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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-30 · 108 added, 66 removed, 161 unchanged (52% of the section changed)

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dollars, unless otherwise noted.

We are a clinical-stage biopharmaceutical company

focused on developing new generation therapies for unmet medical needs.

We are focused on developing (i) a topical formulation for treating

side effects from drugs used for the treatment of cancer (HT-001);

(ii) a treatment for mast-cell derived cancers and anaphylaxis (HT-KIT);

and (iii) a treatment and/or prevention for Alzheimer’s or other neuroinflammatory diseases (HT-ALZ).

We also have preclinical assets

being developed for (i) atopic dermatitis (also known as eczema) (BioLexa);(ii) a treatment for asthma and allergies using inhalational

administration (HT-004);

(iii) a treatment for lung diseases resulting from bacterial infections (HT-006);

and (iv) a treatment for inflammatory

bowel diseases (HT-003).

In addition, we are developing a diagnostic device via a mobile device.

We also have interests in certain other

assets being developed by third parties including HT-005 for patients with lupus that is being developed

We are a clinical-stage

biopharmaceutical company focused on developing new generation therapies for unmet medical needs.

We are focused on developing (i) a topical

formulation for treating side effects from drugs used for the treatment of cancer (HT-001);

(ii) a treatment for mast-cell derived cancers

and anaphylaxis (HT-KIT);

(iii) a treatment for traumatic brain injury and ischemic stroke (HT-TBI);

and (iv) a treatment and/or prevention

for Alzheimer’s or other neuroinflammatory diseases (HT-ALZ).

We also have assets being developed for (i) atopic dermatitis (also

known as eczema) (BioLexa);

(ii) a treatment for asthma and allergies using inhalational administration (HT-004);

and (iii) a treatment

for acne as well as inflammatory bowel diseases (HT-003).

In addition, we are continuing to evaluate a novel peptide that may be used

to slow the transmission of SARS-CoV-2 (HT-002).

We are also developing a diagnostic device via a mobile device.

Furthermore, we have

interests in certain other assets being developed by third parties including a treatment for patients with lupus that is being developed

by Zylö and potential product candidates being developed pursuant to our agreement with Voltron for the prevention of COVID-19.

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31, 2022 and 2021

Costs and Expenses

Operating Costs and Expenses

Research and Development Expenses

For the year ended December 31, 2022, research

and development expenses were approximately $7.5 million, of which approximately $0.2 million was related to licenses acquired and approximately

and development expenses were approximately $4.9 million, of which approximately $87,000 was related to licenses acquired and approximately

$4.8 million was related to other research and development expenses.

Specifically, during the year ended December 31, 2022, our research

and development costs consisted primarily of the following costs for each of our key research and development projects:

(i) BioLexa, approximately

$1 million related to clinical trial costs;

(ii) HT-001, approximately $2.9 million related to manufacturing, preclinical and clinical

(iii) HT-TBI, approximately $0.4 million related to manufacturing and preclinical activities;

(iv) HT-003, approximately $41,000

related to preclinical studies;

(v) HT-004, approximately $0.1 million related to sponsored research;

(vi) HT-006, approximately $51,000

related to sponsored research (on July 12, 2022, our non-exclusive commercial evaluation license agreement with the United States Army

Medical Research and Development Command terminated and we are no longer pursuing HT-006);

(vii) GW breath based diagnostic device, approximately

$76,000 related to research and development with respect to the design of device;

(viii) HT-KIT, approximately $0.2 million related to

manufacturing and preclinical activities;

and (ix) HT-ALZ, approximately $0.2 million in sponsored research.

In addition to the foregoing,

we also incurred fees of approximately $0.3 million payable to members of our scientific advisory board for services.

For the year ended December 31, 2021, research

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$7.4 million was related to other research and development expenses.

Specifically, during the year ended December 31, 2021, our research

and development costs consisted primarily of the following costs for each of our key research and development projects:

(i) BioLexa, approximately

$1.7 million related to clinical trial costs;

(ii) HT-001, approximately $4.1 million related to manufacturing, preclinical and clinical

(iii) HT-002, approximately $56,000 related to sponsored research;

(iv) HT-003, approximately $0.4 million related to preclinical

(v) HT-004, approximately $17,000 related to sponsored research;

(vi) HT-006, approximately $51,000 related to sponsored research;

(vii) GW breath based diagnostic device, approximately $0.3 million related to research and development with respect to the design of

and (viii) HT-KIT, approximately $0.4 million related to research and development manufacturing.

In addition to the foregoing,

we also incurred fees of approximately $0.2 million payable to members of our scientific advisory board for services.

We expect our research and development activities

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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.

● 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, 2021,

General and Administrative Expenses were approximately $6.6 million, which primarily consisted of approximately $3.0 million related

to payroll expenses and stock-based compensation, approximately $2.7 million for professional fees and approximately $0.8 million

for other expenses.

For the year ended December 31, 2022, General

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expenses and stock-based compensation, approximately $2.5 million for professional fees and approximately $1.0 million for other expenses.

For the year ended December 31, 2021, General

and Administrative Expenses were approximately $6.6 million, which primarily consisted of approximately $3.0 million related to payroll

expenses and stock-based compensation, approximately $2.7 million for professional fees and approximately $0.8 million for other expenses.

We anticipate that our General and Administrative

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For the year ended December 31, 2022, other expenses

was approximately $0.3 million, which primarily resulted from $0.4 million losses on marketable securities and $0.4 million change in

fair value of investments in joint ventures, partially offset by $0.5 million of other income related to a research and development tax

credit pursuant to Australian regulations.

For the year ended December 31, 2021, other expenses

were approximately $0.2 million, which consisted of the realized gain or loss, unrealized gain or loss, and dividend income related to

marketable securities.

For the year ended December 31, 2020, other income

was approximately $0.1 million, which consisted of the realized gain or loss, unrealized gain or loss, and dividend income related to

marketable securities.

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, 2021, we had approximately $8.5 million in cash, marketable securities of $1.9 million, current liabilities of $0.9

million and an accumulated deficit of approximately $33.7 million.

To date we have funded our operations primarily

through the sale of equity and debt securities.

As of December 31, 2022, we had approximately $6.4 million in cash, marketable securities

of approximately $0.2 million, working capital of approximately $5.3 million and an accumulated deficit of approximately $45.0 million.

Net cash used in operating activities was $9.3 million and $12.1 million for the years ended December 31, 2022 and 2021, respectively.

We incurred losses of approximately $11.4 million and $14.3 million for the years ended December 31, 2022 and 2021, respectively.

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

future as we continue our pre-clinical and clinical development of our product candidates.

We have not yet commercialized any products

and have never generated any revenue from product sales.

We believe that our existing cash as of December 31, 2022 will enable us to fund

our operating expenses and capital expenditure requirements for at least 12 months from the date that our audited financial statements

are available to be issued.

We have entered into certain license, sublicense,

sponsored research and option agreements with third parties.

Pursuant to such agreements, we may be required make certain:

Pursuant to such agreements, we may be required to make certain:

maintenance fee payments;

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up to approximately $15.6 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 parties.

We have funded our operations from proceeds from

the sale of equity and debt securities.

We will require significant additional capital to make the investments we need to execute our

longer-term business plan.

Our 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 our existing

shareholders and future debt securities may contain covenants that limit our operations or ability to enter into certain transactions.

We believe our current cash is sufficient to fund

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

we 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 our existing and new product candidates.

If such funding is not available, or

not available on terms acceptable to us, our current development plan and plans for expansion of our general and administrative infrastructure

may be curtailed.

Additional funding will be necessary to fund our

future clinical and pre-clinical activities.

We may obtain additional financing through sales of our equity and debt securities or entering

into strategic partnership arrangements, or a combination of the foregoing.

There are no assurances that we will be successful in obtaining

an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light

of the economic downturn.

If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay,

scale back or discontinue the development and commercialization of one or more of our product candidates.

In addition, the magnitude and

duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of

this Annually Report on Form 10-K.

Cash Flows from Operating Activities

For the year ended December 31, 2022, net cash

used in operations was approximately $12.1 million, which primarily resulted from a net loss of approximately $14.3 million, and was partially

offset by changes in operating assets and liabilities of approximately $0.5 million, unrealized loss on marketable securities of approximately

$0.2 million, and approximately $1.3 million stock-based compensation.

used in operating activities was approximately $9.3 million, which primarily resulted from a net loss of approximately $11.3 million and

$0.1 million unrealized gain on marketable securities, partially offset by approximately $0.6 million in stock-based compensation, $0.6

million realized loss on marketable securities, $0.4 million change in fair value of investments in joint ventures and changes in operating

assets and liabilities of approximately $0.4 million.

For the year ended December 31, 2021, 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.

used in operating activities was approximately $12.1 million, which primarily resulted from a net loss of approximately $14.3 million,

and was partially offset by changes in operating assets and liabilities of approximately $0.5 million, unrealized loss on marketable securities

of approximately $0.2 million, and approximately $1.3 million stock-based compensation.

Cash Flows from Investing Activities

For the year ended December 31, 2022, net cash

provided by investing activities was approximately $1.2 million which was primarily related to the sale of marketable securities.

For the year ended December 31, 2021, net cash

used in investing activities was approximately $0.2 million, which was primarily related to the sale of marketable securities of approximately

$2.5 million, and was partially offset by the purchase of marketable securities of approximately $2.6 million.

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.

Cash Flows from Financing Activities

For the year ended December 31, 2022, net cash

provided by financing activities was approximately $18.2 million.

The cash provided by financing activities primarily resulted from approximately

$17.8 million in net proceeds from the issuance of common stock, common stock warrants and pre-funded warrants, and $0.4 million in proceeds

from the exercise of warrants.

provided by financing activities was approximately $6.0 million, which primarily resulted from net proceeds from the issuance of common

For the year ended December 31, 2021, net cash

provided by financing activities was approximately $18.2 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.

Which primarily resulted from approximately $17.8 million in net proceeds

from the issuance of common stock, common stock warrants and pre-funded warrants, and $0.4 million in proceeds from the exercise of warrants.

Our ultimate success is dependent on our ability

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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 7. Management’s Discussion and Analysis