of the Code. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses and tax credits could be limited. The following table summarizes the activity related to the Company’s gross unrecognized tax benefits at the beginning and end of the years ended December 31, 2021 and December 31, 2020, respectively (in thousands): As of December 31, 2021 2020 Gross unrecognized tax benefits at the beginning of the year $ - $ - Increases related to current year positions - - Increases related to prior year positions - - Decreases related to prior year positions - - Expiration of unrecognized tax benefits - - Gross unrecognized tax benefits at the end of the year $ - $ - At December 31, 2021 and 2020, the Company did not have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months. All of the Company’s tax years will 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 COVID-19 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, including variants, 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. F- 22 Furthermore, site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If the Coronavirus continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and the Company may be unable to conduct its clinical trials. Further, if the spread of the Coronavirus pandemic continues and the Company’s operations are adversely impacted, the Company risks a delay, default and/or nonperformance under existing agreements which may increase its costs. These cost increases may not be fully recoverable or adequately covered by insurance. Infections and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay 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. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the Coronavirus could materially and adversely affect the Company’s business and the value of its common stock. The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s operations, and the Company will continue to monitor the situation closely. Nasdaq Delisting Notice On December 30, 2021, the Company received a written notice from the Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that the bid price of its common stock, par value $0.0001 per share, failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was granted an initial 180 calendar day compliance period, or until June 28, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least 10 consecutive business days during the initial 180 calendar day compliance period. In the event the Company does not regain compliance by June 28, 2022, the Company may be eligible for an additional 180 calendar day grace period if the Company meets the continued listing standards for The Nasdaq Capital Market, with the exception of bid price, and the Company provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. Note 11—Subsequent Events On February 2, 2022, the compensation committee of the Board of Directors of the Company approved an increase in the number of shares of common stock reserved for issuance under the 2018 Plan by 250,000 shares from 3,671,926 shares to 3,921,926 shares. F- 23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE None.