UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended: June 30, 2024

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

Commission File Number: 001-38803

 

Hoth Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   82-1553794
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

590 Madison Ave., 21st Floor
New York, NY		   10022
(Address of principal executive offices)   (Zip Code)

 

(646) 756-2997

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common Stock, $0.0001 par value   HOTH   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
    Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of the issuer’s common stock, $0.0001 par value per share, outstanding at August 8, 2024 was 6,903,804.

 

 

 

 

 

 

Table of Contents

 

  Page
PART I - FINANCIAL INFORMATION 1
ITEM 1. Financial Statements 1
  Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023 1
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 2
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 3
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited) 4
  Notes to Unaudited Condensed Consolidated Financial Statements 5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 25
ITEM 4. Controls and Procedures 25
     
PART II - OTHER INFORMATION 26
ITEM 1. Legal Proceedings 26
ITEM 1A. Risk Factors 26
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
ITEM 3. Defaults Upon Senior Securities 26
ITEM 5. Other Information 26
ITEM 6. Exhibits 26
SIGNATURES 27

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “believes,” “will,” “expects,” “anticipates,” “estimates,” “predicts,” “potential,” “continues” “intends,” “plans” and “would” or the negative of these terms or other comparable terminology. For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, and plans are all forward-looking statements. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

 

●our business strategies;

 

●the timing of regulatory submissions;

 

●our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain;

 

●risks relating to the timing and costs of clinical trials and the timing and costs of other expenses;

 

●risks related to market acceptance of our products;

 

●the ultimate impact of any health epidemics on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole;

 

●intellectual property risks;

 

●risks associated with our reliance on third-party organizations;

 

●our competitive position;

 

●our industry environment;

 

●our anticipated financial and operating results, including anticipated sources of revenues;

 

●assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches;

 

●management’s expectation with respect to future acquisitions;

 

  ● statements regarding our goals, intentions, plans and expectations, including the introduction of new products and markets;
     
  ● general business and economic conditions, such as inflationary pressures and geopolitical conditions including, but not limited to, the conflict between Russia and the Ukraine and the conflict between Israel and Gaza; and

 

●our cash needs and financing plans.

 

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

 

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

 

ii

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2024   2023 
   (Unaudited)     
ASSETS        
         
CURRENT ASSETS:        
Cash and cash equivalents  $9,654,837   $9,292,352 
Prepaid expenses and other current assets   299,708    135,361 
Total Current Assets   9,954,545    9,427,713 
           
NON-CURRENT ASSETS:          
Operating lease right-of-use asset, net   41,104    55,165 
Investment in joint ventures at fair value   36,819    37,400 
Total Non-Current Assets   77,923    92,565 
           
Total Assets  $10,032,468   $9,520,278 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable  $333,346   $35,592 
Accrued expenses   317,410    614,226 
Operating lease liability, current portion   30,060    28,839 
Total Current Liabilities   680,816    678,657 
           
LONG-TERM LIABILITIES:          
Operating lease liability, less current portion   11,044    26,326 
Total Long-Term Liabilities   11,044    26,326 
           
Total Liabilities   691,860    704,983 
           
Commitments and Contingencies (Note 6)   
 
    
 
 
           
STOCKHOLDERS’ EQUITY:          
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 3,000,000 shares undesignated; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023   
-
    
-
 
Series A Convertible Preferred Stock, $0.0001 par value;  5,000,000 shares designated; 0 shares issued and outstanding on June 30, 2024 and December 31, 2023   
-
    
-
 
Series B Preferred Stock, $0.0001 par value;  2,000,000 shares designated; 0 shares issued and outstanding on June 30, 2024 and December 31, 2023   
-
    
-
 
Common stock, $0.0001 par value; 50,000,000 shares authorized; 5,358,804 and 4,348,129 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively   536    435 
Additional paid-in capital   65,934,709    61,732,106 
Accumulated deficit   (56,617,763)   (52,944,506)
Accumulated other comprehensive income   23,126    27,260 
Total Stockholders’ Equity   9,340,608    8,815,295 
           
Total Liabilities and Stockholders’ Equity  $10,032,468   $9,520,278 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
                 
NET REVENUES  $
-
   $
-
   $
-
   $
-
 
                     
OPERATING COSTS AND EXPENSES:                    
Research and development expense   566,335    652,202    1,032,231    1,591,080 
General and administrative expenses   1,079,504    1,056,427    2,667,766    2,310,366 
                     
Total operating expenses   1,645,839    1,708,629    3,699,997    3,901,446 
                     
LOSS FROM OPERATIONS   (1,645,839)   (1,708,629)   (3,699,997)   (3,901,446)
                     
OTHER INCOME (EXPENSES), NET:                    
Unrealized loss on marketable securities   
-
    (165,950)   
-
    (184,753)
Change in fair value of investment in joint venture   
-
    
-
    (581)   
-
 
Dividend income   13,365    1,548    27,321    29,661 
                     
Total other income (expenses), net   13,365    (164,402)   26,740    (155,092)
                     
NET LOSS  $(1,632,474)  $(1,873,031)  $(3,673,257)  $(4,056,538)
                     
NET LOSS PER COMMON SHARE:                    
Basic and diluted
  $(0.24)  $(0.57)  $(0.65)  $(1.40)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:                    
Basic and diluted
   6,876,331    3,302,113    5,637,621    2,894,732 
                     
COMPREHENSIVE LOSS:                    
Net loss  $(1,632,474)  $(1,873,031)  $(3,673,257)  $(4,056,538)
                     
Other comprehensive (loss) income:                    
Foreign currency translation adjustment   1,634    (51,088)   (4,134)   (45,718)
                     
Total comprehensive loss  $(1,630,840)  $(1,924,119)  $(3,677,391)  $(4,102,256)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)

 

   For the Three and Six Months Ended June 30, 2024 
           Additional       Accumulated other   Total 
   Common Stock   Paid-in   Accumulated   Comprehensive   Stockholders’ 
   Shares   Amount   Capital   Deficit   Income (Loss)   Equity 
                         
Balance, December 31, 2023   4,348,129   $435   $61,732,106   $(52,944,506)  $27,260   $8,815,295 
Exercise of pre-funded warrants   55,675    5    (5)   
-
    
-
    
-
 
Stock-based compensation   -    
-
    513,350    
-
    
-
    513,350 
Deferred offering cost related to warrant inducement   -    
-
    550,500    
-
    
-
    550,500 
Cumulative translation adjustment   -    
-
    
-
    
-
    (5,768)   (5,768)
Net loss   -    
-
    
-
    (2,040,783)   
-
    (2,040,783)
                               
Balance, March 31, 2024   4,403,804    440    62,795,951    (54,985,289)   21,492    7,832,594 
Exercise of pre-funded warrants   -    
-
    
-
    
-
    
-
    
-
 
Stock-based compensation   -    
-
    7,054    
-
    
-
    7,054 
Common shares issued and issuable for exercise of warrants (1)   955,000    96    3,682,204    
-
    
-
    3,682,300 
Deferred offering cost related to warrant inducement   -    
-
    (550,500)   
-
    
-
    (550,500)
Cumulative translation adjustment   -    
-
    
-
    
-
    1,634    1,634 
Net loss   -    
-
    
-
    (1,632,474)   
-
    (1,632,474)
                               
Balance, June 30, 2024   5,358,804   $536   $65,934,709   $(56,617,763)  $23,126   $9,340,608 

 

   For the Three and Six Months Ended June 30, 2023 
           Additional       Accumulated other   Total 
   Common Stock   Paid-in   Accumulated   Comprehensive   Stockholders’ 
   Shares   Amount   Capital   Deficit   Income (Loss)   Equity 
                         
Balance, December 31, 2022   1,302,113   $130   $50,198,630   $(45,099,116)  $22,006   $5,121,650 
Exercise of warrants   1,860,000    186    1,674    
-
    
-
    1,860 
Stock-based compensation   -    
-
    10,630    
-
    
-
    10,630 
Common stock and warrants issued in private placement, net of offering costs   140,000    14    8,909,516    
-
    
-
    8,909,530 
Cumulative translation adjustment   -    
-
    
-
    
-
    5,370    5,370 
Net loss   -    
-
    
-
    (2,183,507)   
-
    (2,183,507)
                               
Balance, March 31, 2023   3,302,113    330    59,120,450    (47,282,623)   27,376    11,865,533 
Stock-based compensation   -    
-
    9,748    
-
    
-
    9,748 
Cumulative translation adjustment   -    
-
    
-
    
-
    (51,088)   (51,088)
Net loss   -    
-
    
-
    (1,873,031)   
-
    (1,873,031)
                               
Balance, June 30, 2023   3,302,113   $330   $59,130,198   $(49,155,654)  $(23,712)  $9,951,162 

 

(1)Represents the aggregate fair value of 2,500,000 shares of common stock, which includes 955,000 shares that have been issued and 1,545,000 shares held in abeyance (See Note 5 – Stockholders’ Equity – Warrants for additional information.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Six Months Ended 
   June 30, 
   2024   2023 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(3,673,257)  $(4,056,538)
Adjustments to reconcile net loss to net cash used in operating activities:          
Research and development-acquired license, expensed   
-
    8,750 
Stock-based compensation   520,404    20,378 
Unrealized loss on marketable securities   
-
    184,753 
Change in fair value of investment in joint ventures   581    
-
 
Changes in operating assets and liabilities:          
Prepaid expenses   (164,347)   (227,391)
Accounts payable and accrued expenses   938    330,933 
           
NET CASH USED IN OPERATING ACTIVITIES   (3,315,681)   (3,739,115)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from issuance common stock, common stock warrants and prefunded warrants, net of offering costs   
-
    8,909,530 
Proceeds from exercise of warrants   3,682,300    1,860 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   3,682,300    8,911,390 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   366,619    5,172,275 
           
Effect of exchange rate changes on cash and cash equivalents   (4,134)   (56,084)
           
CASH AND CASH EQUIVALENTS - beginning of period   9,292,352    6,428,611 
           
CASH AND CASH EQUIVALENTS - end of period  $9,654,837   $11,544,802 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Increase in deferred offering cost and additional paid-in capital  $550,500   $
-
 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

NOTE 1 – Organization and Description of Business Operations

 

Hoth Therapeutics, Inc. (together with its wholly-owned subsidiaries, merveille.ai and Hoth Therapeutics Australia Pty Ltd, collectively, 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 (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). The Company also has 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). The Company also has interests in certain other assets being developed by third parties including a treatment for patients with lupus that is being developed by Zylö Therapeutics, Inc. and potential product candidates being developed pursuant to our agreement with Voltron Therapeutics, Inc. for the prevention of COVID-19 (see Note 4 to the unaudited condensed consolidated financial statements for a discussion of the Company’s agreement with Zylö 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 unaudited condensed 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 incurred losses and generated negative cash flows from operations since its inception. At June 30, 2024, the Company had an accumulated deficit of $56.6 million and cash and cash equivalents of $9.7 million. 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 may result in dilution to its existing shareholders and future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

 

The Company believes its current cash is sufficient to fund operations for at least the next 12 months from the issuance date of these financial statements. 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 current and future 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.

 

On April 1, 2024, in connection with the March 27, 2024 inducement offer agreement with a holder (the “Holder”) of certain of the Company’s existing warrants (the “January 2023 Existing Warrants”) to exercise, for cash, an aggregate of 2,500,000 of the January 2023 Existing Warrants to purchase shares of the Company’s common stock at a reduced exercise price of $1.6775 per share, the Holder exercised the 2,500,000 January 2023 Existing Warrants and was to be issued 2,500,000 shares of the Company’s common stock (the “Warrant Shares”) for gross proceeds to the Company of approximately $4.2 million before deducting placement agent fees and other offering expenses payable by the Company. As of June 30, 2024, 1,545,000 of the Warrant Shares were held in abeyance and were not reflected as issued and outstanding common shares on the accompanying condensed consolidated balance sheet, in accordance with the terms of the inducement offer agreement. Pursuant to the inducement offer agreement, the Company only issued such number of Warrant Shares to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder, as directed by the Holder, with the balance of the Warrant Shares held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance the limitations set forth in the inducement offer agreement, which abeyance shall be evidenced through the January 2023 Existing Warrants which shall be deemed prepaid thereafter (including the cash payment in full of the exercise price), and exercised pursuant to a Notice of Exercise in the January 2023 Existing Warrants (provided no additional exercise price shall be due and payable) (see Notes 5 to the unaudited condensed consolidated financial statements). As of June 30, 2024, 955,000 Warrant Shares have been issued. On July 24, 2024, the remaining 1,545,000 Warrants Shares were issued and no Warrant Shares remain to be issued.

 

5

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

NOTE 2 – Summary of Significant Accounting Policies

 

Basis of presentation and principles of consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 28, 2024.

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, merveille.ai, which was incorporated under the laws of Nevada on October 4, 2023, and 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.

 

Reclassifications

 

Certain line items on the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 have been reclassified to conform to the current period presentation. For the three months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $11,243 was reclassified to research and development expense, and compensation and related expenses (including stock-based compensation) of $518,476, professional fees (including stock-based compensation) of $483,883, rent of $7,897, and other general and administrative expense of $46,171 were consolidated into one general and administrative expenses line item. For the six months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $59,276 was reclassified to research and development expenses, and compensation and related expenses (including stock-based compensation) of $814,040, professional fees (including stock-based compensation) of $1,100,258, rent of $23,017, and other general and administrative expense of $373,051 were consolidated into one general and administrative expenses line item. These reclassifications did not change the Company’s reported net loss or comprehensive loss for the three and six months ended June 30, 2023.

 

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, proxy statements and registration 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 107 of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (“Securities Act”), for complying with new or revised accounting standards until private companies (that is, those that have not had a Securities Act 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 statements 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. The Company will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which it has total annual gross revenues of $1.235 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the date of its initial public offering, which would be December 31, 2024; (iii) the date on which it has issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC. After the Company is no longer deemed to be an emerging growth company, it will no longer have the ability to delay the adoption of new or revised accounting standards, or to take advantage of reduced corporate governance disclosures.

 

Use of estimates

 

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements relate to stock-based compensation, the valuation of modified warrants, 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 may be affected. 

6

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

Significant Accounting Policies

 

There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 28, 2024.

 

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. Cash and cash equivalents consist of bank accounts and highly liquid money funds and totaled $9,654,837 and $9,292,352 as of June 30, 2024 and December 31, 2023, respectively. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits at the three financial institutions the Company utilizes for its banking requirements. The Company’s foreign bank accounts are not subject to FDIC insurance. Cash held in foreign bank accounts totaled $0.1 million and $0.1 million as of June 30, 2024 and December 31, 2023, respectively.

 

Concentrations of credit risk and off-balance sheet risk

 

The Company has significant cash balances at financial institutions which, throughout the year, regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

 

Leases

 

The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liability, current and lease liability, on the Company’s unaudited condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset, and lease liabilities represent the Company’s obligation to make lease payments in exchange for the ability to use the asset for the duration of the lease term.

 

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component. As such, minimum lease payments include fixed payments for non-lease components within a lease agreement but exclude variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period. Certain of the leases contain an option to extend the term of the lease. The option to extend a lease is included in the lease term only when it is reasonably certain that the Company will elect that option. Additionally, the Company does not record ROU assets or lease liabilities for short-term leases that have a term of twelve months or less at lease commencement.

 

ROU assets and lease liabilities are recognized at the commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company uses an incremental borrowing rate based on an estimated rate of interest for collateralized borrowing since the Company’s leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and the lease term at commencement date.

 

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 fair value of the Company’s assets and liabilities, which would qualify as financial instruments under ASC Topic 820, approximates the carrying amounts represented in the Company’s unaudited condensed consolidated balance sheets, primarily due to their short-term nature.

 

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.

 

7

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

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. During the six months ended June 30, 2024 and 2023, there were no changes in valuation techniques or transfers between Level 1, Level 2, and Level 3.

 

Investment in joint ventures

 

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 ventures is further described in Note 4 of these unaudited condensed 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 stock-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. Options are generally issued fully vested. 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.

 

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. 

 

The Company grants restricted stock awards under its equity incentive plan. Restricted stock awards are granted to employees and non-employees. The restricted stock awards are measured based on the grant-date fair value. In general, the restricted stock awards vest over a service period of zero to three years. Stock-based compensation expense is generally recognized based on the straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

 

The Company has issued warrants to non-employees. The warrants are measured based on the grant-date fair value. In general, the warrants vest over a term of zero to ten years. Stock-based compensation expense is generally recognized based on the straight-line basis over the vesting term.

 

8

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

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 unaudited condensed 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 shares 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 June 30, 
Potentially dilutive securities  2024   2023 
Warrants   5,211,848    3,002,840 
Options   617,362    104,651 
Non-vested restricted stock awards   1,693    3,384 
Total   5,830,903    3,110,875 

 

Recent accounting pronouncements

 

Income Taxes (Topic 740)

 

In December 2023, the FASB issued guidance within ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold.

 

The ASU requires disclosure of the following information about income taxes paid on an annual basis:

 

●Income taxes paid (net of refunds received), disaggregated by federal and state taxes and by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received).

 

●Income tax expense (or benefit) from continuing operations disaggregated by federal and state jurisdictions.

 

The ASU is effective for annual periods beginning after December 15, 2024. The amendments should be applied on a prospective basis. The Company is evaluating the impact that the adoption of this ASU will have on the Company’s consolidated financial statements, as it may require additional disclosures in the notes to the Company’s condensed consolidated financial statements. 

 

9

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

Segment Reporting (Topic 280)

 

In November 2023, the FASB issued guidance within ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and operations consist of a single business segment and a single reporting unit.

 

The amendments in this ASU are intended to improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments included in this ASU:

 

●

Require disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included within each reported measure of segment profit and loss.

 

●

Require disclosure on an annual and interim basis, an amount for other segment items (defined in this ASU) and a description of its composition.

 

●Clarify that if the CODM uses more than one measure of the segment’s profit or loss in assessing performance, one or more of those additional measures may be reported.

 

●Require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance.

 

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the Company’s condensed consolidated financial statements as the Company has a single reportable segment.

 

Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements, if currently adopted, would have a material impact on the Company’s unaudited condensed consolidated financial statements.

 

NOTE 3 - License Agreements

 

The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during the three and six months ended June 30, 2024 and 2023:

 

   For the Three Months Ended
June 30,		   For the Six Months Ended
June 30,		 
   2024   2023   2024   2023 
The George Washington University  $8,597   $10,618   $9,847   $51,776 
North Carolina State University   1,563    —    3,125    — 
Virginia Commonwealth University   —    —    —    6,250 
University of Cincinnati   417    625    417    1,250 
   $10,577   $11,243   $13,389   $59,276 

 

10

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

The George Washington University

 

During the three and six months ended June 30, 2024, the Company recorded expenses of $8,597 and $9,847, respectively, for license fees, including an expense of $6,389 and $6,389 for the three and six months ended June 30, 2024, respectively, related to warrants granted to The George Washington University (“GW”) pursuant to the patent license agreement with GW dated February 1, 2020 (“GW Patent License Agreement”) and the patent license agreement with GW dated August 7, 2020 (“Second GW Patent License Agreement”).

 

During the three and six months ended June 30, 2023, the Company recorded expenses of $10,618 and $51,776, respectively, for license fees, including an expense of $7,754 and $16,412 for the three and six months ended June 30, 2023, respectively, related to warrants granted to GW pursuant to the GW Patent License Agreement and the Second GW Patent License Agreement. In addition, during the three and six months ended June 30, 2023, the Company recorded an expense of $0 and $30,000, respectively, related to the initiation of a clinical trial.

 

North Carolina State University

 

During the three and six months ended June 30, 2024, the Company recorded expenses of $1,563 and $3,125, respectively, for license fees associated with the license agreement by and between the Company and North Carolina State University dated February 25, 2021. During the three and six months ended June 30, 2023, the Company did not recognize any expenses for license fees associated with such license agreement.

 

Virginia Commonwealth University

 

During the three and six months ended June 30, 2024, the Company did not recognize any expenses for license fees associated with the exclusive license agreement (the “VCU License Agreement”) by and between the Company and VCU dated May 18, 2020 that was terminated August 9 2023. During the three and six months ended June 30, 2023, the Company recognized expenses of $0 and $6,250, respectively, for license fees associated with the VCU License Agreement.

 

Chelexa Biosciences, Inc. and the University of Cincinnati

 

During the three and six months ended June 30, 2024, the Company recognized expenses of $417 and $417, respectively, for license fees associated with the Assignment and Assumption Agreement by and between the Company and Chelexa Biosciences, Inc. dated May 14, 2020 (“Chelexa Agreement”). During the three and six months ended June 30, 2023, the Company recognized expenses of $625 and $1,250, respectively, for license fees associated with the Chelexa Agreement.

 

NOTE 4 – Fair Value of Financial Assets and Liabilities

 

The following table presents the Company’s assets and liabilities that are measured at fair value on June 30, 2024 and December 31, 2023:

 

   Fair value measured on June 30, 2024 
   Total at
June 30,
2024		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $36,819   $
   —
   $
   —
   $36,819 

 

   Fair value measured on December 31, 2023 
   Total at
December 31,
2023		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $37,400   $
   —
   $
    —
   $37,400 

 

11

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

Level 3 Measurement

 

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis as of June 30, 2024 and 2023:

 

Investment in joint venture for the three months ended June 30, 2024 and 2023
 
   For the Three Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $36,819   $33,000 
Change in fair value of investments in joint ventures   
-
    
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 

 

Investment in joint venture for the six months ended June 30, 2024 and 2023
 
   For the Six Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $37,400   $33,000 
Change in fair value of investments in joint ventures   (581)   
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 

 

Investment in joint ventures

 

The Company has elected to measure the investment in joint ventures 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 unaudited condensed consolidated statements of operations and comprehensive loss. 

 

The value at which the Company’s investment in joint ventures 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 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. 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). Zylö conducted a 409A valuation of their Class B common stock and as of June 30, 2024 and December 31, 2023, valued its share price at $0.167 and $0.17 per share, respectively. This value was ratified by Zylö’s board of directors in February 2024 and December 2023, respectively.

 

On February 23, 2024, the Company acquired 22,000 shares of Class B Common stock of Atticus Pharma, a subsidiary of Zylö Therapeutics, based upon a 1-for-10 ratio of current shares and were instructed on July 3, 2024 that the 409A valuation of the shares is $79, or $0.0036 per share, pursuant to the February 2024 valuation ratified by Zylö’s board of directors.

 

The valuations reflect a probability-weighted present value of expected future investment returns considering certain possible outcomes and the rights of each class of Zylö’s and Atticus Pharma’s equity. The future values of the common stock under the various outcomes are discounted back to the valuation date at a risk-adjusted discount rate and probability weighted to determine the value for the Class B common stock. Significant unobservable inputs in the valuation include: (i) probabilities of each scenario, (ii) timing of occurrence, (iii) future valuation; (iv) and the risk-adjusted discount rate.

 

The consolidated investment in Zylö was valued at $36,819 and $37,400 as of June 30, 2024 and December 31, 2023, respectively.

 

12

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

NOTE 5 - 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 June 30, 2024 and December 31, 2023, 5,000,000 shares of the Company’s preferred stock have been designated as Series A Convertible Preferred Stock and 2,000,000 shares of the Company’s preferred stock have been designated as Series B Preferred Stock, and 3,000,000 shares of the Company’s preferred stock remain undesignated.

 

Series A Convertible Preferred Stock

 

The shares of Series A Convertible Preferred Stock, par value $0.0001 per share, 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 unaudited condensed consolidated 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. As of June 30, 2024 and December 31, 2023, no Series A preferred shares are issued and outstanding.

 

Series B Preferred Stock

 

On November 2, 2022, the Company filed a Certificate of Designation of the Series B Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada to create a new class of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”). The Certificate of Designation designated 2,000,000 shares of authorized preferred stock as Series B Preferred Stock. The Series B Preferred Stock was not entitled to receive dividends or any other distributions. The Series B Preferred Stock was entitled to ten votes per share and voted together with the Company’s issued and outstanding shares of common stock as a single class exclusively with respect to a proposal to increase the number of shares of common stock that the Company was authorized to issue, together with any ancillary or administrative matters necessary or advisable in connection with the implementation of such increase. The Series B Preferred Stock had no rights as to any distribution or assets of the Company upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company. As of June 30, 2024 and December 31, 2023, no Series B preferred shares are issued and outstanding.

 

Warrants

 

2023

 

On December 29, 2022, the Company entered into a securities purchase agreement with an accredited investor pursuant to which it sold (i) 140,000 shares of common stock, (ii) pre-funded warrants to purchase up to 1,860,000 shares of common stock (“December Pre-Funded Warrants”) and (iii) common stock warrants to purchase up to 2,500,000 shares of common stock (“December Common Stock Warrants”) at a purchase price of $5.00 per share and accompanying warrant (less $0.001 for each December Pre-Funded Warrant), in a private placement, for aggregate gross proceeds of approximately $10 million, exclusive of placement agent commission and fees and other offering expenses. The closing of the offering occurred on January 3, 2023. Each December Common Stock Warrant is exercisable for a period of five and one-half years from the issuance date at an exercise price of $5.00 per share, subject to adjustment, and may, under certain circumstances, be exercised on a cashless basis. Each December Pre-Funded Warrant is exercisable until exercised in full at an exercise price of $0.001 per share and may be exercised on a cashless basis.

 

The measurement of fair value of the December Pre-Funded Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $0.001, term of 30 years beginning January 3, 2023 (as these do not have an expiration date), volatility of 135.07%, risk-free rate of 3.88%, and expected dividend rate of 0%). The grant date fair value of the December Pre-Funded Warrants was estimated to be $12.2 million on January 3, 2023 and is reflected within additional paid-in capital as of June 30, 2023 as the Pre-Funded Warrants were determined to be equity classified.

 

13

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

The measurement of fair value of the December Common Stock Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $5.00, term of five and a half years beginning January 3, 2023, volatility of 135.07%, risk-free rate of 3.94%, and expected dividend rate of 0%). The grant date fair value of these December Common Stock Warrants was estimated to be $15.0 million on January 3, 2023 and is reflected within additional paid-in capital as of June 30, 2023 as the December Common Stock Warrants were determined to be equity classified.

 

On various dates in February 2023, the investor exercised all the December Pre-Funded Warrants for 1,860,000 shares of the Company’s common stock for net proceeds to the Company of $1,860.

 

In addition, pursuant to the terms of the offering, the Company issued the designees of the placement agent, H.C. Wainwright & Co., LLC, warrants to purchase up to 100,000 shares of the Company’s common stock (“December Wainwright Warrants”). The December Wainwright Warrants had a determined fair value of $591,090 as of the date of issuance. The December Wainwright Warrants are exercisable for a period of five and one-half years from the issuance date at an exercise price of $6.25 per share, subject to adjustment, and may, under certain circumstances, be exercised on a cashless basis. As these December Wainwright Warrants were issued for services provided in facilitating the private placement, the Company recorded the fair value of such December Wainwright Warrants as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $6.25, term of five and a half years beginning January 3, 2023, volatility of 135.07%, risk-free rate of 3.94%, and expected dividend rate of 0%).

 

2024

 

On January 8, 2024, the Company issued 55,675 common shares in connection with the exercise of 55,675 pre-funded warrants that were issued in connection with a securities purchase agreement dated September 13, 2023.

 

On March 27, 2024, the Company entered into an inducement offer agreement with the Holder of the January 2023 Existing Warrants to immediately exercise for cash an aggregate 2,500,000 of the January 2023 Existing Warrants to purchase shares of the Company’s common stock at a reduced exercise price of $1.6775 per share for gross proceeds to the Company of approximately $4.2 million before deducting placement agent fees and other offering expenses payable by the Company. The exercised January 2023 Existing Warrants were issued pursuant to a securities purchase agreement dated December 29, 2022 by and between the Company and the Holder. Each January 2023 Existing Warrant was exercisable for a period of five and one-half years from the issuance date at an original exercise price of $5.00 per share.

 

As an inducement to such exercise, the Company agreed to issue new unregistered warrants to purchase up to 3,750,000 shares of the Company’s common stock at an exercise price of $1.50 per share (the “April 2024 Inducement Warrants”). The April 2024 Inducement Warrants are exercisable immediately upon issuance and will expire on July 3, 2028. On April 1, 2024, the Holder of the January 2023 Existing Warrants exercised such warrants, and the Company issued the investor 3,750,000 April 2024 Inducement Warrants. Additionally, in connection with the January 2023 Existing Warrants exercise, the Company issued 125,000 placement agent warrants, which are immediately exercisable and expire on July 3, 2028 at an exercise price of $2.0969 per share. 

 

The amendment to the January 2023 Existing Warrants on March 27, 2024 to lower the exercise price thereof, was considered a modification of the January 2023 Existing Warrants under the guidance of ASU 2021-04. The modification is consistent with the “Equity Issuance” classification under that guidance as the reason for the modification was to induce the holders to cash exercise their warrants, resulting in the exercise of the January 2023 Existing Warrants on April 1, 2024.

 

On March 27, 2024, the Company calculated the total fair value of the consideration for the modification of the January 2023 Existing Warrants, which includes the incremental fair value of the January 2023 Existing Warrants (determined by comparing the fair values immediately prior to and immediately after the modification). The fair values were calculated using the Black-Scholes option-pricing model, and the Company determined that the total fair value of the consideration related to the modification of the January 2023 Existing Warrants amounted to $550,500, which are considered offering costs and were netted against the net proceeds received by the warrant exercise under the guidance of ASU 2021-04.

 

14

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

On April 1, 2024, in connection with the March 27, 2024 inducement offer agreement with the Holder of the January 2023 Existing Warrants, the Holder exercised the January 2023 Existing Warrants for cash at a reduced exercise price of $1.6775 per share resulting in gross proceeds to the Company of approximately $4.2 million (net proceeds of approximately $3.8 million, after deducting placement agent fees and other offering expenses of $436,450). In connection with such exercise, the Company was to issue up to 2,500,000 Warrant Shares upon the exercise of the January 2023 Existing Warrants. As of June 30, 2024, 1,545,000 of the Warrant Shares were held in abeyance and were not reflected as issued and outstanding common shares on the accompanying condensed consolidated balance sheet, in accordance with the terms of the inducement offer agreement. Pursuant to the inducement offer agreement, the Company only issued such number of Warrant Shares to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder, as directed by the Holder, with the balance of the Warrant Shares held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance with the limitations set forth in the inducement offer agreement, which abeyance shall be evidenced through the January 2023 Existing Warrants which shall be deemed prepaid thereafter (including the cash payment in full of the exercise price), and exercised pursuant to a Notice of Exercise in the January 2023 Existing Warrants (provided no additional exercise price shall be due and payable). As of June 30, 2024, the Company issued 955,000 Warrant Shares to the Holder, and 1,545,000 Warrant Shares were held in abeyance for future issuance. On July 24, 2024, the remaining 1,545,000 Warrant Shares held in abeyance were issued.

 

On April 1, 2024, in connection with the issuance of the April 2024 Inducement Warrants and the placement agent warrants, the Company calculated the fair value of such warrants using the Black-Scholes option-pricing model, and the Company determined that the aggregate total fair value of the April 2024 Inducement Warrant and placement agent warrants amounted to $4,166,800, which are considered offering costs and were netted against the net proceeds received by the warrant exercise under the guidance of ASU 2021-04.

 

The fair value of the January 2023 Existing Warrants on the modification date and the fair value of the April 2024 Inducement Warrants were estimated using the Black-Scholes option-pricing model with the following assumptions:

 

    March 27,
2024 to
April 1,
2024		  
Exercise price     $1.50 to $5.00  
Term (years)     4.25  
Expected stock price volatility     109.8%  
Risk-free rate of interest     4.18% to 4.34%  

 

A summary of warrant activity for the six months ended June 30, 2024 is as follows:

 

   Number of
Warrants		   Weighted
Average
Exercise
Price		   Total
Intrinsic
Value		   Weighted
Average
Remaining
Contractual Life
(in years)		 
Outstanding as of December 31, 2023   4,213,515   $7.01   $
    —
    4.5 
Issued   3,875,000    1.52    
—
    
—
 
Expired   (320,992)   48.02    
—
    
—
 
Exercised   (2,555,675)   1.64    
—
    
—
 
Outstanding as of June 30, 2024   5,211,848    2.71    
—
    4.01 
Warrants exercisable as of June 30, 2024   5,211,848   $2.71   $
—
    4.01 

 

The Company has determined that the warrants should be accounted for as a component of stockholders’ equity.

 

Common Shares

 

On various dates in February 2023, the investor exercised all the December Pre-Funded Warrants for 1,860,000 shares of the Company’s common stock for net proceeds to the Company of $1,860.

 

On January 8, 2024, the Company issued 55,675 common shares in connection with the exercise of 55,675 pre-funded warrants that were issued in connection with a securities purchase agreement dated September 13, 2023.

 

During the three months ended June 30, 2024, the Company issued 955,000 shares of its common stock that were held in abeyance in connection with the exercise of 2,500,000 warrants (See Warrants section above).

 

15

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

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 26,878 shares effective as of January 1, 2021, such that as of January 1, 2021, the Company had an aggregate of 66,878 shares of common stock reserved for issuance pursuant to the 2018 Plan. On June 24, 2021, at the annual meeting of shareholders, shareholders of the Company approved an amendment to the 2018 Plan to further increase the number of shares reserved for issuance thereunder from 66,878 shares to 146,878 shares. On February 2, 2022, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 146,878 shares to 156,878 shares. On January 11, 2023, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 156,878 shares to 166,878 shares. On January 4, 2024, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 166,878 shares to 176,878 shares.

 

2022 Equity Incentive Plan

 

On March 24, 2022, the Company’s board of directors adopted the Hoth Therapeutics, Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”) initially reserving 96,000 shares of the Company’s common stock for issuance thereunder. The 2022 Plan became effective on June 23, 2022 upon approval of the 2022 Plan by the Company’s shareholders at the Company’s annual meeting of shareholders. On June 2, 2023, the Company’s board of directors approved the Hoth Therapeutics, Inc. Amended and Restated 2022 Omnibus Equity Incentive Plan (the “Amended and Restated 2022 Plan”) which was approved by stockholders on August 18, 2023. Under the Amended and Restated 2022 Plan, there are 591,317 shares of Company common stock available for grant. On May 15, 2024, the Company’s compensation committee recommended and the board of directors approved an increase to the number of shares of common stock reserved for issuance under the 2022 Plan by 500,000 shares from 51,317 shares to 551,317 shares (“2024 Increase”). The 2024 Increase was approved by shareholders of the Company on August 7, 2024.

 

Restricted Stock Awards

 

A summary of the Company’s restricted stock awards granted under the equity incentive plans during the six months ended June 30, 2024 is as follows:

 

   Number of
Restricted Stock
Awards		   Weighted
Average Grant
Day Fair Value		 
Nonvested on December 31, 2023   1,693    3.16 
Granted   
—
    
—
 
Vested   
—
    
—
 
Nonvested on June 30, 2024   1,693    3.16 

 

As of June 30, 2024, approximately $1,213 of unrecognized stock-based compensation expense was related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards was approximately 0.50 years on June 30, 2024.

 

Stock Options

 

On January 5, 2024, pursuant to and subject to the available number of shares reserved under the 2022 Plan, the Company issued options to the Company’s employees and directors to purchase up to 450,000 shares of the Company’s common stock at an exercise price of $1.36 per share. The options vested immediately and expire on January 5, 2034. The aggregate grant date fair value of these options was $512,685, which was recorded as stock-based compensation during the six months ended June 30, 2024.

 

The fair value of option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

    Six Months Ended
June 30,		  
    2024     2023  
Exercise price   $ 1.36     $
-
  
Term (years)     5.0      
-
  
Expected stock price volatility     120.00 %    
-
 %
Risk-free rate of interest     4.02 %    
-
 %

 

16

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

A summary of option activity under the Company’s equity incentive plans for the six months ended June 30, 2024 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, 2023   169,362   $26.78   $
—
    8.4 
Employee options issued   450,000   $1.36    
—
    
—
 
Expired   (2,000)   147.0    
—
    
—
 
Outstanding as of June 30, 2024   617,362   $7.86   $
—
    9.1 
Options vested and exercisable as of June 30, 2024   617,362   $7.86   $
—
    9.1 

 

All stock compensation associated with the amortization of employee stock option expense was recorded as a component of general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

Estimated future stock-based compensation expense relating to unvested stock options is $0.

 

Stock Based Compensation

 

Stock-based compensation expense for the three and six months ended June 30, 2024 and 2023 was as follows:

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Employee stock option awards  $
—
   $
—
   $512,685   $
—
 
Non-employee restricted stock awards   665    1,994    1,330    3,966 
Non-employee stock warrant awards   6,389    7,754    6,389    16,412 
   $7,054   $9,748   $520,404   $20,378 

 

For the three and six months ended June 30, 2024 and 2023, the amount of stock-based compensation expense included within research and development and general and administrative expenses was as follows:

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Research and development  $6,389   $7,754   $6,389   $16,412 
General and administrative   665    1,994    514,015    3,966 
   $7,054   $9,748   $520,404   $20,378 

 

NOTE 6 - Commitments and Contingencies

 

Office lease

 

Effective November 2023, the Company leased office space for a two-year term. The Company’s office lease contains a renewal option. The Company has evaluated several factors in assessing whether there is reasonable certainty that the Company will exercise its contractual renewal option concluding that it is not reasonably certain to exercise such option. As it is not reasonably certain to be exercised, the Company excluded the renewal term in determining the lease term used in calculating the right-of-use asset and lease liability. Prior to entering into this lease, the Company has not entered into any lease arrangements in excess of 12 months.

 

17

 

 

HOTH THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

The table below presents certain information related to the Company’s lease costs, which are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operation and comprehensive loss: 

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Operating lease expense  $5,615   $
—
   $14,232   $
—
 
Short term lease expense   5,840    7,897    10,493    23,017 
Total lease cost  $11,455   $7,897   $24,725   $23,017 

 

Right-of-use asset for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:

 

   June 30,
2024		   December 31,
2023		 
Office lease right-of-use asset  $59,698   $59,698 
Less accumulated amortization   (18,594)   (4,533)
Total right-of-use asset, net  $41,104   $55,165 

 

Operating lease liability for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:

 

   June 30,
2024		   December 31,
2023		 
Current portion of operating lease liability  $30,060   $28,839 
Long-term portion of operating lease liability   11,044    26,326 
Total operating lease liability  $41,104   $55,165 

 

Supplemental cash flow information related to the Company’s leases for the six months ended June 30, 2024 were as follows:

 

Cash paid for amounts included in the measurement of lease liabilities    
Operating cash flows for operating leases  $16,392 

 

The weighted-average remaining lease term for the operating lease is 1.00 years and the weighted-average incremental borrowing rate is 10% as of June 30, 2024 and December 31, 2023.

 

As of June 30, 2024, future annual minimum lease payments required under operating leases are as follows:

 

2025  $32,784 
2026   10,928 
Total minimum lease payments  $43,712 
Less: effects of discounting   (2,608)
Present value of future minimum lease payments  $41,104 

 

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.

 

NOTE 7 – Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date through the date for which the condensed consolidated financial statements are issued. Based upon the evaluation, except as set forth herein, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.

 

On July 24, 2024, the Company issued 1,545,000 Warrant Shares that were being held in abeyance as of June 30, 2024.

 

An increase to the number of shares of common stock reserved for issuance under the 2022 Plan by 500,000 shares from 51,317 shares to 551,317 shares was approved by shareholders of the Company on August 7, 2024.

 

18

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

Overview

 

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). 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 Therapeutics, Inc. and potential product candidates being developed pursuant to our agreement with Voltron Therapeutics, Inc. for the prevention of COVID-19.

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2024 and 2023

 

Operating Costs and Expenses

 

Research and Development Expenses

 

For the three months ended June 30, 2024, research and development expenses decreased by approximately $86,000, or 13.2%, as compared to the three months ended June 30, 2023.

 

For the three months ended June 30, 2024, research and development expenses were approximately $0.6 million, of which approximately $4,000 was related to licenses acquired and approximately $0.6 million was related to other research and development expenses. Specifically, during the quarter ended June 30, 2024, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) HT-001, approximately $360,000 related to manufacturing, preclinical and clinical activities; (ii) HT-KIT, approximately $133,000 related to manufacturing and preclinical activities; and (iii) HT-004, approximately $26,000 in sponsored research activities. In addition to the foregoing, we also incurred fees of approximately $37,000 payable to members of our scientific advisory board for services.

 

For the three months ended June 30, 2023, research and development expenses were approximately $0.7 million, of which approximately $11,000 was related to licenses acquired and approximately $0.6 million was related to other research and development expenses. Specifically, during the quarter ended June 30, 2023, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) BioLexa, approximately $13,000 related to manufacturing costs; (ii) HT-001, approximately $0.6 million related to manufacturing, preclinical and clinical activities; and (iii) HT-KIT, approximately $0.2 million related to manufacturing and preclinical activities. In addition to the foregoing, we also incurred fees of approximately $57,000 payable to members of our scientific advisory board for services.

 

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

 

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

 

●fees related to in-licensed products and technology;

 

●expenses incurred under agreements with contract research organizations, 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; and

 

●costs associated with non-clinical activities and regulatory approvals.

 

19

 

 

General and Administrative Expenses

 

For the three months ended June 30, 2024, general and administrative expenses amounted to approximately $1.1 million as compared to $1.1 million for the three months ended June 30, 2023, an increase of $23,077, or 2.2%. For the three months ended June 30, 2024 and 2023, general and administrative expenses consisted of the following:

 

   Three Months Ended
June 30,		 
   2024   2023 
Compensation and related expenses  $369,183   $380,976 
Professional and consulting expenses   461,477    483,883 
Rent expense   11,455    7,897 
Other general and administrative expenses   237,389    183,671 
Total  $1,079,504   $1,056,427 

 

During the three months ended June 30, 2024, the increase in general and administrative expenses of approximately $23,000 was primarily attributed to an increase other general and administrative expenses of approximately $53,700, which was attributable to an increase in conference expense offset by a decrease in insurance expense, and an increase in rent expense of approximately $3,600, offset by a decrease in compensation and related expenses of approximately $11,800 and a decrease in professional and consulting expenses of approximately $22,400.

 

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

 

●support of our research and development activities;

 

●stock compensation granted to key employees and non-employees;

 

●support of business development activities; and

 

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

 

Other income (expenses)

 

For the three months ended June 30, 2024 and 2023, we recorded other income (expenses), net of approximately $13,000 and $(164,000), respectively. During the three months ended June 30, 2023, we recorded an unrealized loss of marketable securities of approximately $166,000 as compared to $0 for the three months ended June 30, 2024.

 

Net Loss

 

For the three months ended June 30, 2024 and 2023, we incurred a net loss of approximately $1.6 million, or $0.24 per common share (basic and diluted), and $1.9 million, or $0.57 per common share (basic and diluted), respectively, a decrease of approximately $0.3 million.

 

Comparison of the Six Months Ended June 30, 2024 and 2023

 

Operating Costs and Expenses

 

Research and Development Expenses

 

For the six months ended June 30, 2024, research and development expenses decreased by approximately $559,000, or 35.1%, as compared to the six months ended June 30, 2023.

 

For the six months ended June 30, 2024, research and development expenses were approximately $1.0 million, of which approximately $13,000 was related to licenses acquired and approximately $1.0 million was related to other research and development expenses. Specifically, during the six months ended June 30, 2024, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) HT-001, approximately $641,000 related to manufacturing, preclinical and clinical activities; (ii) HT-ALZ, approximately $16,000 related to preclinical studies; (iii) HT-KIT, approximately $209,000 related to manufacturing and preclinical activities; and (iv) HT-004, approximately $77,000 in sponsored research activities. In addition to the foregoing, we also incurred fees of approximately $75,000 payable to members of our scientific advisory board for services.

 

For the six months ended June 30, 2023, research and development expenses were approximately $1.6 million, of which approximately $0.1 million was related to licenses acquired and approximately $1.5 million was related to other research and development expenses. Specifically, during the six months ended June 30, 2023, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) BioLexa, approximately $40,000 related to manufacturing costs; (ii) HT-001, approximately $1.0 million related to manufacturing, preclinical and clinical activities; and (iii) HT-KIT, approximately $0.2 million related to manufacturing and preclinical activities. In addition to the foregoing, we also incurred fees of approximately $0.1 million payable to members of our scientific advisory board for services. Additionally, our subsidiary, Hoth Therapeutics Australia Pty Ltd, recorded approximately a $260,000 gain due to a settlement agreement on a payable balance with Novotech, a clinical trial management vendor.

 

20

 

 

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

 

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

 

●fees related to in-licensed products and technology;

 

●expenses incurred under agreements with contract research organizations, 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; and

 

●costs associated with non-clinical activities and regulatory approvals.

 

General and Administrative Expenses

 

For the six months ended June 30, 2024, general and administrative expenses amounted to $2,667,766 as compared to $2,310,366 for the six months ended June 30, 2023, an increase of $357,400, or 15.5%. For the six months ended June 30, 2024 and 2023, general and administrative expenses consisted of the following:

 

   Six Months Ended
June 30,		 
   2024   2023 
Compensation and related expenses  $1,217,402   $814,040 
Professional and consulting expenses   1,015,913    1,100,258 
Rent expense   24,725    23,017 
Other general and administrative expenses   409,726    373,051 
Total  $2,667,766   $2,310,366 

 

During the six months ended June 30, 2024, the increase in general and administrative expenses of approximately $357,000 was primarily attributed to an increase other general and administrative expenses of approximately $38,000 and an increase in compensation and related expenses of approximately $403,000, which consisted of an increase in stock-based compensation of approximately $510,000 related to the issuance of stock options to executives and board of director members, offset by a decrease in other compensation and related expenses of approximately $107,000, and a decrease in professional and consulting expenses of approximately $84,000.

 

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

 

●support of our research and development activities;

 

●stock compensation granted to key employees and non-employees;

 

●support of business development activities; and

 

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

 

Other income (expenses)

 

For the six months ended June 30, 2024 and 2023, we recorded other income (expenses), net of approximately $27,000 and $(155,000), respectively. During the six months ended June 30, 2023, we recorded an unrealized loss of marketable securities of approximately $185,000 as compared to $0 for the six months ended June 30, 2024.

 

Net Loss

 

For the six months ended June 30, 2024 and 2023, we incurred a net loss of approximately $3.7 million, or $0.65 per common share (basic and diluted), and $4.1 million, or $1.40 per common share (basic and diluted), respectively, a decrease of approximately $0.4 million.

 

21

 

 

Liquidity and Capital Resources

 

To date we have funded our operations primarily through the sale of equity and debt securities. As of June 30, 2024, we had approximately $9.7 million in cash and cash equivalents, working capital of approximately $9.3 million and an accumulated deficit of approximately $56.6 million. Net cash used in operating activities was $3.3 million and $3.7 million for the six months ended June 30, 2024 and 2023, respectively. We incurred net losses of approximately $3.7 million and $4.1 million for the six months ended June 30, 2024 and 2023, respectively. We have 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 June 30, 2024 will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q.

 

On April 1, 2024, in connection with a March 27, 2024 inducement offer agreement with a holder (the “Holder”) of certain of our existing warrants (“January 2023 Existing Warrants”) to immediately exercise, for cash, an aggregate 2,500,000 January 2023 Existing Warrants to purchase shares of our common stock at a reduced exercise price of $1.6775 per share, we were to issue up to 2,500,000 shares (the “Warrant Shares”) of our common stock upon the exercise of the 2,500,000 January 2023 Existing Warrants for net proceeds of approximately $3.8 million, after deducting placement agent fees and other offering expenses of approximately $0.4 million. As of June 30, 2024, 1,545,000 of the Warrant Shares were held in abeyance and were not reflected as issued and outstanding common shares on the accompanying condensed consolidated balance sheet, in accordance with the terms of the inducement offer agreement. Pursuant to the inducement offer agreement, we issued such number of Warrant Shares to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder, as directed by the Holder, with the balance of the Warrant Shares held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance with the limitations set forth in the inducement offer agreement, which abeyance shall be evidenced through the January 2023 Existing Warrants which shall be deemed prepaid thereafter (including the cash payment in full of the exercise price), and exercised pursuant to a Notice of Exercise in the January 2023 Existing Warrants (provided no additional exercise price shall be due and payable). As of June 30, 2024, we issued 955,000 Warrant Shares to the Holder and 1,545,000 Warrant Shares were held in abeyance for future issuance. On July 24, 2024, the Company issued the remaining 1,545,000 Warrant Shares being held in abeyance.

 

As an inducement to such exercise, we issued new unregistered warrants to the warrant holder to purchase up to 3,750,000 shares of our common stock at an exercise price of $1.50 per share. The warrants are exercisable immediately upon issuance and will expire on July 3, 2028. Additionally, in connection with this exercise, we issued 125,000 placement agent warrants at an exercise price of $2.0969 per share. The placement agent warrants are exercisable immediately upon issuance and will expire on July 3, 2028.

 

We have entered into certain license, sublicense, sponsored research and option agreements with third parties. Pursuant to such agreements, we may be required to make certain: (i) license maintenance fee payments; (ii) out-of-pocket expense payments, including, but not limited to, payments related to intellectual property and research related expenses; (iii) development and commercialization expense payments; (iv) annual and quarterly minimum payments; (v) diligence expense payments; and (vi) revenue interest payments. In addition, subject to the achievement of certain development and/or commercialization events, we may also be required to make certain: (i) minimum royalty payments, ranging from middle to high five figures, (ii) sales-based royalties and running royalties, ranging from low single digits to low double digits; and (iii) milestone payments, of up to approximately $12 million (if all milestones in all of our current agreements are achieved).

 

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, entering into strategic partnerships, grants or other 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.

 

Cash Flows from Operating Activities

 

For the six months ended June 30, 2024, net cash used in operations was approximately $3.3 million, which primarily resulted from a net loss of approximately $3.7 million, adjusted for the add back of stock-based compensation of approximately $0.5 million, and changes in operating assets and liabilities consisting of an increase in prepaid expenses and other current assets of approximately $0.1 million.

 

For the six months ended June 30, 2023, net cash used in operations was approximately $3.7 million, which primarily resulted from a net loss of approximately $4.1 million.

 

Cash Flows from Investing Activities

 

For the six months ended June 30, 2024 and 2023, there was no net cash provided by or used in investing activities.

 

Cash Flows from Financing Activities

 

For the six months ended June 30, 2024, net cash provided by financing activities was approximately $3.7 million, which resulted from net proceeds from the exercise of warrants.

 

For the six months ended June 30, 2023, net cash provided by financing activities was approximately $8.9 million, which primarily resulted from net proceeds from the issuance of common stock and warrants.

 

22

 

 

Critical Accounting Estimates

 

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

 

●it requires assumptions to be made that were uncertain at the time the estimate was made; and

 

●changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition.

 

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material.

 

See Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.

 

Stock-based compensation

 

The Company accounts for stock-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. Options are generally issued fully vested. 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.

 

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. 

 

The Company grants restricted stock awards under its equity incentive plan. Restricted stock awards are granted to employees and non-employees. The restricted stock awards are measured based on the grant-date fair value. In general, the restricted stock awards vest over a service period of zero to three years. Stock-based compensation expense is generally recognized based on the straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

 

The Company has issued warrants to non-employees. The warrants are measured based on the grant-date fair value. In general, the warrants vest over a term of zero to ten years. Stock-based compensation expense is generally recognized based on the straight-line basis over the vesting term.

 

23

 

 

Recently Issued Accounting Standards Not Yet Effective or Adopted

 

Income Taxes (Topic 740)

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance within Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold.

 

The ASU requires disclosure of the following information about income taxes paid on an annual basis:

 

●Income taxes paid (net of refunds received), disaggregated by federal and state taxes and by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received).

 

●Income tax expense (or benefit) from continuing operations disaggregated by federal and state jurisdictions.

 

The ASU is effective for annual periods beginning after December 15, 2024. The amendments should be applied on a prospective basis. The Company is evaluating the impact that the adoption of this ASU will have on the Company’s consolidated financial statements, as it may require additional disclosures in the notes to our condensed consolidated financial statements. 

 

Segment Reporting (Topic 280)

 

In November 2023, the FASB issued guidance within ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and operations consist of a single business segment and a single reporting unit.

 

The amendments in this ASU are intended to improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments included in this ASU:

 

●

Require disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included within each reported measure of segment profit and loss.

 

●

Require disclosure on an annual and interim basis, an amount for other segment items (defined in this ASU) and a description of its composition.

 

●Clarify that if the CODM uses more than one measure of the segment’s profit or loss in assessing performance, one or more of those additional measures may be reported.

 

●Require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance.

 

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the Company’s condensed consolidated financial statements as the Company has a single reportable segment.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying unaudited condensed consolidated financial statements.

 

JOBS Act

 

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

 

24

 

 

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

 

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering, which would be December 31, 2024; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of June 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

 

Changes in Internal Control

 

There have been no significant changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

25

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

 

ITEM 1A. RISK FACTORS

 

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 28, 2024 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 5. OTHER INFORMATION

 

Rule 10b5-1 Trading Plans

 

During the fiscal quarter ended June 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
3.1   Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 20, 2019)
3.2   Amendment to the Amended and Restated Bylaws of Hoth Therapeutics, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 22, 2022)
3.3   Amendment No. 2 to the Amended and Restated Bylaws of Hoth Therapeutics, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 17, 2024)
31.1*   Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**   Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**   Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*   Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 is formatted in Inline XBRL

 

*Filed herewith.

 

**Furnished herewith.

 

26

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  HOTH THERAPEUTICS, INC.
   
Date: August 9, 2024 By: /s/ Robb Knie
    Robb Knie,
    Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 9, 2024 By: /s/ David Briones
    David Briones,
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

27

 

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Exhibit 31.1

 

Certification of Chief Executive Officer of Hoth Therapeutics, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Robb Knie, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Hoth Therapeutics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 9, 2024 /s/ Robb Knie
  Robb Knie
  Chief Executive Officer
  (Principal Executive Officer)

 

 

Exhibit 31.2

 

Certification of Chief Financial Officer of Hoth Therapeutics, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, David Briones, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Hoth Therapeutics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 9, 2024 /s/ David Briones
  David Briones
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

Exhibit 32.1

 

Statement of Chief Executive Officer Pursuant to Section 1350 of Title 18 of the United States Code

 

Pursuant to Section 1350 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Robb Knie, Chief Executive Officer of Hoth Therapeutics, Inc. (the “Company”), hereby certifies that based on the undersigned’s knowledge:

 

1.The Company’s quarterly report on Form 10-Q for the period ended June 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 9, 2024 /s/ Robb Knie
  Robb Knie
  Chief Executive Officer
  (Principal Executive Officer)

  

Exhibit 32.2

 

Statement of Chief Financial Officer Pursuant to Section 1350 of Title 18 of the United States Code

 

Pursuant to Section 1350 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, David Briones, Chief Financial Officer of Hoth Therapeutics, Inc. (the “Company”), hereby certifies that based on the undersigned’s knowledge:

 

1.The Company’s quarterly report on Form 10-Q for the period ended June 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 9, 2024 /s/ David Briones
  David Briones
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

v3.24.2.u1
Cover - shares
 6 Months Ended
Jun. 30, 2024
Aug. 08, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Amendment Flag false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q2  
Entity Information [Line Items]    
Entity Registrant Name Hoth Therapeutics, Inc.  
Entity Central Index Key 0001711786  
Entity File Number 001-38803  
Entity Tax Identification Number 82-1553794  
Entity Incorporation, State or Country Code NV  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Contact Personnel [Line Items]    
Entity Address, Address Line One 590 Madison Ave  
Entity Address, Address Line Two 21st Floor  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10022  
Entity Phone Fax Numbers [Line Items]    
City Area Code (646)  
Local Phone Number 756-2997  
Entity Listings [Line Items]    
Title of 12(b) Security Common Stock, $0.0001 par value  
Trading Symbol HOTH  
Security Exchange Name NASDAQ  
Entity Common Stock, Shares Outstanding   6,903,804
v3.24.2.u1
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2024
Dec. 31, 2023
CURRENT ASSETS:    
Cash and cash equivalents $ 9,654,837 $ 9,292,352
Prepaid expenses and other current assets 299,708 135,361
Total Current Assets 9,954,545 9,427,713
NON-CURRENT ASSETS:    
Operating lease right-of-use asset, net 41,104 55,165
Investment in joint ventures at fair value 36,819 37,400
Total Non-Current Assets 77,923 92,565
Total Assets 10,032,468 9,520,278
CURRENT LIABILITIES:    
Accounts payable 333,346 35,592
Accrued expenses 317,410 614,226
Operating lease liability, current portion 30,060 28,839
Total Current Liabilities 680,816 678,657
LONG-TERM LIABILITIES:    
Operating lease liability, less current portion 11,044 26,326
Total Long-Term Liabilities 11,044 26,326
Total Liabilities 691,860 704,983
Commitments and Contingencies (Note 6)
STOCKHOLDERS’ EQUITY:    
Preferred stock, value
Common stock, $0.0001 par value; 50,000,000 shares authorized; 5,358,804 and 4,348,129 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 536 435
Additional paid-in capital 65,934,709 61,732,106
Accumulated deficit (56,617,763) (52,944,506)
Accumulated other comprehensive income 23,126 27,260
Total Stockholders’ Equity 9,340,608 8,815,295
Total Liabilities and Stockholders’ Equity 10,032,468 9,520,278
Series A Convertible Preferred Stock    
STOCKHOLDERS’ EQUITY:    
Preferred stock, value
Series B Preferred Stock    
STOCKHOLDERS’ EQUITY:    
Preferred stock, value
v3.24.2.u1
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
Preferred stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Preferred stock, shares undesignated 3,000,000 3,000,000
Common stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 5,358,804 4,348,129
Common stock, shares outstanding 5,358,804 4,348,129
Series A Convertible Preferred Stock    
Preferred stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Preferred stock, shares designated (in Dollars per share) $ 5,000,000 $ 5,000,000
Series B Preferred Stock    
Preferred stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Preferred stock, shares designated (in Dollars per share) $ 2,000,000 $ 2,000,000
v3.24.2.u1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]        
NET REVENUES
OPERATING COSTS AND EXPENSES:        
Research and development expense 566,335 652,202 1,032,231 1,591,080
General and administrative expenses 1,079,504 1,056,427 2,667,766 2,310,366
Total operating expenses 1,645,839 1,708,629 3,699,997 3,901,446
LOSS FROM OPERATIONS (1,645,839) (1,708,629) (3,699,997) (3,901,446)
OTHER INCOME (EXPENSES), NET:        
Unrealized loss on marketable securities (165,950) (184,753)
Change in fair value of investment in joint venture (581)
Dividend income 13,365 1,548 27,321 29,661
Total other income (expenses), net 13,365 (164,402) 26,740 (155,092)
NET LOSS $ (1,632,474) $ (1,873,031) $ (3,673,257) $ (4,056,538)
NET LOSS PER COMMON SHARE:        
Net loss per common share, basic (in Dollars per share) $ (0.24) $ (0.57) $ (0.65) $ (1.4)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:        
Weighted average number of common shares outstanding, basic (in Shares) 6,876,331 3,302,113 5,637,621 2,894,732
COMPREHENSIVE LOSS:        
Net loss $ (1,632,474) $ (1,873,031) $ (3,673,257) $ (4,056,538)
Other comprehensive (loss) income:        
Foreign currency translation adjustment 1,634 (51,088) (4,134) (45,718)
Total comprehensive loss $ (1,630,840) $ (1,924,119) $ (3,677,391) $ (4,102,256)
v3.24.2.u1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parentheticals) - $ / shares
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]        
Net loss per common share, diluted $ (0.24) $ (0.57) $ (0.65) $ (1.40)
Weighted average number of common shares outstanding, diluted 6,876,331 3,302,113 5,637,621 2,894,732
v3.24.2.u1
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($)
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated other Comprehensive Income (Loss)
Total
Balance at Dec. 31, 2022 $ 130 $ 50,198,630 $ (45,099,116) $ 22,006 $ 5,121,650
Balance (in Shares) at Dec. 31, 2022 1,302,113        
Exercise of warrants $ 186 1,674 1,860
Exercise of warrants (in Shares) 1,860,000        
Stock-based compensation 10,630 10,630
Common stock and warrants issued in private placement, net of offering costs $ 14 8,909,516 8,909,530
Common stock and warrants issued in private placement, net of offering costs (in Shares) 140,000        
Cumulative translation adjustment 5,370 5,370
Net loss (2,183,507) (2,183,507)
Balance at Mar. 31, 2023 $ 330 59,120,450 (47,282,623) 27,376 11,865,533
Balance (in Shares) at Mar. 31, 2023 3,302,113        
Balance at Dec. 31, 2022 $ 130 50,198,630 (45,099,116) 22,006 5,121,650
Balance (in Shares) at Dec. 31, 2022 1,302,113        
Net loss         (4,056,538)
Balance at Jun. 30, 2023 $ 330 59,130,198 (49,155,654) (23,712) 9,951,162
Balance (in Shares) at Jun. 30, 2023 3,302,113        
Balance at Mar. 31, 2023 $ 330 59,120,450 (47,282,623) 27,376 11,865,533
Balance (in Shares) at Mar. 31, 2023 3,302,113        
Stock-based compensation 9,748 9,748
Cumulative translation adjustment (51,088) (51,088)
Net loss (1,873,031) (1,873,031)
Balance at Jun. 30, 2023 $ 330 59,130,198 (49,155,654) (23,712) 9,951,162
Balance (in Shares) at Jun. 30, 2023 3,302,113        
Balance at Dec. 31, 2023 $ 435 61,732,106 (52,944,506) 27,260 8,815,295
Balance (in Shares) at Dec. 31, 2023 4,348,129        
Exercise of pre-funded warrants $ 5 (5)
Exercise of pre-funded warrants (in Shares) 55,675        
Stock-based compensation 513,350 513,350
Deferred offering cost related to warrant inducement 550,500 550,500
Cumulative translation adjustment (5,768) (5,768)
Net loss (2,040,783) (2,040,783)
Balance at Mar. 31, 2024 $ 440 62,795,951 (54,985,289) 21,492 7,832,594
Balance (in Shares) at Mar. 31, 2024 4,403,804        
Balance at Dec. 31, 2023 $ 435 61,732,106 (52,944,506) 27,260 8,815,295
Balance (in Shares) at Dec. 31, 2023 4,348,129        
Net loss         (3,673,257)
Balance at Jun. 30, 2024 $ 536 65,934,709 (56,617,763) 23,126 9,340,608
Balance (in Shares) at Jun. 30, 2024 5,358,804        
Balance at Mar. 31, 2024 $ 440 62,795,951 (54,985,289) 21,492 7,832,594
Balance (in Shares) at Mar. 31, 2024 4,403,804        
Exercise of pre-funded warrants
Common shares issued and issuable for exercise of warrants [1] $ 96 3,682,204 3,682,300
Common shares issued and issuable for exercise of warrants (in Shares) [1] 955,000        
Stock-based compensation 7,054 7,054
Deferred offering cost related to warrant inducement (550,500) (550,500)
Cumulative translation adjustment 1,634 1,634
Net loss (1,632,474) (1,632,474)
Balance at Jun. 30, 2024 $ 536 $ 65,934,709 $ (56,617,763) $ 23,126 $ 9,340,608
Balance (in Shares) at Jun. 30, 2024 5,358,804        
[1] Represents the aggregate fair value of 2,500,000 shares of common stock, which includes 955,000 shares that have been issued and 1,545,000 shares held in abeyance (See Note 5 – Stockholders’ Equity – Warrants for additional information.
v3.24.2.u1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,673,257) $ (4,056,538)
Adjustments to reconcile net loss to net cash used in operating activities:    
Research and development-acquired license, expensed 8,750
Stock-based compensation 520,404 20,378
Unrealized loss on marketable securities 184,753
Change in fair value of investment in joint ventures 581
Changes in operating assets and liabilities:    
Prepaid expenses (164,347) (227,391)
Accounts payable and accrued expenses 938 330,933
NET CASH USED IN OPERATING ACTIVITIES (3,315,681) (3,739,115)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance common stock, common stock warrants and prefunded warrants, net of offering costs 8,909,530
Proceeds from exercise of warrants 3,682,300 1,860
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,682,300 8,911,390
NET INCREASE IN CASH AND CASH EQUIVALENTS 366,619 5,172,275
Effect of exchange rate changes on cash and cash equivalents (4,134) (56,084)
CASH AND CASH EQUIVALENTS - beginning of period 9,292,352 6,428,611
CASH AND CASH EQUIVALENTS - end of period 9,654,837 11,544,802
NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Increase in deferred offering cost and additional paid-in capital $ 550,500
v3.24.2.u1
Organization and Description of Business Operations
 6 Months Ended
Jun. 30, 2024
Organization and Description of Business Operations [Abstract]  
Organization and Description of Business Operations

NOTE 1 – Organization and Description of Business Operations

 

Hoth Therapeutics, Inc. (together with its wholly-owned subsidiaries, merveille.ai and Hoth Therapeutics Australia Pty Ltd, collectively, 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 (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). The Company also has 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). The Company also has interests in certain other assets being developed by third parties including a treatment for patients with lupus that is being developed by Zylö Therapeutics, Inc. and potential product candidates being developed pursuant to our agreement with Voltron Therapeutics, Inc. for the prevention of COVID-19 (see Note 4 to the unaudited condensed consolidated financial statements for a discussion of the Company’s agreement with Zylö 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 unaudited condensed 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 incurred losses and generated negative cash flows from operations since its inception. At June 30, 2024, the Company had an accumulated deficit of $56.6 million and cash and cash equivalents of $9.7 million. 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 may result in dilution to its existing shareholders and future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

 

The Company believes its current cash is sufficient to fund operations for at least the next 12 months from the issuance date of these financial statements. 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 current and future 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.

 

On April 1, 2024, in connection with the March 27, 2024 inducement offer agreement with a holder (the “Holder”) of certain of the Company’s existing warrants (the “January 2023 Existing Warrants”) to exercise, for cash, an aggregate of 2,500,000 of the January 2023 Existing Warrants to purchase shares of the Company’s common stock at a reduced exercise price of $1.6775 per share, the Holder exercised the 2,500,000 January 2023 Existing Warrants and was to be issued 2,500,000 shares of the Company’s common stock (the “Warrant Shares”) for gross proceeds to the Company of approximately $4.2 million before deducting placement agent fees and other offering expenses payable by the Company. As of June 30, 2024, 1,545,000 of the Warrant Shares were held in abeyance and were not reflected as issued and outstanding common shares on the accompanying condensed consolidated balance sheet, in accordance with the terms of the inducement offer agreement. Pursuant to the inducement offer agreement, the Company only issued such number of Warrant Shares to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder, as directed by the Holder, with the balance of the Warrant Shares held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance the limitations set forth in the inducement offer agreement, which abeyance shall be evidenced through the January 2023 Existing Warrants which shall be deemed prepaid thereafter (including the cash payment in full of the exercise price), and exercised pursuant to a Notice of Exercise in the January 2023 Existing Warrants (provided no additional exercise price shall be due and payable) (see Notes 5 to the unaudited condensed consolidated financial statements). As of June 30, 2024, 955,000 Warrant Shares have been issued. On July 24, 2024, the remaining 1,545,000 Warrants Shares were issued and no Warrant Shares remain to be issued.
v3.24.2.u1
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 – Summary of Significant Accounting Policies

 

Basis of presentation and principles of consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 28, 2024.

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, merveille.ai, which was incorporated under the laws of Nevada on October 4, 2023, and 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.

 

Reclassifications

 

Certain line items on the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 have been reclassified to conform to the current period presentation. For the three months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $11,243 was reclassified to research and development expense, and compensation and related expenses (including stock-based compensation) of $518,476, professional fees (including stock-based compensation) of $483,883, rent of $7,897, and other general and administrative expense of $46,171 were consolidated into one general and administrative expenses line item. For the six months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $59,276 was reclassified to research and development expenses, and compensation and related expenses (including stock-based compensation) of $814,040, professional fees (including stock-based compensation) of $1,100,258, rent of $23,017, and other general and administrative expense of $373,051 were consolidated into one general and administrative expenses line item. These reclassifications did not change the Company’s reported net loss or comprehensive loss for the three and six months ended June 30, 2023.

 

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, proxy statements and registration 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 107 of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (“Securities Act”), for complying with new or revised accounting standards until private companies (that is, those that have not had a Securities Act 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 statements 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. The Company will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which it has total annual gross revenues of $1.235 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the date of its initial public offering, which would be December 31, 2024; (iii) the date on which it has issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC. After the Company is no longer deemed to be an emerging growth company, it will no longer have the ability to delay the adoption of new or revised accounting standards, or to take advantage of reduced corporate governance disclosures.

 

Use of estimates

 

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements relate to stock-based compensation, the valuation of modified warrants, 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 may be affected. 

Significant Accounting Policies

 

There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 28, 2024.

 

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. Cash and cash equivalents consist of bank accounts and highly liquid money funds and totaled $9,654,837 and $9,292,352 as of June 30, 2024 and December 31, 2023, respectively. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits at the three financial institutions the Company utilizes for its banking requirements. The Company’s foreign bank accounts are not subject to FDIC insurance. Cash held in foreign bank accounts totaled $0.1 million and $0.1 million as of June 30, 2024 and December 31, 2023, respectively.

 

Concentrations of credit risk and off-balance sheet risk

 

The Company has significant cash balances at financial institutions which, throughout the year, regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

 

Leases

 

The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liability, current and lease liability, on the Company’s unaudited condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset, and lease liabilities represent the Company’s obligation to make lease payments in exchange for the ability to use the asset for the duration of the lease term.

 

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component. As such, minimum lease payments include fixed payments for non-lease components within a lease agreement but exclude variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period. Certain of the leases contain an option to extend the term of the lease. The option to extend a lease is included in the lease term only when it is reasonably certain that the Company will elect that option. Additionally, the Company does not record ROU assets or lease liabilities for short-term leases that have a term of twelve months or less at lease commencement.

 

ROU assets and lease liabilities are recognized at the commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company uses an incremental borrowing rate based on an estimated rate of interest for collateralized borrowing since the Company’s leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and the lease term at commencement date.

 

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 fair value of the Company’s assets and liabilities, which would qualify as financial instruments under ASC Topic 820, approximates the carrying amounts represented in the Company’s unaudited condensed consolidated balance sheets, primarily due to their short-term nature.

 

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. During the six months ended June 30, 2024 and 2023, there were no changes in valuation techniques or transfers between Level 1, Level 2, and Level 3.

 

Investment in joint ventures

 

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 ventures is further described in Note 4 of these unaudited condensed 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 stock-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. Options are generally issued fully vested. 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.

 

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. 

 

The Company grants restricted stock awards under its equity incentive plan. Restricted stock awards are granted to employees and non-employees. The restricted stock awards are measured based on the grant-date fair value. In general, the restricted stock awards vest over a service period of zero to three years. Stock-based compensation expense is generally recognized based on the straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

 

The Company has issued warrants to non-employees. The warrants are measured based on the grant-date fair value. In general, the warrants vest over a term of zero to ten years. Stock-based compensation expense is generally recognized based on the straight-line basis over the vesting term.

 

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 unaudited condensed 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 shares 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 June 30, 
Potentially dilutive securities  2024   2023 
Warrants   5,211,848    3,002,840 
Options   617,362    104,651 
Non-vested restricted stock awards   1,693    3,384 
Total   5,830,903    3,110,875 

 

Recent accounting pronouncements

 

Income Taxes (Topic 740)

 

In December 2023, the FASB issued guidance within ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold.

 

The ASU requires disclosure of the following information about income taxes paid on an annual basis:

 

●Income taxes paid (net of refunds received), disaggregated by federal and state taxes and by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received).

 

●Income tax expense (or benefit) from continuing operations disaggregated by federal and state jurisdictions.

 

The ASU is effective for annual periods beginning after December 15, 2024. The amendments should be applied on a prospective basis. The Company is evaluating the impact that the adoption of this ASU will have on the Company’s consolidated financial statements, as it may require additional disclosures in the notes to the Company’s condensed consolidated financial statements. 

 

Segment Reporting (Topic 280)

 

In November 2023, the FASB issued guidance within ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and operations consist of a single business segment and a single reporting unit.

 

The amendments in this ASU are intended to improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments included in this ASU:

 

●

Require disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included within each reported measure of segment profit and loss.

 

●

Require disclosure on an annual and interim basis, an amount for other segment items (defined in this ASU) and a description of its composition.

 

●Clarify that if the CODM uses more than one measure of the segment’s profit or loss in assessing performance, one or more of those additional measures may be reported.

 

●Require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance.

 

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the Company’s condensed consolidated financial statements as the Company has a single reportable segment.

 

Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements, if currently adopted, would have a material impact on the Company’s unaudited condensed consolidated financial statements.
v3.24.2.u1
License Agreements
 6 Months Ended
Jun. 30, 2024
License Agreements [Abstract]  
License Agreements

NOTE 3 - License Agreements

 

The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during the three and six months ended June 30, 2024 and 2023:

 

   For the Three Months Ended
June 30,		   For the Six Months Ended
June 30,		 
   2024   2023   2024   2023 
The George Washington University  $8,597   $10,618   $9,847   $51,776 
North Carolina State University   1,563    —    3,125    — 
Virginia Commonwealth University   —    —    —    6,250 
University of Cincinnati   417    625    417    1,250 
   $10,577   $11,243   $13,389   $59,276 

 

The George Washington University

 

During the three and six months ended June 30, 2024, the Company recorded expenses of $8,597 and $9,847, respectively, for license fees, including an expense of $6,389 and $6,389 for the three and six months ended June 30, 2024, respectively, related to warrants granted to The George Washington University (“GW”) pursuant to the patent license agreement with GW dated February 1, 2020 (“GW Patent License Agreement”) and the patent license agreement with GW dated August 7, 2020 (“Second GW Patent License Agreement”).

 

During the three and six months ended June 30, 2023, the Company recorded expenses of $10,618 and $51,776, respectively, for license fees, including an expense of $7,754 and $16,412 for the three and six months ended June 30, 2023, respectively, related to warrants granted to GW pursuant to the GW Patent License Agreement and the Second GW Patent License Agreement. In addition, during the three and six months ended June 30, 2023, the Company recorded an expense of $0 and $30,000, respectively, related to the initiation of a clinical trial.

 

North Carolina State University

 

During the three and six months ended June 30, 2024, the Company recorded expenses of $1,563 and $3,125, respectively, for license fees associated with the license agreement by and between the Company and North Carolina State University dated February 25, 2021. During the three and six months ended June 30, 2023, the Company did not recognize any expenses for license fees associated with such license agreement.

 

Virginia Commonwealth University

 

During the three and six months ended June 30, 2024, the Company did not recognize any expenses for license fees associated with the exclusive license agreement (the “VCU License Agreement”) by and between the Company and VCU dated May 18, 2020 that was terminated August 9 2023. During the three and six months ended June 30, 2023, the Company recognized expenses of $0 and $6,250, respectively, for license fees associated with the VCU License Agreement.

 

Chelexa Biosciences, Inc. and the University of Cincinnati

 

During the three and six months ended June 30, 2024, the Company recognized expenses of $417 and $417, respectively, for license fees associated with the Assignment and Assumption Agreement by and between the Company and Chelexa Biosciences, Inc. dated May 14, 2020 (“Chelexa Agreement”). During the three and six months ended June 30, 2023, the Company recognized expenses of $625 and $1,250, respectively, for license fees associated with the Chelexa Agreement.
v3.24.2.u1
Fair Value of Financial Assets and Liabilities
 6 Months Ended
Jun. 30, 2024
Fair Value of Financial Assets and Liabilities [Abstract]  
Fair Value of Financial Assets and Liabilities

NOTE 4 – Fair Value of Financial Assets and Liabilities

 

The following table presents the Company’s assets and liabilities that are measured at fair value on June 30, 2024 and December 31, 2023:

 

   Fair value measured on June 30, 2024 
   Total at
June 30,
2024		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $36,819   $
   —
   $
   —
   $36,819 

 

   Fair value measured on December 31, 2023 
   Total at
December 31,
2023		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $37,400   $
   —
   $
    —
   $37,400 

 

Level 3 Measurement

 

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis as of June 30, 2024 and 2023:

 

Investment in joint venture for the three months ended June 30, 2024 and 2023
 
   For the Three Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $36,819   $33,000 
Change in fair value of investments in joint ventures   
-
    
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 

 

Investment in joint venture for the six months ended June 30, 2024 and 2023
 
   For the Six Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $37,400   $33,000 
Change in fair value of investments in joint ventures   (581)   
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 

 

Investment in joint ventures

 

The Company has elected to measure the investment in joint ventures 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 unaudited condensed consolidated statements of operations and comprehensive loss. 

 

The value at which the Company’s investment in joint ventures 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 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. 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). Zylö conducted a 409A valuation of their Class B common stock and as of June 30, 2024 and December 31, 2023, valued its share price at $0.167 and $0.17 per share, respectively. This value was ratified by Zylö’s board of directors in February 2024 and December 2023, respectively.

 

On February 23, 2024, the Company acquired 22,000 shares of Class B Common stock of Atticus Pharma, a subsidiary of Zylö Therapeutics, based upon a 1-for-10 ratio of current shares and were instructed on July 3, 2024 that the 409A valuation of the shares is $79, or $0.0036 per share, pursuant to the February 2024 valuation ratified by Zylö’s board of directors.

 

The valuations reflect a probability-weighted present value of expected future investment returns considering certain possible outcomes and the rights of each class of Zylö’s and Atticus Pharma’s equity. The future values of the common stock under the various outcomes are discounted back to the valuation date at a risk-adjusted discount rate and probability weighted to determine the value for the Class B common stock. Significant unobservable inputs in the valuation include: (i) probabilities of each scenario, (ii) timing of occurrence, (iii) future valuation; (iv) and the risk-adjusted discount rate.

 

The consolidated investment in Zylö was valued at $36,819 and $37,400 as of June 30, 2024 and December 31, 2023, respectively.
v3.24.2.u1
Stockholders’ Equity
 6 Months Ended
Jun. 30, 2024
Stockholders Equity [Abstract]  
Stockholders’ Equity

NOTE 5 - 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 June 30, 2024 and December 31, 2023, 5,000,000 shares of the Company’s preferred stock have been designated as Series A Convertible Preferred Stock and 2,000,000 shares of the Company’s preferred stock have been designated as Series B Preferred Stock, and 3,000,000 shares of the Company’s preferred stock remain undesignated.

 

Series A Convertible Preferred Stock

 

The shares of Series A Convertible Preferred Stock, par value $0.0001 per share, 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 unaudited condensed consolidated 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. As of June 30, 2024 and December 31, 2023, no Series A preferred shares are issued and outstanding.

 

Series B Preferred Stock

 

On November 2, 2022, the Company filed a Certificate of Designation of the Series B Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada to create a new class of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”). The Certificate of Designation designated 2,000,000 shares of authorized preferred stock as Series B Preferred Stock. The Series B Preferred Stock was not entitled to receive dividends or any other distributions. The Series B Preferred Stock was entitled to ten votes per share and voted together with the Company’s issued and outstanding shares of common stock as a single class exclusively with respect to a proposal to increase the number of shares of common stock that the Company was authorized to issue, together with any ancillary or administrative matters necessary or advisable in connection with the implementation of such increase. The Series B Preferred Stock had no rights as to any distribution or assets of the Company upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company. As of June 30, 2024 and December 31, 2023, no Series B preferred shares are issued and outstanding.

 

Warrants

 

2023

 

On December 29, 2022, the Company entered into a securities purchase agreement with an accredited investor pursuant to which it sold (i) 140,000 shares of common stock, (ii) pre-funded warrants to purchase up to 1,860,000 shares of common stock (“December Pre-Funded Warrants”) and (iii) common stock warrants to purchase up to 2,500,000 shares of common stock (“December Common Stock Warrants”) at a purchase price of $5.00 per share and accompanying warrant (less $0.001 for each December Pre-Funded Warrant), in a private placement, for aggregate gross proceeds of approximately $10 million, exclusive of placement agent commission and fees and other offering expenses. The closing of the offering occurred on January 3, 2023. Each December Common Stock Warrant is exercisable for a period of five and one-half years from the issuance date at an exercise price of $5.00 per share, subject to adjustment, and may, under certain circumstances, be exercised on a cashless basis. Each December Pre-Funded Warrant is exercisable until exercised in full at an exercise price of $0.001 per share and may be exercised on a cashless basis.

 

The measurement of fair value of the December Pre-Funded Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $0.001, term of 30 years beginning January 3, 2023 (as these do not have an expiration date), volatility of 135.07%, risk-free rate of 3.88%, and expected dividend rate of 0%). The grant date fair value of the December Pre-Funded Warrants was estimated to be $12.2 million on January 3, 2023 and is reflected within additional paid-in capital as of June 30, 2023 as the Pre-Funded Warrants were determined to be equity classified.

 

The measurement of fair value of the December Common Stock Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $5.00, term of five and a half years beginning January 3, 2023, volatility of 135.07%, risk-free rate of 3.94%, and expected dividend rate of 0%). The grant date fair value of these December Common Stock Warrants was estimated to be $15.0 million on January 3, 2023 and is reflected within additional paid-in capital as of June 30, 2023 as the December Common Stock Warrants were determined to be equity classified.

 

On various dates in February 2023, the investor exercised all the December Pre-Funded Warrants for 1,860,000 shares of the Company’s common stock for net proceeds to the Company of $1,860.

 

In addition, pursuant to the terms of the offering, the Company issued the designees of the placement agent, H.C. Wainwright & Co., LLC, warrants to purchase up to 100,000 shares of the Company’s common stock (“December Wainwright Warrants”). The December Wainwright Warrants had a determined fair value of $591,090 as of the date of issuance. The December Wainwright Warrants are exercisable for a period of five and one-half years from the issuance date at an exercise price of $6.25 per share, subject to adjustment, and may, under certain circumstances, be exercised on a cashless basis. As these December Wainwright Warrants were issued for services provided in facilitating the private placement, the Company recorded the fair value of such December Wainwright Warrants as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at January 3, 2023, the date of issuance (i.e., share price of $6.56, exercise price of $6.25, term of five and a half years beginning January 3, 2023, volatility of 135.07%, risk-free rate of 3.94%, and expected dividend rate of 0%).

 

2024

 

On January 8, 2024, the Company issued 55,675 common shares in connection with the exercise of 55,675 pre-funded warrants that were issued in connection with a securities purchase agreement dated September 13, 2023.

 

On March 27, 2024, the Company entered into an inducement offer agreement with the Holder of the January 2023 Existing Warrants to immediately exercise for cash an aggregate 2,500,000 of the January 2023 Existing Warrants to purchase shares of the Company’s common stock at a reduced exercise price of $1.6775 per share for gross proceeds to the Company of approximately $4.2 million before deducting placement agent fees and other offering expenses payable by the Company. The exercised January 2023 Existing Warrants were issued pursuant to a securities purchase agreement dated December 29, 2022 by and between the Company and the Holder. Each January 2023 Existing Warrant was exercisable for a period of five and one-half years from the issuance date at an original exercise price of $5.00 per share.

 

As an inducement to such exercise, the Company agreed to issue new unregistered warrants to purchase up to 3,750,000 shares of the Company’s common stock at an exercise price of $1.50 per share (the “April 2024 Inducement Warrants”). The April 2024 Inducement Warrants are exercisable immediately upon issuance and will expire on July 3, 2028. On April 1, 2024, the Holder of the January 2023 Existing Warrants exercised such warrants, and the Company issued the investor 3,750,000 April 2024 Inducement Warrants. Additionally, in connection with the January 2023 Existing Warrants exercise, the Company issued 125,000 placement agent warrants, which are immediately exercisable and expire on July 3, 2028 at an exercise price of $2.0969 per share. 

 

The amendment to the January 2023 Existing Warrants on March 27, 2024 to lower the exercise price thereof, was considered a modification of the January 2023 Existing Warrants under the guidance of ASU 2021-04. The modification is consistent with the “Equity Issuance” classification under that guidance as the reason for the modification was to induce the holders to cash exercise their warrants, resulting in the exercise of the January 2023 Existing Warrants on April 1, 2024.

 

On March 27, 2024, the Company calculated the total fair value of the consideration for the modification of the January 2023 Existing Warrants, which includes the incremental fair value of the January 2023 Existing Warrants (determined by comparing the fair values immediately prior to and immediately after the modification). The fair values were calculated using the Black-Scholes option-pricing model, and the Company determined that the total fair value of the consideration related to the modification of the January 2023 Existing Warrants amounted to $550,500, which are considered offering costs and were netted against the net proceeds received by the warrant exercise under the guidance of ASU 2021-04.

 

On April 1, 2024, in connection with the March 27, 2024 inducement offer agreement with the Holder of the January 2023 Existing Warrants, the Holder exercised the January 2023 Existing Warrants for cash at a reduced exercise price of $1.6775 per share resulting in gross proceeds to the Company of approximately $4.2 million (net proceeds of approximately $3.8 million, after deducting placement agent fees and other offering expenses of $436,450). In connection with such exercise, the Company was to issue up to 2,500,000 Warrant Shares upon the exercise of the January 2023 Existing Warrants. As of June 30, 2024, 1,545,000 of the Warrant Shares were held in abeyance and were not reflected as issued and outstanding common shares on the accompanying condensed consolidated balance sheet, in accordance with the terms of the inducement offer agreement. Pursuant to the inducement offer agreement, the Company only issued such number of Warrant Shares to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder, as directed by the Holder, with the balance of the Warrant Shares held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance with the limitations set forth in the inducement offer agreement, which abeyance shall be evidenced through the January 2023 Existing Warrants which shall be deemed prepaid thereafter (including the cash payment in full of the exercise price), and exercised pursuant to a Notice of Exercise in the January 2023 Existing Warrants (provided no additional exercise price shall be due and payable). As of June 30, 2024, the Company issued 955,000 Warrant Shares to the Holder, and 1,545,000 Warrant Shares were held in abeyance for future issuance. On July 24, 2024, the remaining 1,545,000 Warrant Shares held in abeyance were issued.

 

On April 1, 2024, in connection with the issuance of the April 2024 Inducement Warrants and the placement agent warrants, the Company calculated the fair value of such warrants using the Black-Scholes option-pricing model, and the Company determined that the aggregate total fair value of the April 2024 Inducement Warrant and placement agent warrants amounted to $4,166,800, which are considered offering costs and were netted against the net proceeds received by the warrant exercise under the guidance of ASU 2021-04.

 

The fair value of the January 2023 Existing Warrants on the modification date and the fair value of the April 2024 Inducement Warrants were estimated using the Black-Scholes option-pricing model with the following assumptions:

 

    March 27,
2024 to
April 1,
2024		  
Exercise price     $1.50 to $5.00  
Term (years)     4.25  
Expected stock price volatility     109.8%  
Risk-free rate of interest     4.18% to 4.34%  

 

A summary of warrant activity for the six months ended June 30, 2024 is as follows:

 

   Number of
Warrants		   Weighted
Average
Exercise
Price		   Total
Intrinsic
Value		   Weighted
Average
Remaining
Contractual Life
(in years)		 
Outstanding as of December 31, 2023   4,213,515   $7.01   $
    —
    4.5 
Issued   3,875,000    1.52    
—
    
—
 
Expired   (320,992)   48.02    
—
    
—
 
Exercised   (2,555,675)   1.64    
—
    
—
 
Outstanding as of June 30, 2024   5,211,848    2.71    
—
    4.01 
Warrants exercisable as of June 30, 2024   5,211,848   $2.71   $
—
    4.01 

 

The Company has determined that the warrants should be accounted for as a component of stockholders’ equity.

 

Common Shares

 

On various dates in February 2023, the investor exercised all the December Pre-Funded Warrants for 1,860,000 shares of the Company’s common stock for net proceeds to the Company of $1,860.

 

On January 8, 2024, the Company issued 55,675 common shares in connection with the exercise of 55,675 pre-funded warrants that were issued in connection with a securities purchase agreement dated September 13, 2023.

 

During the three months ended June 30, 2024, the Company issued 955,000 shares of its common stock that were held in abeyance in connection with the exercise of 2,500,000 warrants (See Warrants section above).

 

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 26,878 shares effective as of January 1, 2021, such that as of January 1, 2021, the Company had an aggregate of 66,878 shares of common stock reserved for issuance pursuant to the 2018 Plan. On June 24, 2021, at the annual meeting of shareholders, shareholders of the Company approved an amendment to the 2018 Plan to further increase the number of shares reserved for issuance thereunder from 66,878 shares to 146,878 shares. On February 2, 2022, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 146,878 shares to 156,878 shares. On January 11, 2023, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 156,878 shares to 166,878 shares. On January 4, 2024, the compensation committee of the board of directors further increased the number of shares reserved for issuance under the 2018 Plan from 166,878 shares to 176,878 shares.

 

2022 Equity Incentive Plan

 

On March 24, 2022, the Company’s board of directors adopted the Hoth Therapeutics, Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”) initially reserving 96,000 shares of the Company’s common stock for issuance thereunder. The 2022 Plan became effective on June 23, 2022 upon approval of the 2022 Plan by the Company’s shareholders at the Company’s annual meeting of shareholders. On June 2, 2023, the Company’s board of directors approved the Hoth Therapeutics, Inc. Amended and Restated 2022 Omnibus Equity Incentive Plan (the “Amended and Restated 2022 Plan”) which was approved by stockholders on August 18, 2023. Under the Amended and Restated 2022 Plan, there are 591,317 shares of Company common stock available for grant. On May 15, 2024, the Company’s compensation committee recommended and the board of directors approved an increase to the number of shares of common stock reserved for issuance under the 2022 Plan by 500,000 shares from 51,317 shares to 551,317 shares (“2024 Increase”). The 2024 Increase was approved by shareholders of the Company on August 7, 2024.

 

Restricted Stock Awards

 

A summary of the Company’s restricted stock awards granted under the equity incentive plans during the six months ended June 30, 2024 is as follows:

 

   Number of
Restricted Stock
Awards		   Weighted
Average Grant
Day Fair Value		 
Nonvested on December 31, 2023   1,693    3.16 
Granted   
—
    
—
 
Vested   
—
    
—
 
Nonvested on June 30, 2024   1,693    3.16 

 

As of June 30, 2024, approximately $1,213 of unrecognized stock-based compensation expense was related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards was approximately 0.50 years on June 30, 2024.

 

Stock Options

 

On January 5, 2024, pursuant to and subject to the available number of shares reserved under the 2022 Plan, the Company issued options to the Company’s employees and directors to purchase up to 450,000 shares of the Company’s common stock at an exercise price of $1.36 per share. The options vested immediately and expire on January 5, 2034. The aggregate grant date fair value of these options was $512,685, which was recorded as stock-based compensation during the six months ended June 30, 2024.

 

The fair value of option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

    Six Months Ended
June 30,		  
    2024     2023  
Exercise price   $ 1.36     $
-
  
Term (years)     5.0      
-
  
Expected stock price volatility     120.00 %    
-
 %
Risk-free rate of interest     4.02 %    
-
 %

 

A summary of option activity under the Company’s equity incentive plans for the six months ended June 30, 2024 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, 2023   169,362   $26.78   $
—
    8.4 
Employee options issued   450,000   $1.36    
—
    
—
 
Expired   (2,000)   147.0    
—
    
—
 
Outstanding as of June 30, 2024   617,362   $7.86   $
—
    9.1 
Options vested and exercisable as of June 30, 2024   617,362   $7.86   $
—
    9.1 

 

All stock compensation associated with the amortization of employee stock option expense was recorded as a component of general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

Estimated future stock-based compensation expense relating to unvested stock options is $0.

 

Stock Based Compensation

 

Stock-based compensation expense for the three and six months ended June 30, 2024 and 2023 was as follows:

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Employee stock option awards  $
—
   $
—
   $512,685   $
—
 
Non-employee restricted stock awards   665    1,994    1,330    3,966 
Non-employee stock warrant awards   6,389    7,754    6,389    16,412 
   $7,054   $9,748   $520,404   $20,378 

 

For the three and six months ended June 30, 2024 and 2023, the amount of stock-based compensation expense included within research and development and general and administrative expenses was as follows:

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Research and development  $6,389   $7,754   $6,389   $16,412 
General and administrative   665    1,994    514,015    3,966 
   $7,054   $9,748   $520,404   $20,378 
v3.24.2.u1
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

NOTE 6 - Commitments and Contingencies

 

Office lease

 

Effective November 2023, the Company leased office space for a two-year term. The Company’s office lease contains a renewal option. The Company has evaluated several factors in assessing whether there is reasonable certainty that the Company will exercise its contractual renewal option concluding that it is not reasonably certain to exercise such option. As it is not reasonably certain to be exercised, the Company excluded the renewal term in determining the lease term used in calculating the right-of-use asset and lease liability. Prior to entering into this lease, the Company has not entered into any lease arrangements in excess of 12 months.

 

The table below presents certain information related to the Company’s lease costs, which are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operation and comprehensive loss: 

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Operating lease expense  $5,615   $
—
   $14,232   $
—
 
Short term lease expense   5,840    7,897    10,493    23,017 
Total lease cost  $11,455   $7,897   $24,725   $23,017 

 

Right-of-use asset for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:

 

   June 30,
2024		   December 31,
2023		 
Office lease right-of-use asset  $59,698   $59,698 
Less accumulated amortization   (18,594)   (4,533)
Total right-of-use asset, net  $41,104   $55,165 

 

Operating lease liability for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:

 

   June 30,
2024		   December 31,
2023		 
Current portion of operating lease liability  $30,060   $28,839 
Long-term portion of operating lease liability   11,044    26,326 
Total operating lease liability  $41,104   $55,165 

 

Supplemental cash flow information related to the Company’s leases for the six months ended June 30, 2024 were as follows:

 

Cash paid for amounts included in the measurement of lease liabilities    
Operating cash flows for operating leases  $16,392 

 

The weighted-average remaining lease term for the operating lease is 1.00 years and the weighted-average incremental borrowing rate is 10% as of June 30, 2024 and December 31, 2023.

 

As of June 30, 2024, future annual minimum lease payments required under operating leases are as follows:

 

2025  $32,784 
2026   10,928 
Total minimum lease payments  $43,712 
Less: effects of discounting   (2,608)
Present value of future minimum lease payments  $41,104 

 

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.
v3.24.2.u1
Subsequent Events
 6 Months Ended
Jun. 30, 2024
Subsequent Events [Abstarct]  
Subsequent Events

NOTE 7 – Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date through the date for which the condensed consolidated financial statements are issued. Based upon the evaluation, except as set forth herein, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.

 

On July 24, 2024, the Company issued 1,545,000 Warrant Shares that were being held in abeyance as of June 30, 2024.

 

An increase to the number of shares of common stock reserved for issuance under the 2022 Plan by 500,000 shares from 51,317 shares to 551,317 shares was approved by shareholders of the Company on August 7, 2024.
v3.24.2.u1
Pay vs Performance Disclosure - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2024
Jun. 30, 2023
Pay vs Performance Disclosure            
Net Income (Loss) $ (1,632,474) $ (2,040,783) $ (1,873,031) $ (2,183,507) $ (3,673,257) $ (4,056,538)
v3.24.2.u1
Insider Trading Arrangements
 3 Months Ended
Jun. 30, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.2.u1
Accounting Policies, by Policy (Policies)
 6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies [Abstract]  
Basis of presentation and principles of consolidation

Basis of presentation and principles of consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 28, 2024.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, merveille.ai, which was incorporated under the laws of Nevada on October 4, 2023, and 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.
Reclassifications

Reclassifications

Certain line items on the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 have been reclassified to conform to the current period presentation. For the three months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $11,243 was reclassified to research and development expense, and compensation and related expenses (including stock-based compensation) of $518,476, professional fees (including stock-based compensation) of $483,883, rent of $7,897, and other general and administrative expense of $46,171 were consolidated into one general and administrative expenses line item. For the six months ended June 30, 2023, research and development - licenses acquired (including stock-based compensation) of $59,276 was reclassified to research and development expenses, and compensation and related expenses (including stock-based compensation) of $814,040, professional fees (including stock-based compensation) of $1,100,258, rent of $23,017, and other general and administrative expense of $373,051 were consolidated into one general and administrative expenses line item. These reclassifications did not change the Company’s reported net loss or comprehensive loss for the three and six months ended June 30, 2023.
Emerging growth company

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, proxy statements and registration 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 107 of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (“Securities Act”), for complying with new or revised accounting standards until private companies (that is, those that have not had a Securities Act 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 statements 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. The Company will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which it has total annual gross revenues of $1.235 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the date of its initial public offering, which would be December 31, 2024; (iii) the date on which it has issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC. After the Company is no longer deemed to be an emerging growth company, it will no longer have the ability to delay the adoption of new or revised accounting standards, or to take advantage of reduced corporate governance disclosures.
Use of estimates

Use of estimates

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements relate to stock-based compensation, the valuation of modified warrants, 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 may be affected. 
Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 28, 2024.
Cash and cash equivalents

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. Cash and cash equivalents consist of bank accounts and highly liquid money funds and totaled $9,654,837 and $9,292,352 as of June 30, 2024 and December 31, 2023, respectively. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits at the three financial institutions the Company utilizes for its banking requirements. The Company’s foreign bank accounts are not subject to FDIC insurance. Cash held in foreign bank accounts totaled $0.1 million and $0.1 million as of June 30, 2024 and December 31, 2023, respectively.
Concentrations of credit risk and off-balance sheet risk

Concentrations of credit risk and off-balance sheet risk

The Company has significant cash balances at financial institutions which, throughout the year, regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Leases

Leases

The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liability, current and lease liability, on the Company’s unaudited condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset, and lease liabilities represent the Company’s obligation to make lease payments in exchange for the ability to use the asset for the duration of the lease term.

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component. As such, minimum lease payments include fixed payments for non-lease components within a lease agreement but exclude variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period. Certain of the leases contain an option to extend the term of the lease. The option to extend a lease is included in the lease term only when it is reasonably certain that the Company will elect that option. Additionally, the Company does not record ROU assets or lease liabilities for short-term leases that have a term of twelve months or less at lease commencement.

ROU assets and lease liabilities are recognized at the commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company uses an incremental borrowing rate based on an estimated rate of interest for collateralized borrowing since the Company’s leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and the lease term at commencement date.
Fair value of financial instruments

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 fair value of the Company’s assets and liabilities, which would qualify as financial instruments under ASC Topic 820, approximates the carrying amounts represented in the Company’s unaudited condensed consolidated balance sheets, primarily due to their short-term nature.

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. During the six months ended June 30, 2024 and 2023, there were no changes in valuation techniques or transfers between Level 1, Level 2, and Level 3.
Investment in joint ventures

Investment in joint ventures

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 ventures is further described in Note 4 of these unaudited condensed consolidated financial statements.
Research and development costs

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

Stock-based compensation

The Company accounts for stock-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. Options are generally issued fully vested. 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.

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. 

The Company grants restricted stock awards under its equity incentive plan. Restricted stock awards are granted to employees and non-employees. The restricted stock awards are measured based on the grant-date fair value. In general, the restricted stock awards vest over a service period of zero to three years. Stock-based compensation expense is generally recognized based on the straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

The Company has issued warrants to non-employees. The warrants are measured based on the grant-date fair value. In general, the warrants vest over a term of zero to ten years. Stock-based compensation expense is generally recognized based on the straight-line basis over the vesting term.

 
Income taxes

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 unaudited condensed 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

Net loss per share is computed by dividing net loss by the weighted average number of shares 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 June 30, 
Potentially dilutive securities  2024   2023 
Warrants   5,211,848    3,002,840 
Options   617,362    104,651 
Non-vested restricted stock awards   1,693    3,384 
Total   5,830,903    3,110,875 
Recent accounting pronouncements

Recent accounting pronouncements

Income Taxes (Topic 740)

In December 2023, the FASB issued guidance within ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU requires disclosure in the rate reconciliation of specific categories as well as additional information for reconciling items that meet a quantitative threshold.

The ASU requires disclosure of the following information about income taxes paid on an annual basis:

●Income taxes paid (net of refunds received), disaggregated by federal and state taxes and by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received).
●Income tax expense (or benefit) from continuing operations disaggregated by federal and state jurisdictions.

The ASU is effective for annual periods beginning after December 15, 2024. The amendments should be applied on a prospective basis. The Company is evaluating the impact that the adoption of this ASU will have on the Company’s consolidated financial statements, as it may require additional disclosures in the notes to the Company’s condensed consolidated financial statements. 

 

Segment Reporting (Topic 280)

In November 2023, the FASB issued guidance within ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and operations consist of a single business segment and a single reporting unit.

The amendments in this ASU are intended to improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments included in this ASU:

●

Require disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included within each reported measure of segment profit and loss.
●

Require disclosure on an annual and interim basis, an amount for other segment items (defined in this ASU) and a description of its composition.
●Clarify that if the CODM uses more than one measure of the segment’s profit or loss in assessing performance, one or more of those additional measures may be reported.
●Require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the Company’s condensed consolidated financial statements as the Company has a single reportable segment.

Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements, if currently adopted, would have a material impact on the Company’s unaudited condensed consolidated financial statements.
v3.24.2.u1
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies [Abstract]  
Schedule of Anti-Dilutive Impact on the Company’s Net Loss 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 June 30, 
Potentially dilutive securities  2024   2023 
Warrants   5,211,848    3,002,840 
Options   617,362    104,651 
Non-vested restricted stock awards   1,693    3,384 
Total   5,830,903    3,110,875 
v3.24.2.u1
License Agreements (Tables)
 6 Months Ended
Jun. 30, 2024
License Agreements [Abstract]  
Schedule of Research and Development Expenses for Licenses Acquired The following summarizes the Company’s research and development expenses for licenses acquired (including stock-based compensation) during the three and six months ended June 30, 2024 and 2023:
   For the Three Months Ended
June 30,		   For the Six Months Ended
June 30,		 
   2024   2023   2024   2023 
The George Washington University  $8,597   $10,618   $9,847   $51,776 
North Carolina State University   1,563    —    3,125    — 
Virginia Commonwealth University   —    —    —    6,250 
University of Cincinnati   417    625    417    1,250 
   $10,577   $11,243   $13,389   $59,276 

 
v3.24.2.u1
Fair Value of Financial Assets and Liabilities (Tables)
 6 Months Ended
Jun. 30, 2024
Fair Value of Financial Assets and Liabilities [Abstract]  
Schedule of Assets and Liabilities that are Measured at Fair Value The following table presents the Company’s assets and liabilities that are measured at fair value on June 30, 2024 and December 31, 2023:
   Fair value measured on June 30, 2024 
   Total at
June 30,
2024		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $36,819   $
   —
   $
   —
   $36,819 
   Fair value measured on December 31, 2023 
   Total at
December 31,
2023		   Quoted prices
in active
markets
(Level 1)		   Significant
other
observable
inputs
(Level 2)		   Significant
unobservable
inputs
(Level 3)		 
Assets                
Investment in joint ventures  $37,400   $
   —
   $
    —
   $37,400 

 
Schedule of Level 3 Financial Assets are Measured Fair Value The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis as of June 30, 2024 and 2023:
Investment in joint venture for the three months ended June 30, 2024 and 2023
 
   For the Three Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $36,819   $33,000 
Change in fair value of investments in joint ventures   
-
    
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 
Investment in joint venture for the six months ended June 30, 2024 and 2023
 
   For the Six Months Ended
June 30,		 
   2024   2023 
Investment in joint ventures at fair value – beginning of period  $37,400   $33,000 
Change in fair value of investments in joint ventures   (581)   
-
 
Investment in joint ventures at fair value – end of period  $36,819   $33,000 
v3.24.2.u1
Stockholders’ Equity (Tables)
 6 Months Ended
Jun. 30, 2024
Stockholders’ Equity (Tables) [Line Items]  
Schedule of Fair Value of Options Warrant The fair value of option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
    Six Months Ended
June 30,		  
    2024     2023  
Exercise price   $ 1.36     $
-
  
Term (years)     5.0      
-
  
Expected stock price volatility     120.00 %    
-
 %
Risk-free rate of interest     4.02 %    
-
 %

 
Schedule of Stock Option Plan A summary of option activity under the Company’s equity incentive plans for the six months ended June 30, 2024 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, 2023   169,362   $26.78   $
—
    8.4 
Employee options issued   450,000   $1.36    
—
    
—
 
Expired   (2,000)   147.0    
—
    
—
 
Outstanding as of June 30, 2024   617,362   $7.86   $
—
    9.1 
Options vested and exercisable as of June 30, 2024   617,362   $7.86   $
—
    9.1 
Schedule of Restricted Stock Awards Granted A summary of the Company’s restricted stock awards granted under the equity incentive plans during the six months ended June 30, 2024 is as follows:
   Number of
Restricted Stock
Awards		   Weighted
Average Grant
Day Fair Value		 
Nonvested on December 31, 2023   1,693    3.16 
Granted   
—
    
—
 
Vested   
—
    
—
 
Nonvested on June 30, 2024   1,693    3.16 
Schedule of Stock-Based Compensation Expense Stock-based compensation expense for the three and six months ended June 30, 2024 and 2023 was as follows:
   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Employee stock option awards  $
—
   $
—
   $512,685   $
—
 
Non-employee restricted stock awards   665    1,994    1,330    3,966 
Non-employee stock warrant awards   6,389    7,754    6,389    16,412 
   $7,054   $9,748   $520,404   $20,378 
Schedule of Stock-Based Compensation Expense Included Within Research and Development and General and Administrative Expenses For the three and six months ended June 30, 2024 and 2023, the amount of stock-based compensation expense included within research and development and general and administrative expenses was as follows:
   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Research and development  $6,389   $7,754   $6,389   $16,412 
General and administrative   665    1,994    514,015    3,966 
   $7,054   $9,748   $520,404   $20,378 
Warrant [Member]  
Stockholders’ Equity (Tables) [Line Items]  
Schedule of Fair Value of Options Warrant The fair value of the January 2023 Existing Warrants on the modification date and the fair value of the April 2024 Inducement Warrants were estimated using the Black-Scholes option-pricing model with the following assumptions:
    March 27,
2024 to
April 1,
2024		  
Exercise price     $1.50 to $5.00  
Term (years)     4.25  
Expected stock price volatility     109.8%  
Risk-free rate of interest     4.18% to 4.34%  
Schedule of Stock Option Plan A summary of warrant activity for the six months ended June 30, 2024 is as follows:
   Number of
Warrants		   Weighted
Average
Exercise
Price		   Total
Intrinsic
Value		   Weighted
Average
Remaining
Contractual Life
(in years)		 
Outstanding as of December 31, 2023   4,213,515   $7.01   $
    —
    4.5 
Issued   3,875,000    1.52    
—
    
—
 
Expired   (320,992)   48.02    
—
    
—
 
Exercised   (2,555,675)   1.64    
—
    
—
 
Outstanding as of June 30, 2024   5,211,848    2.71    
—
    4.01 
Warrants exercisable as of June 30, 2024   5,211,848   $2.71   $
—
    4.01 
v3.24.2.u1
Commitments and Contingencies (Tables)
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies [Abstract]  
Schedule of Lease Cost The table below presents certain information related to the Company’s lease costs, which are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operation and comprehensive loss:
   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Operating lease expense  $5,615   $
—
   $14,232   $
—
 
Short term lease expense   5,840    7,897    10,493    23,017 
Total lease cost  $11,455   $7,897   $24,725   $23,017 
Schedule of Right-of-Use Asset for Operating Leases Right-of-use asset for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:
   June 30,
2024		   December 31,
2023		 
Office lease right-of-use asset  $59,698   $59,698 
Less accumulated amortization   (18,594)   (4,533)
Total right-of-use asset, net  $41,104   $55,165 
Schedule of Operating Lease Liability Operating lease liability for operating leases were recorded in the unaudited condensed consolidated balance sheets as follows:
   June 30,
2024		   December 31,
2023		 
Current portion of operating lease liability  $30,060   $28,839 
Long-term portion of operating lease liability   11,044    26,326 
Total operating lease liability  $41,104   $55,165 
Schedule of Supplemental Cash Flow Information Supplemental cash flow information related to the Company’s leases for the six months ended June 30, 2024 were as follows:
Cash paid for amounts included in the measurement of lease liabilities    
Operating cash flows for operating leases  $16,392 
Schedule of Future Minimum Lease Payments As of June 30, 2024, future annual minimum lease payments required under operating leases are as follows:
2025  $32,784 
2026   10,928 
Total minimum lease payments  $43,712 
Less: effects of discounting   (2,608)
Present value of future minimum lease payments  $41,104 
v3.24.2.u1
Organization and Description of Business Operations (Details) - USD ($)
Apr. 01, 2024
Dec. 29, 2022
Jul. 24, 2024
Jun. 30, 2024
Dec. 31, 2023
Organization and Description of Business Operations [Line Items]          
Accumulated deficit (in Dollars)       $ (56,617,763) $ (52,944,506)
Cash and cash equivalents (in Dollars)       $ 9,654,837 $ 9,292,352
Warrants to purchase 2,500,000        
Warrant shares       955,000  
Gross proceeds (in Dollars)   $ 10,000,000      
January 2023 Existing Warrants [Member]          
Organization and Description of Business Operations [Line Items]          
Exercise price reduced (in Dollars per share) $ 1.6775        
Warrant shares 2,500,000        
Gross proceeds (in Dollars) $ 4,200,000        
Warrant [Member]          
Organization and Description of Business Operations [Line Items]          
Warrant shares 125,000     1,545,000  
Subsequent Event [Member]          
Organization and Description of Business Operations [Line Items]          
Warrant shares     1,545,000    
Subsequent Event [Member] | Warrant [Member]          
Organization and Description of Business Operations [Line Items]          
Warrant shares     1,545,000    
Common Stock [Member] | Maximum [Member] | January 2023 Existing Warrants [Member]          
Organization and Description of Business Operations [Line Items]          
Number of share issued 2,500,000        
v3.24.2.u1
Summary of Significant Accounting Policies (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Summary of Significant Accounting Policies [Line Items]          
Research and development $ 10,577 $ 11,243 $ 13,389 $ 59,276  
Compensation and related expenses   518,476   814,040  
Professional fees   483,883   1,100,258  
Rent   7,897   23,017  
Other general and administrative expense   $ 46,171   $ 373,051  
Gross revenues     1,235,000,000    
Non convertible debt 1,000,000,000   1,000,000,000    
Liquid money funds 9,654,837   9,654,837   $ 9,292,352
Cash held in foreign bank 100,000   100,000   $ 100,000
Federally insured amount $ 250,000   $ 250,000    
Income tax percent rate     5.00%    
v3.24.2.u1
Summary of Significant Accounting Policies (Details) - Schedule of Anti-Dilutive Impact on the Company’s Net Loss - shares
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Schedule of Anti-Dilutive Impact on the Company’s Net Loss [Line Items]    
Total Anti-dilutive 5,830,903 3,110,875
Warrants [Member]    
Schedule of Anti-Dilutive Impact on the Company’s Net Loss [Line Items]    
Total Anti-dilutive 5,211,848 3,002,840
Options [Member]    
Schedule of Anti-Dilutive Impact on the Company’s Net Loss [Line Items]    
Total Anti-dilutive 617,362 104,651
Non-vested restricted stock awards [Member]    
Schedule of Anti-Dilutive Impact on the Company’s Net Loss [Line Items]    
Total Anti-dilutive 1,693 3,384
v3.24.2.u1
License Agreements (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
The George Washington University [Member]        
License Agreements [Line Items]        
Research and development expense $ 8,597 $ 10,618 $ 9,847 $ 51,776
License fee 6,389 7,754 6,389 16,412
Expenses   0   30,000
North Carolina State University [Member]        
License Agreements [Line Items]        
Research and development expense 1,563 3,125
Virginia Commonwealth University [Member]        
License Agreements [Line Items]        
Research and development expense 0 6,250
Chelexa Biosciences, Inc. and the University of Cincinnati [Member]        
License Agreements [Line Items]        
Research and development expense $ 417 $ 625 $ 417 $ 1,250
v3.24.2.u1
License Agreements (Details) - Schedule of Research and Development Expenses for Licenses Acquired - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Schedule of Research and Development Expenses for Licenses Acquired [Line Items]        
Research and development expense $ 10,577 $ 11,243 $ 13,389 $ 59,276
The George Washington University [Member]        
Schedule of Research and Development Expenses for Licenses Acquired [Line Items]        
Research and development expense 8,597 10,618 9,847 51,776
North Carolina State University [Member]        
Schedule of Research and Development Expenses for Licenses Acquired [Line Items]        
Research and development expense 1,563 3,125
Virginia Commonwealth University [Member]        
Schedule of Research and Development Expenses for Licenses Acquired [Line Items]        
Research and development expense 0 6,250
University of Cincinnati [Member]        
Schedule of Research and Development Expenses for Licenses Acquired [Line Items]        
Research and development expense $ 417 $ 625 $ 417 $ 1,250
v3.24.2.u1
Fair Value of Financial Assets and Liabilities (Details) - Zylö Therapeutics, Inc. [Member] - USD ($)
Jul. 03, 2024
Jun. 30, 2024
Feb. 23, 2024
Dec. 31, 2023
Dec. 06, 2021
May 04, 2020
Fair Value of Financial Assets and Liabilities [Line Items]            
Investment in shares   36,819   37,400    
Common stock per share (in Dollars per share)       $ 0.17    
Subsequent Event [Member]            
Fair Value of Financial Assets and Liabilities [Line Items]            
Investment in shares 79          
Common stock per share (in Dollars per share) $ 0.0036          
Class B Common Stock [Member]            
Fair Value of Financial Assets and Liabilities [Line Items]            
Investment in shares     22,000   100,000 120,000
Investment share amount (in Dollars)           $ 60,000
Common stock per share (in Dollars per share)   $ 0.167        
v3.24.2.u1
Fair Value of Financial Assets and Liabilities (Details) - Schedule of Assets and Liabilities that are Measured at Fair Value - USD ($)
Jun. 30, 2024
Jun. 30, 2023
Assets    
Investment in joint ventures $ 36,819 $ 37,400
Quoted prices in active markets (Level 1) [Member]    
Assets    
Investment in joint ventures
Significant other observable inputs (Level 2) [Member]    
Assets    
Investment in joint ventures
Significant unobservable inputs (Level 3) [Member]    
Assets    
Investment in joint ventures $ 36,819 $ 37,400
v3.24.2.u1
Fair Value of Financial Assets and Liabilities (Details) - Schedule of Level 3 Financial Assets are Measured Fair Value - Fair Value, Recurring [Member] - Level 3 Financial Assets [Member] - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Schedule of Level 3 Financial Assets are Measured Fair Value [Line Items]        
Investment in joint ventures at fair value $ 36,819 $ 33,000 $ 37,400 $ 33,000
Change in fair value of investments in joint ventures (581)
Investment in joint ventures at fair value $ 36,819 $ 33,000 $ 36,819 $ 33,000
v3.24.2.u1
Stockholders’ Equity (Details)
 3 Months Ended 6 Months Ended 12 Months Ended
Apr. 01, 2024
USD ($)
$ / shares
shares
Mar. 27, 2024
USD ($)
$ / shares
shares
Jan. 08, 2024
shares
Feb. 28, 2023
USD ($)
shares
Jan. 03, 2023
USD ($)
Dec. 29, 2022
USD ($)
$ / shares
shares
Jun. 30, 2024
USD ($)
$ / shares
shares
Jun. 30, 2024
USD ($)
$ / shares
shares
Jun. 30, 2023
USD ($)
Dec. 31, 2023
USD ($)
$ / shares
shares
Jul. 24, 2024
shares
May 15, 2024
shares
Jan. 31, 2024
$ / shares
Jan. 05, 2024
$ / shares
shares
Jan. 04, 2024
shares
Jan. 11, 2023
shares
Nov. 02, 2022
$ / shares
Mar. 24, 2022
shares
Feb. 02, 2022
shares
Jun. 24, 2021
shares
Jan. 01, 2021
shares
Stockholders’ Equity [Line Items]                                          
Preferred stock, shares authorized             10,000,000 10,000,000   10,000,000                      
Preferred stock, shares undesignated             3,000,000 3,000,000   3,000,000                      
Preferred stock, par value (in Dollars per share) | $ / shares             $ 0.0001 $ 0.0001   $ 0.0001                      
Common stock warrants price per share (in Dollars per share) | $ / shares           $ 5                              
Pre-funded warrants price per share (in Dollars per share) | $ / shares           $ 0.001                              
Gross proceeds (in Dollars) | $           $ 10,000,000                              
Original exercise price (in Dollars per share) | $ / shares $ 1.6775         $ 5                              
Fair value of warrants (in Dollars) | $ $ 4,166,800                                        
Pre-funded common stock warrants sold       1,860,000                                  
Net proceeds (in Dollars) | $       $ 1,860                                  
Purchase of common stock warrants       100,000                                  
Aggregate exercise warrants shares   2,500,000                                      
Warrants purchase               3,750,000                          
Warrant expirations             Jul. 03, 2028 Jul. 03, 2028                          
Warrants exercised shares             955,000 955,000                          
Warrants exercised shares 2,500,000             955,000                          
Warrants shares for future issuance             1,545,000 1,545,000                          
Net proceeds (in Dollars) | $               $ 8,909,530                        
Unrecognized stock-based compensation expense (in Dollars) | $               $ 1,213                          
Weighted average contractual terms               9 years 1 month 6 days   8 years 4 months 24 days                      
Stock options issued             617,362 617,362   169,362                      
Exercise price per share (in Dollars per share) | $ / shares             $ 7.86 $ 7.86   $ 26.78                      
Aggregate grant date fair value options (in Dollars) | $                                    
Stock-based compensation expense relating to unvested stock options (in Dollars) | $             $ 0 $ 0                          
Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Number of shares issued           1,860,000                              
Original exercise price (in Dollars per share) | $ / shares           $ 0.001                              
Fair value of warrants (in Dollars) | $         $ 12,200,000                                
Warrants issued     55,675                                    
December Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Number of shares issued           2,500,000                              
Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Fair value of warrants (in Dollars) | $         $ 15,000,000                                
Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Original exercise price (in Dollars per share) | $ / shares $ 2.0969 $ 1.6775         $ 1.5 $ 1.5         $ 5                
Fair value of warrants (in Dollars) | $       $ 591,090                                  
Common stock, shares issued     55,675                                    
Warrants issued             2,500,000 2,500,000                          
Gross proceeds (in Dollars) | $ $ 4,200,000 $ 4,200,000                                      
Warrants exercised shares 125,000           1,545,000 1,545,000                          
Offering costs (in Dollars) | $   $ 550,500                                      
Net proceeds from issuance of warrants (in Dollars) | $ $ 3,800,000                                        
Other offering expenses (in Dollars) | $ $ 436,450                                        
Warrants shares for future issuance             1,545,000 1,545,000                          
April 2024 Inducement Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrant expirations             Jul. 03, 2028 Jul. 03, 2028                          
April 2024 Inducement Warrants [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants exercised shares 3,750,000                                        
2022 Equity Incentive Plan [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock reserved                       500,000           96,000     26,878
Common stock available for grant             591,317 591,317                          
2022 Equity Incentive Plan [Member] | Minimum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock reserved                       51,317     166,878 156,878     146,878    
2022 Equity Incentive Plan [Member] | Maximum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock reserved                       551,317     176,878 166,878     156,878 146,878  
Common Stock [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock, shares issued     55,675       955,000                            
Net proceeds (in Dollars) | $       $ 1,860                                  
Common Stock [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants issued     55,675 1,860,000                                  
Common Stock [Member] | 2022 Equity Incentive Plan [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock reserved                                         66,878
Share Price [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         6.56                                
Share Price [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         6.56                                
Share Price [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             6.56 6.56                          
Measurement Input, Exercise Price [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         0.001                                
Measurement Input, Exercise Price [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         5                                
Measurement Input, Exercise Price [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             6.25 6.25                          
Measurement Input, Exercise Price [Member] | December Wainwright Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             6.25 6.25                          
Measurement Input, Exercise Price [Member] | Minimum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 1.5                                        
Measurement Input, Exercise Price [Member] | Maximum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 5                                        
Measurement Input, Expected Term [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 4.25                                        
Measurement Input, Expected Term [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         30                                
Measurement Input, Expected Term [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         5.6                                
Measurement Input, Price Volatility [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 109.8                                        
Measurement Input, Price Volatility [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         135.07                                
Measurement Input, Price Volatility [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         135.07                                
Measurement Input, Price Volatility [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             135.07 135.07                          
Measurement Input, Risk Free Interest Rate [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         3.88                                
Measurement Input, Risk Free Interest Rate [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         3.94                                
Measurement Input, Risk Free Interest Rate [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             3.94 3.94                          
Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 4.18                                        
Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input 4.34                                        
Measurement Input, Expected Dividend Rate [Member] | Pre-Funded Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         0                                
Measurement Input, Expected Dividend Rate [Member] | Common Stock Warrants [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input         0                                
Measurement Input, Expected Dividend Rate [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants measurement input             0 0                          
Restricted Stock Awards [Member]                                          
Stockholders’ Equity [Line Items]                                          
Weighted average contractual terms               6 months                          
Stock Options [Member]                                          
Stockholders’ Equity [Line Items]                                          
Stock options issued                           450,000              
Exercise price per share (in Dollars per share) | $ / shares                           $ 1.36              
Aggregate grant date fair value options (in Dollars) | $             $ 512,685 $ 512,685                          
Securities Purchase Agreement [Member]                                          
Stockholders’ Equity [Line Items]                                          
Number of shares issued           140,000                              
Subsequent Event [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants exercised shares                     1,545,000                    
Warrants shares for future issuance                     1,545,000                    
Subsequent Event [Member] | Warrant [Member]                                          
Stockholders’ Equity [Line Items]                                          
Warrants exercised shares                     1,545,000                    
Series A Convertible Preferred Stock [Member]                                          
Stockholders’ Equity [Line Items]                                          
Preferred stock shares designated (in Dollars per share) | $ / shares             $ 5,000,000 $ 5,000,000   $ 5,000,000                      
Preferred stock, par value (in Dollars per share) | $ / shares             0.0001 0.0001   0.0001                      
Series B Preferred Stock [Member]                                          
Stockholders’ Equity [Line Items]                                          
Preferred stock shares designated (in Dollars per share) | $ / shares             2,000,000 2,000,000   2,000,000             $ 2,000,000        
Preferred stock, par value (in Dollars per share) | $ / shares             0.0001 0.0001   $ 0.0001             $ 0.0001        
Series B Preferred Stock [Member] | Preferred Stock [Member]                                          
Stockholders’ Equity [Line Items]                                          
Preferred stock shares designated (in Dollars per share) | $ / shares             $ 2,000,000 $ 2,000,000                          
Common Stock [Member] | 2022 Equity Incentive Plan [Member] | Minimum [Member]                                          
Stockholders’ Equity [Line Items]                                          
Common stock reserved                                       66,878  
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant
Apr. 01, 2024
Exercise price | Minimum [Member]  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 1.5
Exercise price | Maximum [Member]  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 5
Term (years)  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 4.25
Expected stock price volatility  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 109.8
Risk-free rate of interest | Minimum [Member]  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 4.18
Risk-free rate of interest | Maximum [Member]  
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Warrant [Line Items]  
Measurement input warrants 4.34
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Warrant Activity - Warrant Activity [Member] - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Schedule of Warrant Activity [Line Items]    
Number of Warrants, Outstanding 5,211,848 4,213,515
Weighted Average Exercise Price, Outstanding $ 2.71 $ 7.01
Total Intrinsic Value, Outstanding
Weighted Average Remaining Contractual Life (in years), Outstanding 4 years 3 days 4 years 6 months
Number of Warrants, Warrants exercisable 5,211,848  
Weighted Average Exercise Price, Warrants exercisable $ 2.71  
Total Intrinsic Value, Warrants exercisable  
Weighted Average Remaining Contractual Life (in years), Warrants exercisable 4 years 3 days  
Number of Warrants, Issued 3,875,000  
Weighted Average Exercise Price, Issued $ 1.52  
Total Intrinsic Value, Issued  
Weighted Average Remaining Contractual Life (in years), Issued  
Number of Warrants, Expired (320,992)  
Weighted Average Exercise Price, Expired $ 48.02  
Total Intrinsic Value, Expired  
Weighted Average Remaining Contractual Life (in years), Expired  
Number of Warrants, Exercised (2,555,675)  
Weighted Average Exercise Price, Exercised $ 1.64  
Total Intrinsic Value, Exercised  
Weighted Average Remaining Contractual Life (in years), Exercised  
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Restricted Stock Awards Granted - Restricted Stock [Member]
 6 Months Ended
Jun. 30, 2024
$ / shares
shares
Stockholders’ Equity (Details) - Schedule of Restricted Stock Awards Granted [Line Items]  
Number of shares,Outstanding | shares 1,693
Weighted Average Exercise Price, Outstanding | $ / shares $ 3.16
Number of Restricted Stock Awards, Granted | shares
Weighted Average Grant Day Fair Value, Granted | $ / shares
Number of Restricted Stock Awards, Vested | shares
Weighted Average Grant Day Fair Value, Vested | $ / shares
Number of shares,Outstanding | shares 1,693
Weighted Average Exercise Price, Outstanding | $ / shares $ 3.16
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Fair Value of Options Granted Assumptions - $ / shares
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Schedule Of Fair Value Of Options Granted Assumptions Abstract    
Exercise price (in Dollars per share) $ 1.36
Term (years) 5 years
Expected stock price volatility 120.00%
Risk-free rate of interest 4.02%
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Stock Option Plan - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Schedule of Stock Option Plan [Abstract]    
Number of Shares, Outstanding 617,362 169,362
Weighted Average Exercise Price, Outstanding $ 7.86 $ 26.78
Intrinsic Value, Outstanding
Weighted Average Remaining Contractual Life (in years), Outstanding 9 years 1 month 6 days 8 years 4 months 24 days
Number of Shares, Options vested and exercisable 617,362  
Weighted Average Exercise Price, Options vested and exercisable $ 7.86  
Intrinsic Value, Options vested and exercisable  
Weighted Average Remaining Contractual Life (in years), Options vested and exercisable 9 years 1 month 6 days  
Number of Shares, Employee options issued 450,000  
Weighted Average Exercise Price, Employee options issued $ 1.36  
Intrinsic Value, Employee options issued  
Weighted Average Remaining Contractual Life (in years), Employee options issued  
Number of Shares, Expired (2,000)  
Weighted Average Exercise Price, Expired $ 147  
Intrinsic Value, Expired  
Weighted Average Remaining Contractual Life (in years), Expired  
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Stock-Based Compensation Expense - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Schedule of Stock-Based Compensation Expense [Line Items]        
Stock-based compensation, total $ 7,054 $ 9,748 $ 520,404 $ 20,378
Employee stock option awards [Member]        
Schedule of Stock-Based Compensation Expense [Line Items]        
Stock-based compensation, total 512,685
Non-employee restricted stock awards [Member]        
Schedule of Stock-Based Compensation Expense [Line Items]        
Stock-based compensation, total 665 1,994 1,330 3,966
Non-employee stock warrant awards [Member]        
Schedule of Stock-Based Compensation Expense [Line Items]        
Stock-based compensation, total $ 6,389 $ 7,754 $ 6,389 $ 16,412
v3.24.2.u1
Stockholders’ Equity (Details) - Schedule of Stock-Based Compensation Expense Included Within Research and Development and General and Administrative Expenses - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Schedule of Stock-Based Compensation Expense Included Within Research and Development and General and Administrative Expenses [Line Items]        
Stock-based compensation $ 7,054 $ 9,748 $ 520,404 $ 20,378
Research and Development [Member]        
Schedule of Stock-Based Compensation Expense Included Within Research and Development and General and Administrative Expenses [Line Items]        
Stock-based compensation 6,389 7,754 6,389 16,412
General and Administrative [Member]        
Schedule of Stock-Based Compensation Expense Included Within Research and Development and General and Administrative Expenses [Line Items]        
Stock-based compensation $ 665 $ 1,994 $ 514,015 $ 3,966
v3.24.2.u1
Commitments and Contingencies (Details)
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Commitments and Contingencies [Line Items]    
Weighted average remaining lease term 1 year  
Weighted average incremental borrowing rate 10.00% 10.00%
v3.24.2.u1
Commitments and Contingencies (Details) - Schedule of Lease Cost - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Schedule of Lease Cost [Abstract]        
Operating lease expense $ 5,615 $ 14,232
Short term lease expense 5,840 7,897 10,493 23,017
Total lease cost $ 11,455 $ 7,897 $ 24,725 $ 23,017
v3.24.2.u1
Commitments and Contingencies (Details) - Schedule of Right-of-Use Asset for Operating Leases - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Schedule of Right-of-Use Asset and Lease Liability for Operating Leases [Abstract]    
Office lease right-of-use asset $ 59,698 $ 59,698
Less accumulated amortization (18,594) (4,533)
Total right-of-use asset, net $ 41,104 $ 55,165
v3.24.2.u1
Commitments and Contingencies (Details) - Schedule of Operating Lease Liability - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Schedule of Operating Lease Liability [Abstract]    
Current portion of operating lease liability $ 30,060 $ 28,839
Long-term portion of operating lease liability 11,044 26,326
Total operating lease liability $ 41,104 $ 55,165
v3.24.2.u1
Commitments and Contingencies (Details) - Schedule of Supplemental Cash Flow Information
 6 Months Ended
Jun. 30, 2024
USD ($)
Cash paid for amounts included in the measurement of lease liabilities  
Operating cash flows for operating leases $ 16,392
v3.24.2.u1
Commitments and Contingencies (Details) - Schedule of Future Minimum Lease Payments - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Schedule of Future Minimum Lease Payments [Abstract]    
2025 $ 32,784  
2026 10,928  
Total minimum lease payments 43,712  
Less: effects of discounting (2,608)  
Present value of future minimum lease payments $ 41,104 $ 55,165
v3.24.2.u1
Subsequent Events (Details) - Subsequent Event [Member] - shares
Aug. 07, 2024
Jul. 24, 2024
Stockholders Equity [Line Item]    
Class of Warrant or Right, Number of Securities Called by Warrants or Rights   1,545,000
Warrant [Member]    
Stockholders Equity [Line Item]    
Class of Warrant or Right, Number of Securities Called by Warrants or Rights   1,545,000
2022 Plan [Member]    
Stockholders Equity [Line Item]    
Shares of common stock reserved for issuance 500,000  
2022 Plan [Member] | Minimum [Member]    
Stockholders Equity [Line Item]    
Shares of common stock reserved for issuance 51,317  
2022 Plan [Member] | Maximum [Member]    
Stockholders Equity [Line Item]    
Shares of common stock reserved for issuance 551,317  
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