Hoth Therapeutics(HOTH) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This part details the company's financial performance, condition, and related disclosures for the first quarter of 2023 Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, statements of operations, equity, and cash flows Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2023, shows a significant increase in total assets to $13.5 million, primarily driven by cash from financing activities Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $13,044,382 | $6,428,611 | | Total current assets | $13,428,592 | $6,726,381 | | Total assets | $13,461,592 | $6,759,381 | | Liabilities & Equity | | | | Total current liabilities | $1,346,059 | $1,387,731 | | Total liabilities | $1,596,059 | $1,637,731 | | Total stockholders' equity | $11,865,533 | $5,121,650 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q1 2023, the company reported a net loss of $2.18 million, an improvement from the prior year, with no revenue generated Statement of Operations Summary (Unaudited, for the three months ended March 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Research and development | $890,845 | $948,379 | | Total operating expenses | $2,192,817 | $2,660,694 | | Loss from operations | $(2,192,817) | $(2,660,694) | | Net loss | $(2,183,507) | $(2,571,507) | | Net loss per share | $(0.88) | $(2.68) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $11.9 million, primarily due to $8.9 million net proceeds from a private placement of common stock and warrants - In Q1 2023, the company issued 140,000 shares of common stock and warrants in a private placement, resulting in net proceeds of approximately $8.9 million[18] - The exercise of 1,860,000 pre-funded warrants during the quarter contributed an additional $1,860 in proceeds[18] Condensed Consolidated Statements of Cash Flows Q1 2023 saw $2.3 million net cash used in operations and $8.9 million provided by financing, increasing cash to $13.0 million Cash Flow Summary (Unaudited, for the three months ended March 31) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,289,419) | $(2,136,489) | | Net cash used in investing activities | $0 | $(25,000) | | Net cash provided by financing activities | $8,911,390 | $0 | | Net change in cash | $6,621,971 | $(2,161,489) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's business, liquidity, accounting policies, and specific financial items, including a January 2023 financing - The company is a clinical-stage biopharmaceutical firm focused on therapies for cancer treatment side effects (HT-001), mast-cell cancers (HT-KIT), traumatic brain injury (HT-TBI), and Alzheimer's (HT-ALZ), among others[22] - Management believes current cash is sufficient to fund operations for at least the next 12 months, following a private placement that closed on January 3, 2023, which raised approximately $10 million in gross proceeds[25][26] - The investment in the HaloVax joint venture was fully impaired in Q4 2022 due to adverse changes in its business operations and is valued at $0 as of March 31, 2023[57] - In January 2023, the company issued 4,460,000 new warrants and saw the exercise of 1,860,000 pre-funded warrants, significantly altering its capital structure[72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, highlighting decreased net loss, R&D expenses, and sufficient cash for 12 months Q1 2023 Research & Development Expense Breakdown | Project | Expense | Purpose | | :--- | :--- | :--- | | HT-001 | ~$0.6 million | Manufacturing, preclinical and clinical activities | | HT-KIT | ~$0.2 million | Manufacturing and preclinical activities | | BioLexa | ~$13,000 | Manufacturing costs | | Scientific Advisory Board | ~$57,000 | Service fees | - General and Administrative Expenses decreased by approximately $0.4 million in Q1 2023 compared to Q1 2022, primarily due to a reduction in compensation and related expenses, including stock-based compensation[82] - As of March 31, 2023, the company had approximately $13.0 million in cash and an accumulated deficit of $47.3 million[83] - Management believes existing cash will fund operations for at least the next 12 months[83] - Net cash provided by financing activities in Q1 2023 was approximately $8.9 million, resulting from proceeds from the issuance of common stock and warrants[90] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," the company is exempt from providing quantitative and qualitative market risk disclosures - As a "smaller reporting company," Hoth Therapeutics is exempt from the requirement to provide disclosures about market risk[99] Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2023, due to a material weakness in segregation of duties - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2023[100] - The ineffectiveness is due to a material weakness identified previously: a lack of sufficient resources to provide adequate segregation of duties related to financial reporting[101][102] - The company is in the process of remediating the material weakness by expanding controls related to the preparation and review of financial information[103] PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, unregistered equity sales, and other significant business updates Legal Proceedings The company is not currently involved in any material legal proceedings or aware of any pending claims - The company is not currently involved in any material legal proceedings[110] Risk Factors No material changes have occurred in the company's risk factors since those disclosed in its prior Annual Report on Form 10-K - No material changes have occurred in the company's risk factors from those previously disclosed in the Annual Report on Form 10-K filed on March 31, 2023[111] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[112] Other Information This section discloses the termination of an exclusive license agreement with VCU and a non-binding term sheet with Algorithm Sciences - On May 11, 2023, the company provided notice to terminate its exclusive license agreement with the Virginia Commonwealth University Intellectual Property Foundation, with the termination effective August 9, 2023[115] - On May 10, 2023, the company and Algorithm Sciences, Inc. mutually agreed to terminate a Non-Binding Confidential Term Sheet dated April 24, 2023[116] Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[117]