Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-284172
PROSPECTUS
Up
to 972,151 Shares of Common Stock
Issuable Upon Conversion of Shares of Series B Preferred Stock
Up
to 303,041 Shares of Common Stock
Issuable Upon Conversion of Shares of Series C Preferred Stock
Up
to 97,216 Shares of Common Stock
Issuable Upon Exercise of Placement Agent Warrants
Lipella
Pharmaceuticals Inc.
This
prospectus relates to the offer and resale of up to an aggregate of 1,372,408 shares of common stock, par value $0.0001 per share
(the “Common Stock”), of Lipella Pharmaceuticals Inc. (the “Company”, “Lipella”, “we”,
“us” or “our”), which consists of: (i) 972,151 shares of Common Stock (the “Series B Conversion
Shares”) issuable upon conversion of the Company’s Series B non-voting convertible preferred stock, $0.0001 par value
per share (the “Series B Preferred Stock”), issued to certain investors (“Investors”) issued pursuant
to subscription agreements between the Company and the Investors in connection with (x) an initial closing that occurred on December
23, 2024 (the “Initial Closing”) and (y) a second closing that occurred on December 31, 2024 (the “Second Closing”)
of a best efforts private offering by the Company (the “Offering”) of up to $6,000,000 of shares of Series B Preferred
Stock (the “Offering”); (ii) an aggregate of 303,041 shares of Common Stock (the “Series C Conversion Shares”,
and together with the Series B Conversion Shares, the “Conversion Shares”) issuable upon conversion of the Company’s
Series C voting convertible preferred stock, $0.0001 par value per share (the “Series C Preferred Stock”), issued
to Spartan Capital Securities, LLC (“Spartan” or the “Placement Agent”) and its designee in connection
with the Initial Closing and the Second Closing; and (iii) 97,216 shares of Common Stock (the “Placement Agent Warrant Shares”,
and together with the Conversion Shares, the “Shares”) issuable upon exercise of Common Stock purchase warrants (the
“Placement Agent Warrants”) issued to Spartan in connection with the Initial Closing and the Second Closing.
The
shares of Series B Preferred Stock, shares of Series C Preferred Stock, Series B Conversion Shares, Series C Conversion Shares,
the Placement Agent Warrants and the Placement Agent Warrant Shares are collectively referred to herein as the “Securities.”
The holders of the Securities are each referred to herein as a “Selling Stockholder” and collectively as the “Selling
Stockholders”.
The
shares of Series B Preferred Stock, shares of Series C Preferred Stock and the Placement Agent Warrants were each issued to the
applicable Selling Stockholders in connection with private placement offerings pursuant to Section 4(a)(2) of the Securities Act
of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder. For additional information
regarding the issuance of the Securities, see “Private Placement” beginning on page 9.
This
prospectus also covers any additional shares of Common Stock that may become issuable upon any standard adjustment pursuant to
the terms of the Certificate of Designation of Preferences, Rights and Limitations of Series B Non-Voting Convertible Preferred
Stock (the “Series B Certificate of Designation”), the Certificate of Designation of Preferences, Rights and Limitations
of Series C Voting Convertible Preferred Stock (the “Series C Certificate of Designation”) or the Placement Agent
Warrants by reason of stock splits, stock dividends and other events described therein.
The
Shares will be resold from time to time by the Selling Stockholders listed in the section titled “Selling Stockholders”
beginning on page 12.
The
Selling Stockholders, or their respective transferees, pledgees, donees or other successors-in-interest, may sell the Shares through
public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated
prices. The Selling Stockholders may sell any, all or none of the Shares offered by this prospectus, and we do not know when or
in what amount the Selling Stockholders may sell their Shares hereunder following the effective date of the registration statement
on Form S-3 of which this prospectus forms a part of (the “Resale Registration Statement”).
We provide more information about how Selling Stockholders may sell their Shares in the section titled “Plan of Distribution”
on page 24.
We
registered the Shares on the Resale Registration Statement on behalf of the Selling Stockholders, to be offered and sold by
them from time to time. While we will not receive any proceeds from the sale of the Shares by the Selling Stockholders in the
offering described in this prospectus, we will receive $1.00 per share upon the cash exercise of the Placement Agent
Warrants, and upon full cash exercise thereof for all 97,216 Placement Agent Warrant Shares, we will receive aggregate gross
proceeds of $97,216. However, we cannot predict when and in what amounts or if the Placement Agent Warrants will be
exercised, and it is possible that the Placement Agent Warrants may expire and never be exercised, in which case we would not
receive any cash proceeds. We have agreed to bear all of the expenses incurred in connection with the registration of the
Shares. The Selling Stockholders will pay or assume discounts, commissions, fees of underwriters, selling brokers or dealer
managers and similar expenses, if any, incurred for the sale of the Shares.
Our Common Stock is listed on the Nasdaq Capital Market
under the symbol “LIPO.” The last reported sales price of our Common Stock on the Nasdaq Capital Market on January 15, 2025
was $2.99 per share.
We
are an “emerging growth company” as the term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”) and, as such, have elected to comply with certain reduced public company reporting requirements for this and future filings.
This
offering will terminate on the earlier of (i) the date when all of the Shares registered hereunder have been sold pursuant to
this prospectus or Rule 144 under the Securities Act, and (ii) the date on which all of the Shares may be sold pursuant to Rule
144 without volume or manner-of-sale restrictions, unless we terminate it earlier.
Investing
in our Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 5 and in the documents which
are incorporated by reference herein to read about factors you should consider before investing in our Common Stock.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these Securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is January 15, 2025
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus describes the general manner in which the Selling Stockholders may offer from time to time up to 1,372,408 Shares.
You should rely only on the information contained in this prospectus and the related exhibits, any prospectus supplement or amendment
thereto and the documents incorporated by reference, or to which we have referred you, before making your investment decision.
Neither we nor the Selling Stockholders have authorized anyone to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. This prospectus, any prospectus supplement or amendments
thereto do not constitute an offer to sell, or a solicitation of an offer to purchase, the Shares offered by this prospectus,
any prospectus supplement or amendments thereto in any jurisdiction to or from any person to whom or from whom it is unlawful
to make such offer or solicitation of an offer in such jurisdiction. You should not assume that the information contained in this
prospectus, any prospectus supplement or amendments thereto, as well as information we have previously filed with the U.S. Securities
and Exchange Commission (the “SEC”), is accurate as of any date other than the date on the front cover of the applicable
document.
If
necessary, the specific manner in which the Shares may be offered and sold will be described in a supplement to this prospectus,
which supplement may also add, update or change any of the information contained in this prospectus. To the extent there is a
conflict between the information contained in this prospectus and any prospectus supplement, you should rely on the information
in such prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another
document having a later date — for example, a document incorporated by reference in this prospectus or any prospectus supplement
— the statement in the document having the later date modifies or supersedes the earlier statement.
Neither
the delivery of this prospectus nor any distribution of Shares pursuant to this prospectus shall, under any circumstances, create
any implication that there has been no change in the information set forth or incorporated by reference into this prospectus or
in our affairs since the date of this prospectus. Our business, financial condition, results of operations and prospects may have
changed since such date.
On
November 7, 2024, we effected a one-for-eight reverse stock split (the “Reverse Stock Split”) of all of our outstanding
shares of Common Stock. Unless the context expressly indicates otherwise, all references to share and per share amounts referred
to herein reflect the amounts after giving effect to the Reverse Stock Split.
PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information
that you should consider before investing in our Common Stock. You should carefully read this entire prospectus, and our other
filings with the SEC, including the following sections, which are either included herein and/or incorporated by reference herein,
“Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements incorporated by
reference herein before making a decision about whether to invest in our Common Stock. All references to “we,” “us,”
“our,” and the “Company” refer to Lipella Pharmaceuticals Inc., unless we specifically state otherwise
or the context indicates otherwise.
Company
Overview
We
are a clinical-stage biotechnology company focused on developing new drugs by reformulating the active agents in existing generic
drugs and optimizing these reformulations for new applications. We believe that this strategy combines many of the cost efficiencies
and risk abatements derived from using existing generic drugs with potential patent protections for our proprietary formulations;
this strategy allows us to expedite, protect, and monetize our product candidates. Additionally, we maintain a therapeutic focus
on diseases with significant, unaddressed morbidity and mortality where no approved drug therapy currently exists. We believe
that this focus can potentially help reduce the cost, time and risk associated with obtaining marketing approval.
LP-10
is the development name of our reformulation of tacrolimus (an approved generic active agent) specifically optimized for topical
deposition to the internal surface of the urinary bladder lumen using a proprietary drug delivery platform that we have developed
and that we refer to as our metastable liposome drug delivery platform (our “Platform”). We are developing LP-10 and
our Platform to be, to our knowledge, the first drug candidate and drug delivery technology that could be successful in treating
cancer survivors who acquire hemorrhagic cystitis. We have received U.S. Food and Drug Administration (“FDA”) “orphan
drug” designation covering LP-10 and plan to apply for additional regulatory designations in the event we achieve qualifying
results in clinical trials for LP-10.
The
safety and efficacy of LP-10 was evaluated in a 13-subject, open-label, multi-center, dose-escalation, phase 2a clinical trial
in patients experiencing complications associated with a rare but highly morbid disease called “radiation-induced hemorrhagic
cystitis” or “radiation cystitis.” This phase 2a clinical trial commenced on February 15, 2021, and we reported
the trial’s summary results in the first quarter of 2023. We met with the FDA in the fourth quarter of 2023 regarding the
LP-10 clinical trial results, and on April 3, 2024, the FDA granted a Type C meeting request to discuss our proposed Phase-2b
clinical trial design for the evaluation of LP-10. We have submitted to the FDA a full Phase 2b multi-center prospective double-blind
placebo controlled trial that is ready to initiate.
There
is currently no FDA approved drug therapy available for radiation cystitis patients, who are all cancer survivors who received
pelvic radiation therapy to treat solid pelvic tumors, including prostate and ovarian cancers, and who are now dealing with therapy-associated
complications, including urinary bleeding (a radiation cystitis symptom). LP-10’s active ingredient, tacrolimus, which has
a well-known pharmacology and toxicology, addresses a reduction (or cessation) of uncontrolled urinary bleeding.
In
the fourth quarter of 2023, we received IND approval from the FDA for LP-310, our product for the treatment of oral lichen planus
(“OLP”). We have begun the clinical trial process for LP-310, and initiated the first clinical site in the second
quarter of 2024. Three patients have completed the trial, and we expect topline results before the end of 2024. OLP is a chronic,
T-cell-mediated, autoimmune oral mucosal disease, and LP-310 contains tacrolimus which inhibits T-lymphocyte activation. To date,
upon review of relevant FDA public data resources on approved drugs and biologics, we are not aware of any other liposomal products
developed to treat such disease.
In
the first quarter of 2024, we received IND approval from the FDA for LP-410, our phase-1/2a product, for the treatment of oral
graft-versus-host disease (“GVHD”). LP-410 is an oral rinse, similar to LP-310, but will have a different containment
system. Hematopoietic cell transplantation (“HCT”) is used to treat a wide range of malignancies, hematologic and
immune deficiency states, and autoimmune diseases. GVHD is a clinical syndrome where donor-derived immunocompetent T-cells react
against patient tissues directly or through exaggerated inflammatory responses following HCT. We have developed LP-410 for the
topical delivery directly to the mouth surface. LP-410 targets the underlying mechanisms of oral GVHD, potentially providing a
safe and effective treatment option for affected individuals. We received “orphan drug” designation approval on November
11, 2023 for tacrolimus for the treatment of oral GVHD.
On
November 21, 2024, we announced the completion of dosing for the first cohort in its multi-center Phase 2a clinical trial of LP-310,
our liposomal-tacrolimus oral rinse being developed for the treatment of Oral Lichen Planus (OLP). We anticipate completing the
two additional cohorts by mid-2025.
Since
our inception in 2005, we have focused primarily on business planning and progressing our lead product candidates, including progressing
LP-10 through clinical development, raising capital, organizing and staffing the Company.
Recent
Developments
Offering
and Spartan Agreements
The
Company and Spartan entered into that certain (i) placement agent agreement, dated December 5, 2024 (the “Placement Agent
Agreement”), and (ii) consulting agreement and advisory agreement, made as of December 5, 2024 (the “Consulting Agreement”),
each as amended by that certain amendment to consulting agreement and placement agent agreement, made as of December 10, 2024,
between the Company and Spartan (the “Amendment”, and collectively with the Placement Agent Agreement and Consulting
Agreement, the “Spartan Agreements”), pursuant to which Spartan agreed to provide placement agent and consulting services
in connection with the Offering and will receive certain compensation in consideration for such services, including, but not limited
to, the Common Stock purchase warrants to purchase a number of shares of Common Stock equal to ten percent (10%) of the shares
of Common Stock issuable upon conversion of the Series B Conversion Shares sold in each closing of the Offering (each, a “Closing”)
and (ii) shares of Series C Preferred Stock to be issued on a pro rata basis
at each Closing. For more information on the Spartan Agreements and the Offering, see the Current Reports on Form 8-K filed
by the Company with the SEC on December 10, 2024, December 30, 2024 and January 6, 2025, including the exhibits filed therewith,
as well as “Private Placement” on page 9 below.
Nasdaq
Notifications
As
previously disclosed, on April 17, 2024 and on August 21, 2024, the Company received letters from the Nasdaq Listing Qualifications
staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) stating that it was not in compliance with
Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) and Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’
Equity Requirement”), respectively. On October 16, 2024, the Company received a letter from the Staff stating that although
the Company submitted a plan to regain compliance with the Stockholders’ Equity Requirement on October 4, 2024, the Common
Stock would be delisted from the Nasdaq Capital Market unless such determination is appealed to a Nasdaq Hearings Panel (the “Panel”)
by October 23, 2024. On October 17, 2024, the Company requested a hearing before the Panel to appeal such determination and the
hearing occurred on December 12, 2024 (the “Hearing”).
On
January 10, 2025, the Company received a decision (the “January Letter”) from the Panel granting the Company’s
request for continued listing on Nasdaq, subject to the Company demonstrating compliance with the Stockholders’ Equity
Requirement, including the achievement of interim milestones as follows: (i) on or before April 14, 2025, the Company must file
a public disclosure describing any transactions undertaken by the Company to increase its equity and providing an indication of
its equity following those transactions; and (ii) on or before April 14, 2025, the Company must provide the Staff with an update
on its fundraising plans, updated income projections for the next 12 months, with all underlying assumptions clearly stated, and
a description of how the Company intends to achieve, if necessary, and maintain compliance with the Minimum Bid Price Requirement.
For more information on such decision, please see the Current Report on Form 8-K filed by the Company with the SEC on January
13, 2025 (the “January 8-K”).
Reverse
Stock Split
On
November 7, 2024, the Company effected the Reverse Stock Split, whereby every 8 shares of Common Stock before the Reverse Stock
Split was consolidated into 1 share of Common Stock following the Reverse Stock Split. For more information on the Reverse Stock
Split, please see the Current Report on Form 8-K filed by the Company with the SEC on November 7, 2024.
Cancelled
Special Meeting
On
December 6, 2024, the Company convened a special meeting of stockholders to
approve the issuance of 20% or more of Common Stock in connection with a potential equity line of credit transaction, which was
adjourned to December 20, 2024 and December 27, 2024 and was ultimately cancelled on December 27, 2024 due to the inability to
obtain a quorum.
Corporate
Information
We
were incorporated under the laws of the state of Delaware in February 2005. Our principal executive offices are located at 7800
Susquehanna Street, Suite 505, Pittsburgh, PA 15208. Our telephone number is (412) 894-1853. We maintain an Internet website at
www.lipella.com. The information contained therein or connected thereto shall not be deemed to be incorporated by reference into
this prospectus.
When
used herein, unless the context requires otherwise, references to “Lipella,” the “Company,” “we,”
“our” and “us” refer to Lipella Pharmaceuticals Inc., a Delaware corporation.
Implications
of Being an Emerging Growth Company and a Smaller Reporting Company
We
qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that
are otherwise applicable generally to public companies. These provisions include:
● reduced
obligations with respect to financial data;
● an
exception from compliance with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”);
● reduced
disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements;
and
● exemptions
from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.
We
may take advantage of these provisions for up to five years following our December 2022 initial public offering (our “IPO”)
or such earlier time that we no longer qualify as an emerging growth company. We would cease to be an emerging growth company
upon the earliest of:
● the
last day of the fiscal year on which we have $1.235 billion or more in annual revenue,
● the
date on which we become a “large accelerated filer” (i.e., as of our fiscal year end, the total market value of our
common equity securities held by non-affiliates is $700 million or more as of June 30),
● the
date on which we issue more than $1.0 billion of non-convertible debt over a three-year period, or
● the
last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO. We may choose to take advantage
of some but not all of these reduced reporting burdens.
In
addition, under the JOBS Act, emerging growth companies can take advantage of an extended transition period and delay adopting
new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this
extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which
adoption of such standards is required for private companies. If we were to subsequently elect instead to comply with public company
effective dates, such election would be irrevocable pursuant to the JOBS Act.
Also,
we are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging
growth company). For as long as we qualify as a “smaller reporting company,” we may provide reduced disclosure in
the public filings that we make with the SEC than larger public companies, such as the inclusion of only two years of audited
financial statements and only two years of management’s discussion and analysis of financial condition and results of operations
disclosure.
As
a result of qualifying as an emerging growth company and a smaller reporting company, to the extent we take advantage of the allowable
reduced reporting burdens, the information that we provide to our stockholders may be different than what you might receive from
other public reporting companies in which you hold equity interests.
THE
OFFERING
This
prospectus relates to the offer and resale by the Selling Stockholders of up to an aggregate of 1,372,408 Shares issuable upon
the conversion of the Series B Preferred Stock and Series C Preferred Stock and the exercise of the Placement Agent Warrants,
as applicable. All of the Shares, if and when sold, will be sold by the Selling Stockholders. The Selling Stockholders may sell
the Shares from time to time at prevailing market prices or at privately negotiated prices.
| Series
B Conversion Shares offered by the Selling Stockholders: |
|
Up
to 972,151 shares of Common Stock. |
| |
|
|
| Series
C Conversion Shares offered by the Selling Stockholders: |
|
Up
to 303,041 shares of Common Stock. |
| |
|
|
| Placement
Agent Warrant Shares offered by the Selling Stockholders: |
|
Up
to 97,216 shares of Common Stock. |
| |
|
|
| Shares
of Common Stock outstanding immediately prior to this offering: |
|
1,208,919
shares of Common Stock(1) |
| |
|
|
| Shares
of Common Stock outstanding after completion of this offering (assuming full conversion of the shares of Series B Preferred
Stock and Series C Preferred Stock, as well as full exercise of the Placement Agent Warrants, issued to the applicable Selling
Stockholders): |
|
2,581,327
shares of Common Stock (1) |
| Use
of proceeds: |
|
We
will not receive any of the proceeds from any sale of the Shares by the Selling Stockholders. We may receive proceeds in the
event that the Placement Agent Warrants are exercised for cash at their applicable exercise prices, which may result in aggregate
gross proceeds of up to approximately $97,216 if the Placement Agent Warrants are fully exercised with cash. Any proceeds
that we receive from the exercise of the Placement Agent Warrants will be used for working capital and other general corporate
purposes. See “Use of Proceeds.” |
| |
|
|
| Risk
factors: |
|
An
investment in the shares of Common Stock offered under this prospectus is highly speculative and involves substantial risk.
Please carefully consider the “Risk Factors” section on page 5 and other information in this prospectus for a
discussion of risks. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial
may also impair our business and operations. |
| |
|
|
| Nasdaq
symbol: |
|
Our
Common Stock is listed on the Nasdaq Capital Market under the symbol “LIPO”. |
| |
(1) |
Such
shares of Common Stock outstanding excludes the following as of January 15, 2025: (i) 134,750 shares of Common Stock issuable
upon options outstanding under the Company’s 2008 Stock Incentive Plan having an exercise price of $10.00 per share,
all of which are fully exercisable, (ii) 226,875 shares of Common Stock issuable upon options outstanding under the Amended
and Restated 2020 Stock Incentive Plan, having exercise prices ranging from $6.16 to $40.00 per share, with a weighted average
exercise price of $19.74 per share, all of which are fully exercisable, and (iii) 214,177 shares of Common Stock issuable
upon the exercise of fully exercisable warrants having exercise prices ranging from $6.20 to $40.00 per share, with a weighted
average exercise price of $13.40 per share. |
RISK
FACTORS
Holding
the shares of Common Stock offered under this prospectus involves a high degree of risk. You should carefully consider and evaluate
all of the information contained in this prospectus, any prospectus supplement and in the documents that we incorporate by reference
herein before you decide to invest in our Common Stock. In particular, you should carefully consider and evaluate the risks and
uncertainties described under the heading “Risk Factors” in this prospectus, any prospectus supplement and our filings
with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as well as of the documents
incorporated by reference herein or therein. Investors are further advised that the risks described below may not be the only
risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also negatively impact
our business operations or financial results. Any of the risks and uncertainties set forth in this prospectus and in the documents
incorporated by reference herein, as updated by annual, quarterly and other reports and documents that we file with the SEC and
incorporate by reference into this prospectus, could materially and adversely affect our business, results of operations and financial
condition, which in turn could materially and adversely affect the value of our Common Stock.
Risks
Related to the Resale of the Shares and Ownership of Our Common Stock
We
will have broad discretion as to any proceeds that we receive from the cash exercise by any holder of the Placement Agent Warrants,
and we may not use the proceeds effectively.
We
will not receive any of the proceeds from the sale of the Shares by the Selling Stockholders pursuant to this prospectus. We may
receive up to $97,216 in aggregate gross proceeds from cash exercises of the Placement Agent Warrants, based on the per share
exercise price of the Placement Agent Warrants, and to the extent that we receive such proceeds, we intend to use such proceeds
for working capital and general corporate purposes. We have considerable discretion in the application of such proceeds. You will
not have the opportunity, as part of your investment decision, to assess whether such proceeds are being used in a manner agreeable
to you. You must rely on our judgment regarding the application of such proceeds, which may be used for corporate purposes that
do not improve our profitability or increase the price of our shares of Common Stock. Such proceeds may also be placed in investments
that do not produce income or that lose value. The failure to use such funds by us effectively could have a material adverse effect
on our business, financial condition, operating results and cash flow.
The
Selling Stockholders may choose to sell the Shares at prices below the current market price.
The
Selling Stockholders are not restricted as to the prices at which they may sell or otherwise dispose of the Shares covered by
this prospectus. Sales or other dispositions of the Shares below the then-current market prices could adversely affect the market
price of our Common Stock.
A
large number of shares of Common Stock may be sold in the market following this offering and upon the SEC declaring the Resale
Registration Statement effective, which may significantly depress the market price of our Common Stock.
The
Shares sold in the offering will be freely tradable without restriction or further registration under the Securities Act upon
the SEC declaring the Resale Registration Statement effective. As a result, a substantial number of shares of our Common Stock
may be sold in the public market following this offering and upon the SEC declaring the Resale Registration Statement effective.
If
there are significantly more shares of Common Stock offered for sale than buyers are willing to purchase, then the market price
of our Common Stock may decline to a market price at which buyers are willing to purchase the offered Common Stock and sellers
remain willing to sell our Common Stock. Sales of a substantial number of Shares in the public market following the completion
of this offering, or the perception that such sales might occur, could depress the market price of our Common Stock and could
impair our ability to raise capital through the sale of our additional equity securities.
You
may experience future dilution as a result of the issuance of the Shares, future equity offerings by us and other issuances of
our Common Stock or other securities. In addition, the issuance of the Shares and future equity offerings and other issuances
of our Common Stock or other securities may adversely affect our Common Stock price.
In
order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible
into or exchangeable for our Common Stock at prices that may not be the same as the price per share as prior issuances of Common
Stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater
than the price per share previously paid by investors, and investors purchasing shares or other securities in the future could
have rights superior to existing stockholders. The price per share at which we sell additional shares of our Common Stock or securities
convertible into or exercisable for Common Stock in future transactions may be higher or lower than the prices per share for previous
issuances of Common Stock or securities convertible into or exercisable for Common Stock paid by certain investors. You will incur
dilution upon exercise of any outstanding stock options or warrants or upon the issuance of shares of Common Stock in accordance
with our equity incentive plans. In addition, the issuance of the Shares and any future sales of a substantial number of shares
of our Common Stock in the public market, or the perception that such sales may occur, could adversely affect the price of our
Common Stock. We cannot predict the effect, if any, that market sales of those shares of Common Stock or the availability of such
shares for sale will have on the market price of our Common Stock.
Neither
we nor the Selling Stockholders have authorized any other party to provide you with information concerning us or this offering.
You
should carefully evaluate all of the information in this prospectus and the Resale Registration Statement, including the documents
incorporated by reference herein and therein. We may receive media coverage regarding our Company, including coverage that is
not directly attributable to statements made by our officers, that incorrectly reports on statements made by our officers or employees,
or that is misleading as a result of omitting information provided by us, our officers or employees. Neither we nor the Selling
Stockholders have authorized any other party to provide you with information concerning us or this offering of Shares, and such
recipients should not rely on this information.
We
have been notified by Nasdaq of our failure to comply with certain continued listing requirements and, if we are unable to regain
compliance with all applicable continued listing requirements and standards of Nasdaq, our Common Stock could be delisted from
Nasdaq.
Our
Common Stock is currently listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial
and other continued listing requirements and standards, including those regarding director independence and independent committee
requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements.
As
disclosed in our Current Report on Form 8-K filed with the SEC on April 19, 2024, we received a written notification from
the Staff on April 17, 2024 notifying us that we were not in compliance with the Minimum Bid Price Requirement because the closing
bid price of our Common Stock was below $1.00 per share for the previous thirty (30) consecutive business days. As
disclosed in our Current Report on Form 8-K filed with the SEC on August 23, 2024, we received a letter from the Staff on August
21, 2024 stating that we were not in compliance with the Stockholders’ Equity Requirement. We reported stockholders’
equity of $1,703,798 in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and, as a result, we were not in
compliance with such requirement.
As
disclosed in our Current Report on Form 8-K filed with the SEC on October 18, 2024, the Staff notified us on October 16, 2024
that it would delist the Common Stock from the Nasdaq Capital Market, and in response, we timely requested an appeal of such notice
to the Panel. We received a written communication from the Staff advising us that we had regained compliance with the Minimum
Bid Price Requirement as of November 26, 2024, and we presented in front of the Panel at the Hearing on December 12, 2024. As
disclosed in the January 8-K, the Panel notified us on January 10, 2025 that it had granted the Company’s request for continued
listing on Nasdaq Capital Market, subject to the Company demonstrating compliance with the Stockholders’
Equity Requirement, including the achievement of interim milestones as follows: (i) on or before April 14, 2025, the Company must
file a public disclosure describing any transactions undertaken by the Company to increase its equity and providing an indication
of its equity following those transactions; and (ii) on or before April 14, 2025, the Company must provide the Staff with an update
on its fundraising plans, updated income projections for the next 12 months, with all underlying assumptions clearly stated, and
a description of how the Company intends to achieve, if necessary, and maintain compliance with the Minimum Bid Price Requirement.
There can be no assurances that we will be able to comply with all of the obligations placed on us by
the Panel pursuant to the January Letter, and, assuming that we are able to comply with such obligations, that we will be able
to continue to comply with all applicable Nasdaq listing requirements now or in the future, including the Stockholders’ Equity
Requirement or the Minimum Bid Price Requirement. If we fail to meet all of the conditions listed in the January Letter, our Common
Stock may be delisted from the Nasdaq Capital Market. Additionally, assuming that we are able to comply with all such obligations,
if we fail to comply with all applicable Nasdaq continued listing standards now or in the future, our Common Stock may be subject
to delisting from the Nasdaq Capital Market.
In
the event that our Common Stock is delisted from the Nasdaq Capital Market, as a result of our failure to comply with the obligations
in the January Letter, our failure to comply with the Stockholders’ Equity Requirement or due to our failure to continue
to comply with any other requirement for continued listing on the Nasdaq Capital Market, and the Common Stock is not eligible
for listing on another exchange, trading in the shares of our Common Stock could be conducted in the over-the-counter market or
on an electronic bulletin board established for unlisted securities such as the Pink Market or another over-the-counter market
operated by the OTC Markets Group Inc. In such event, it could become more difficult to dispose of, or obtain accurate price quotations
for, our Common Stock, and it would likely be more difficult to obtain coverage by securities analysts and the news media, which
could cause the price of our Common Stock to decline further. Also, it may be difficult for us to raise additional capital if
we are not listed on a national exchange.
We
could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder
interests and impairing their voting rights; and provisions in our charter documents could discourage a takeover that stockholders
may consider favorable.
Our
certificate of incorporation, as amended (“Certificate of Incorporation”), authorizes the issuance of “blank
check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board. Our
Board is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion,
voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance
of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example,
it would be possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success
of any attempt to change control of our Company.
The
Series B Preferred Stock ranks senior to the Common Stock and any class or series of capital stock created after the Series B
Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution
and winding up of the Company. The Series C Preferred Stock ranks pari passu to the Common Stock and junior to all other shares
of capital stock of the Company authorized or designated before or after the date of designation of the Series C Preferred Stock
with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of
the Company. For further information regarding our shares of Series B Preferred Stock and Series C Preferred Stock, see the Current
Report on Form 8-K filed with the SEC on December 30, 2024, including the exhibits filed therewith.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, any prospectus supplement and the documents we incorporate by reference herein or therein contain forward-looking
statements within the meaning of Section 21(E) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and Section 27A of the Securities Act. These forward-looking statements include, without limitation: statements regarding proposed
new products or services; statements concerning litigation or other matters; statements concerning projections, predictions, expectations,
estimates or forecasts for our business, financial and operating results and future economic performance; statements of our management’s
goals and objectives; statements concerning our competitive environment, availability of resources and regulation; trends affecting
our financial condition, results of operations or future prospects; our financing plans or growth strategies; and other similar
expressions concerning matters that are not historical facts. Words such as “may”, “will”, “should”,
“could”, “would”, “predicts”, “potential”, “continue”, “expects”,
“anticipates”, “future”, “intends”, “plans”, “believes” and “estimates,”
and variations of such terms or similar expressions, are intended to identify such forward-looking statements.
Forward-looking
statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications
of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information
available at the time they are made and/or our management’s good faith belief as of that time with respect to future events
and are subject to risks and uncertainties that could cause actual performance or results to differ materially from what is expressed
in or suggested by the forward-looking statements.
Forward-looking
statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume
no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking
statements. You should review our subsequent reports filed with the SEC described in the sections of this prospectus entitled
“Where You Can Find More Information” and “Incorporation of Documents by Reference,” all of which are
accessible on the SEC’s website at www.sec.gov.
INDUSTRY
AND MARKET DATA
Unless
otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including
our market position, market opportunity and market size, is based on information from various sources, on assumptions that we
have made based on such data and other similar sources and on our knowledge of the markets for our products. These data sources
involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.
We
have not independently verified any third-party information. While we believe the market position, market opportunity and market
size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections,
assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily
subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled
“Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially
from those expressed in the estimates made by the independent parties and by us.
Private
Placement
Spartan
Agreements
On
December 5, 2024, the Company entered into the Spartan Agreements, pursuant to which Spartan agreed to serve as exclusive placement
agent and consultant in connection with the Offering. Pursuant to the Spartan Agreements, upon each Closing, the Company is required
to (i) pay to Spartan a cash placement fee equal to ten percent (10%) of the gross proceeds derived from the sale of shares of
Series B Preferred Stock at each Closing (ii) issue Spartan (or its designated nominees) at each Closing Common Stock purchase
warrants to purchase a number of shares of Common Stock equal to ten percent (10%) of the shares of Common Stock issuable upon
the conversion of the Series B Preferred Stock sold in the Offering, which will be exercisable at any time during the five (5)-year
period after the date of each issuance and have an exercise price of $1.00 per share, (iii) pay to Spartan a $300,000 consulting
fee paid on a pro rata basis according to the amount of gross proceeds received at each Closing, and (iv) issue to Spartan (or
its designated nominees) an aggregate of 700,000 shares of Series C Preferred Stock, which will be issued on a pro rata basis
at each Closing based on the proceeds received by the Company at each Closing.
Initial
Closing and Second Closing
On
December 23, 2024, the Company completed the Initial Closing and formally entered into subscription agreements (each, an “Initial
Subscription Agreement”) with the applicable Investors, pursuant to which the Company issued and sold to such Investors
an aggregate of 22,295 shares of Series B Preferred Stock convertible into an aggregate of 854,205 shares of Common Stock at a
conversion price of $2.61 per share (which is equal to the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)(1)(A)) immediately
prior to the execution of the Initial Subscription Agreements) at a purchase price of $100 per share, for an aggregate of $2,229,500.
The Company received net proceeds of $1,800,485 in connection with the Initial Closing. In accordance with the Spartan Agreements,
at the Initial Closing the Company paid Spartan an aggregate of $379,015 in placement agent and consulting fees, as well as $50,000
for Spartan’s legal expenses, and issued (i) Spartan and its designee an aggregate of 260,108 Series C Conversion Shares
at a conversion price of $1.00 per share, subject to customary adjustments, and (ii) Spartan a Placement Agent Warrant exercisable
for up to 85,421 Placement Agent Warrant Shares at an exercise price of $1.00 per share, subject to customary adjustments thereunder.
On
December 31, 2024, the Company completed the Second Closing and formally entered into additional subscription agreements (the
“Second Subscription Agreements”, and collectively with the Initial Subscription Agreements, the “Subscription
Agreements”) with the Investors, pursuant to which the Company issued and sold to the applicable Investors an aggregate
of 3,680 shares of Series B Preferred Stock convertible into an aggregate of 117,946 shares of Common Stock at a conversion price
of $3.12 per share (which is equal to the Minimum Price immediately prior to the execution of the Second Subscription Agreements)
and received gross proceeds of $368,000 and net proceeds of $305,440. In accordance with the Spartan Agreements, at the Second
Closing the Company paid Spartan an aggregate of $62,560 in placement agent and consulting fees and issued (i) Spartan and its
designee an aggregate of 42,933 Series C Conversion Shares and (ii) Spartan a Placement Agent Warrant exercisable for up to 11,795
Placement Agent Warrant Shares.
Each Subscription Agreement that the Investors entered into with the Company in connection with the Offering
contains customary representations, warranties, obligations, indemnification rights and agreements of the Company and the applicable
Investor. In addition, pursuant to the Subscription Agreements, Investors were granted (i) the right to participate (on a pro rata
basis based on such Investor’s participation in the Offering) in any subsequent financing transaction pursuant to which the
Company is offering Common Stock or Common Stock Equivalents (as defined in the Subscription Agreements) at an effective price
per share that is lower than the conversion price of the shares of Series B Preferred Stock then in effect during the six-month
period commencing on the later of (x) such Investor’s purchase of shares of Series B Preferred Stock in a subsequent financing
after the Offering and (y) the effective date of the Resale Registration Statement (the “Effective Date”) and (ii)
the right to participate in any subsequent offering of shares of Series B Preferred Stock that occurs after the Offering on a pro
rata basis (on a pro rata basis based on such investor’s participation in the Offering) during the six-month period commencing
on the Effective Date. The Subscription Agreements provide that subscriptions for shares of Series B Preferred Stock cannot be
less than $50,000 and that the Offering will terminate on the earliest of (i) the date on which $6,000,000 of shares of Series
B Preferred Stock are sold (subject to Spartan’s exercise of its 45-day over-allotment option to increase the maximum amount
of shares of Series B Preferred Stock that could be offered to $7,200,000), (ii) the date on which the Company and Spartan agree
to terminate the Offering, or (iii) June 30, 2025, subject to extension upon agreement by the Company and Spartan, provided that
the Company shall have the right to terminate the Offering in the event an aggregate of (x) $1,000,000 of shares of Series B Preferred
Stock are not sold by December 12, 2024 and (y) $4,000,000 of shares of Series B Preferred Stock are not sold by March 31, 2025,
in each case subject to extension upon agreement by the Company and Spartan.
Pursuant
to the Series B Certificate of Designation, each share of Series B Preferred Stock is convertible at any time into such number
of shares of Common Stock obtained by the quotient of (i) the product of (x) such number of shares of Preferred Stock being converted
by such holder and (y) a stated value of $100 and (ii) the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)(1)(A)). Holders
of shares of Series B Preferred Stock do not have any voting rights other than certain limited voting rights with respect to actions
which may adversely affect the Series B Preferred Stock. A holder of shares of Series B Preferred Stock cannot convert such shares
to the extent that such holder would own more than 4.99% (or at the election of such holder, 9.99%) of outstanding Common Stock
immediately after such conversion. The Series B Preferred Stock ranks senior to the Common Stock and any class or series of capital
stock created after the Series B Preferred Stock with respect to the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the Company. The Series B Certificate of Designation also contains certain standard
adjustment provisions as are customarily included in similar derivative securities.
Pursuant
to the Series C Certificate of Designation, each share of Series C Preferred Stock is convertible into one share of Common Stock
at any time only on or after the date on which the applicable Registration Statement (as defined in the Series C Certificate of
Designation) has been declared effective by the SEC. A holder of shares of Series C Preferred Stock cannot convert such shares
to the extent that such holder would own more than 4.99% (or at the election of such holder, 9.99%) of outstanding Common Stock
immediately after such conversion. The Series C Preferred Stock ranks pari passu to the Common Stock and junior to all other shares
of capital stock of the Company authorized or designated before or after the date of designation of the Series C Preferred Stock
with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of
the Company. The Series C Certificate of Designation also contains certain standard adjustment provisions as are customarily included
in similar derivative securities.
The
Placement Agent Warrants may also be exercisable on a cashless basis for a net number of shares using the formula provided in
the Placement Agent Warrants in the event that the Placement Agent Warrant Shares are not registered on a registration statement
declared effective by the SEC and so long as the closing price of the Common Stock on the applicable principal trading market
on the date immediately preceding such exercise date is greater than $1.00 per share. The Placement Agent Warrants also contains
standard adjustment provisions and a holder (together with its affiliates) may not exercise the Placement Agent Warrants to the
extent that such holder would own more than 4.99% (or at the election of such holder, 9.99%) of outstanding Common Stock immediately
after such exercise.
In
connection with each Closing, the Company entered into registration rights agreements with the Investors, pursuant to which the
Company agreed to register the resale of the Series B Conversion Shares. The Company is required to prepare and file a resale
registration statement with the SEC no later than the thirtieth (30th) calendar day following the applicable Closing
and to use its best efforts to have such registration statement declared effective within sixty (60) calendar days after such
Closing, subject to certain exceptions. In addition, pursuant to the Placement Agent Agreement and the Amendment, the Company
is also required to register the resale of the Series C Conversion Shares and the Placement Agent Warrant Shares. In order to
satisfy such obligations, the Company filed the Resale Registration Statement to register for resale all of the Shares issuable
upon conversion of the Series B Preferred Stock and Series C Preferred Stock, and upon exercise of the Placement Agent Warrants,
as applicable.
Irrevocable
Proxy and Power of Attorney
Dr. Jonathan Kaufman, Chief Executive Officer of the Company, and Spartan are parties to an irrevocable
proxy and power of attorney, effective as of December 20, 2024 (the “Irrevocable Proxy”), pursuant to which, among
other things, Spartan agreed to grant to Dr. Kaufman all voting power over and power of attorney with respect to all shares of
Series C Preferred Stock, Series C Conversion Shares and Placement Agent Warrant Shares issued or issuable to Spartan or its Attribution
Parties (as defined in the Irrevocable Proxy) in connection with the Offering (collectively, the “Proxied Shares”).
In addition, subject to certain exceptions, Spartan is not permitted to transfer or sell the applicable Proxied Shares without
the Company’s prior written consent. Upon such time as the applicable Series C Conversion Shares and Placement Agent Warrant
Shares are registered on a registration statement declared effective by the SEC, including but not limited to, the Resale Registration
Statement, the rights granted to Dr. Kaufman to such shares pursuant to the Irrevocable Proxy terminate and revert to Spartan (or
its Attribution Parties), subject to certain exceptions, provided that if the registration of such shares on such registration
statement does not occur within six months after the issuance of such Proxied Shares, all such restrictions on Spartan’s
rights to transfer such Proxied Shares will terminate. On each of December 23, 2024 and December 31, 2024, in connection with the
Initial Closing and the Second Closing, respectively, Spartan granted Dr. Kaufman such voting power over all applicable Proxied
Shares issued or issuable to Spartan and its Attribution Parties in connection with the Initial Closing and the Second Closing.
Upon the effectiveness of the Resale Registration Statement, the applicable Proxied Shares that were issued to Spartan and its
designee, Eric Meyer, at the Initial Closing and the Second Closing are now deemed beneficially owned by each of them (subject
to the 4.99% beneficial ownership limitation provisions in the Placement Agent Warrants and the Series C Certificate of Designation)
and the rights granted to Dr. Kaufman with respect to such Proxied Shares have terminated.
At
each of the Initial Closing and the Second Closing, such shares of Series B Preferred Stock were offered and sold to such Investors,
and such Placement Agent Warrants and shares of Series C Preferred Stock were issued to Spartan and its designee, pursuant to
an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or
Regulation D promulgated thereunder. In connection with the offer, sale and/or issuance of such securities, the Company relied
on the written representations of each of the Investors, Spartan and its designee, as applicable, that they were each an “accredited
investor” as defined in Rule 501(a) of Regulation D. In addition, neither the Company nor anyone acting on its behalf offered
or sold such securities by any form of general solicitation or general advertising.
For more information on the Spartan Agreements,
the Offering and the other transaction documents applicable to the Offering, see the Current Reports on Form 8-K filed by the Company
with the SEC on December 10, 2024, December 30, 2024 and January 6, 2025, including the applicable exhibits filed therewith.
SELLING
STOCKHOLDERS
The Shares being offered by the Selling Stockholders consist of (i) the 972,151 Series B Conversion Shares
issuable upon full conversion of Series B Preferred Stock, (ii) the 303,041 Series C Conversion Shares issuable upon full conversion
of Series C Preferred Stock, and (iii) the 97,216 Placement Agent Warrant Shares issuable upon full exercise of the Placement Agent
Warrants. For additional information regarding the issuance of these securities, see “Private Placement” beginning
on page 9 of this prospectus. We registered the Shares on the Resale Registration Statement in order to permit the Selling Stockholders
to offer such Shares for resale from time to time. Except for the Spartan Agreements and the Subscription Agreements described
in the section entitled “Private Placement”, and as disclosed in this section under “Material Relationships with
Selling Stockholders,” the Selling Stockholders have not had any material relationship with us or our affiliates within the
past three years.
The
following table sets forth certain information with respect to each Selling Stockholder, including (i) the shares of Common Stock
beneficially owned by each Selling Stockholder prior to this offering, (ii) the number of Shares being offered by such Selling
Stockholder pursuant to this prospectus, and (iii) such Selling Stockholder’s beneficial and percentage ownership of our
outstanding shares of Common Stock after completion of this offering. The registration of the Shares issuable to the Selling Stockholders
upon conversion of the Series B Preferred Stock and Series C Preferred Stock, or upon exercise of the Placement Agent Warrants,
as applicable, does not necessarily mean that the Selling Stockholders will sell all or any of such Series B Conversion Shares,
Series C Conversion Shares, or Placement Agent Warrant Shares, but the number of shares of Common Stock and percentages set forth
in the final two columns below assume that all Shares being offered by the Selling Stockholders are sold. The final two columns
also assume, as of January 15, 2025, the full conversion of the Series B Preferred Stock and Series C Preferred Stock, and the
full exercise of the Placement Agent Warrants, without regard to any limitations on conversion or exercise. See “Plan of
Distribution.”
The
table is based on information supplied to us by the Selling Stockholders, with beneficial ownership and percentage ownership determined
in accordance with the rules and regulations of the SEC, and includes voting or investment power with respect to shares of Common
Stock. This information does not necessarily indicate beneficial ownership for any other purpose. In computing the number of shares
of Common Stock beneficially owned by a Selling Stockholder and the percentage ownership of that Selling Stockholder, shares of
Common Stock subject to securities held by that Selling Stockholder that are exercisable for or convertible into shares of Common
Stock within 60 days after January 15, 2025, are deemed outstanding. Such shares of Common Stock, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other Selling Stockholder.
| | |
Number of
Shares of
Common
Stock
Beneficially
Owned
Prior to
Offering
(1) | | |
Maximum
Number of
Shares
to be Sold
Pursuant
to this
Prospectus
(2) | | |
Number of
Shares of
Common
Stock
Beneficially
Owned
After
Offering
(1)(3) | | |
Percentage
Beneficially
Owned
After
Offering
(1)(3) | |
| Nutie Dowdle (4)(5) | |
| 63,493 | | |
| 185,240 | | |
| — | | |
| — | |
| Vijay Singh and Richa Mishra (4)(6) | |
| 63,493 | | |
| 172,413 | | |
| — | | |
| — | |
| Michael D. Dunham (4) | |
| 63,493 | | |
| 114,176 | | |
| — | | |
| — | |
| Robert Forster | |
| 57,471 | | |
| 57,471 | | |
| — | | |
| — | |
| Jack Cavin Holland 1979 Trust (7) | |
| 57,471 | | |
| 57,471 | | |
| — | | |
| — | |
| Albert Gentile and Heidi L. Gentile (6) | |
| 54,789 | | |
| 54,789 | | |
| — | | |
| — | |
| GSB Holdings Inc. (8) | |
| 47,892 | | |
| 47,892 | | |
| — | | |
| — | |
| The Flying S Ranch Trust (9) | |
| 38,314 | | |
| 38,314 | | |
| — | | |
| — | |
| John Aksak | |
| 38,314 | | |
| 38,314 | | |
| — | | |
| — | |
| Bradley C. Karp and Belinda Karp (6) | |
| 35,808 | | |
| 35,808 | | |
| — | | |
| — | |
| Brent Orr (10) | |
| 41,666 | | |
| 41,666 | | |
| — | | |
| — | |
| John Geddes Parsons | |
| 19,157 | | |
| 19,157 | | |
| — | | |
| — | |
| Kenneth Williamson | |
| 15,325 | | |
| 15,325 | | |
| — | | |
| — | |
| William Kadi | |
| 12,930 | | |
| 12,930 | | |
| — | | |
| — | |
| Paul Traxler | |
| 12,643 | | |
| 12,643 | | |
| — | | |
| — | |
| Kadi Family Trust (11) | |
| 11,840 | | |
| 11,840 | | |
| — | | |
| — | |
| Donald P. Sesterhenn | |
| 11,494 | | |
| 11,494 | | |
| — | | |
| — | |
| Elvis Rizvic | |
| 9,578 | | |
| 9,578 | | |
| — | | |
| — | |
| Stephen Mut | |
| 9,578 | | |
| 9,578 | | |
| — | | |
| — | |
| James G. Diemert | |
| 9,578 | | |
| 9,578 | | |
| — | | |
| — | |
| Umberto Stangarone | |
| 6,896 | | |
| 6,896 | | |
| — | | |
| — | |
| Joseph M. Diangelo | |
| 5,747 | | |
| 5,747 | | |
| — | | |
| — | |
| Aleksandr Simma | |
| 3,831 | | |
| 3,831 | | |
| — | | |
| — | |
| Eric Meyer (12) | |
| 63,493 | | |
| 90,912 | | |
| — | | |
| — | |
| Spartan Capital Securities, LLC (13) | |
| 63,493 | | |
| 309,345 | | |
| — | | |
| — | |
| TOTAL | |
| 817,787 | | |
| 1,372,408 | | |
| — | | |
| — | |
| |
(1) |
The number of shares owned and the percentage of beneficial ownership prior to and after this offering
set forth in these columns are based on 1,208,919 shares of Common Stock outstanding on January 15, 2025. Conversions of the shares
of Series B Preferred Stock and shares of Series C Preferred Stock, and exercises of the Placement Agent Warrants held by the Selling
Stockholders are subject to certain beneficial ownership limitations, which provide that a holder of such shares of Series B Preferred
Stock, shares of Series C Preferred Stock and the Placement Agent Warrants will not have the right to convert such shares
of Series B Preferred Stock or Series C Preferred Stock, or exercise such Placement Agent Warrants, as the case may be, if such
holder, together with such holder’s affiliates, would beneficially own in excess of 4.99% of the number of shares of Common
Stock outstanding immediately after giving effect to such conversion or exercise, as applicable, provided that upon notice to the
Company, a holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding
which shall take effect on the 61st day following the date of such notice (each such limitation, a “Beneficial
Ownership Limitation”). As a result, the number of shares of Common Stock reflected in these columns as beneficially owned
by each Selling Stockholder includes (a) if any, the number of Shares offered hereby which such Selling Stockholder has the right
to acquire as of January 15, 2025 and without such holder or any of such holder’s affiliates beneficially owning more than
4.99% or 9.99%, as applicable, of the number of outstanding shares of Common Stock as of January 15, 2025. Additionally pursuant
to the Series C Certificate of Designation, shares of Series C Preferred Stock cannot be converted until the date on which the
SEC declares a registration statement registering the applicable Series C Conversion Shares underlying such shares effective, including
the Resale Registration Statement. As a result of the Resale Registration Statement being declared effective by the SEC on January
15, 2025, the number of shares of Common Stock reflected in these columns as beneficially owned by each Selling Stockholder that
holds shares of Series C Preferred Stock includes the applicable Series C Conversion Shares that may be issued to such Selling
Stockholder upon conversion of such shares of Series C Preferred Stock, as such shares of Common Stock are now deemed beneficially
owned by such Selling Stockholders, subject to the Beneficial Ownership Limitation. |
| |
(2) |
Represents all Shares
offered hereby upon full conversion of the Series B Preferred Stock and Series C Preferred Stock and upon full exercise of
the Placement Agent Warrants held by the applicable Selling Stockholders, without regard to the Beneficial Ownership Limitations
that apply thereto and any limitation on conversion set forth in the Series C Certificate of Designation. Except as otherwise
stated in the footnotes to this table, such Shares represent Series B Conversion Shares issuable upon full conversion of the
shares of Series B Preferred Stock held by the applicable Selling Stockholder. |
| |
(3) |
The number of shares
owned and the percentage of beneficial ownership after this offering set forth in these columns assumes full conversion of
(i) the Series B Preferred Stock for an aggregate of 972,151 Series B Conversion Shares offered hereby, and (ii) the Series
C Preferred Stock for an aggregate of 303,041 Series C Conversion Shares offered hereby, and the full exercise of the Placement
Agent Warrants for an aggregate of 97,216 Placement Agent Warrant Shares and the subsequent sale of all such Shares. |
| |
(4) |
Represents the maximum
number of shares of Common Stock currently deemed to be beneficially owned by such Selling Stockholder due to the 4.99% Beneficial
Ownership Limitation provision in the Series B Certificate of Designation. |
| |
(5) |
Consists of (i)
48,076 Series B Conversion Shares issuable upon full conversion of the shares of Series B Preferred Stock held by Nutie Dowdle
individually, (ii) 98,850 Series B Conversion Shares issuable upon full conversion of the shares of Series B Preferred Stock
held by Axos Clearing Custodian Nutie Dowdle IRA (“Dowdle IRA”), and (iii) 38,314 Series B Conversion Shares issuable
upon full conversion of the shares of Series B Preferred Stock held by Blue Mule Investments LLP (“Blue Mule”).
Nutie Dowdle is the general partner of Blue Mule and holds voting and dispositive power over the Shares and other Company
securities held by Blue Mule and by the Dowdle IRA, as applicable. The principal business address of Blue Mule is PO Box 8060,
Columbus, MS 39705. |
| |
(6) |
The Series B Conversion
Shares issuable upon full conversion of such shares of Series B Preferred Stock are held jointly by such individuals. |
| |
(7) |
Jack Cavin Holland
is the trustee of the Jack Cavin Holland 1979 Trust and holds voting and dispositive control of such Series B Conversion Shares
issuable upon full conversion of the shares of Series B Preferred Stock held by such Selling Stockholder. |
| |
(8) |
David Clarke, Leslie
Clarke and Adriana Quartarolli are the stockholders of GSB Holdings Inc. (“GSB”) and share voting and investment
power with respect to such Series B Conversion Shares issuable upon full conversion of the shares of Series B Preferred Stock
held by GSB. The address of GSB is 14179 Laurel Trail, Wellington, FL 33414. |
| |
(9) |
Ryan Shay is the
trustee of The Flying S Ranch Trust and holds voting and dispositive control of such Series B Conversion Shares issuable upon
full conversion of the shares of Series B Preferred Stock held by such Selling Stockholder. |
| |
(10) |
Consists of (i)
9,615 Series B Conversion Shares issuable upon full conversion of the shares of Series B Preferred Stock held by Brent Orr
individually, and (ii) 32,051 Series B Conversion Shares issuable upon full conversion of the shares of Series B Preferred
Stock held by Cool Blue Capital Management LLC (“Cool Blue”). Brent Orr is the managing member of Cool Blue and
has voting and investment power with respect to such Series B Conversion Shares issuable upon full conversion of the shares
of Series B Preferred Stock held by Cool Blue. The address of Cool Blue is 11702 South Richmond Avenue, Tulsa, OK 74137. |
| |
(11) |
William Kadi and
Sandra M Kadi are the trustees of The Kadi Family Trust and hold voting and dispositive control of such Series B Conversion
Shares issuable upon full conversion of the shares of Series B Preferred Stock held by such Selling Stockholder. |
| |
(12) |
Mr. Meyer holds an aggregate of 90,912 shares of Series C Preferred Stock, which are convertible into
90,912 Series C Conversion Shares, all of which are being offered for resale in this offering, but is currently deemed to beneficially
own only an aggregate of 63,493 shares of Common Stock due to the 4.99% Beneficial Ownership Limitation provision in the Series
C Certificate of Designation. |
| |
(13) |
Spartan holds (i) an aggregate of 212,129 shares of Series C Preferred Stock, which are convertible into
212,129 Series C Conversion Shares, and (ii) Placement Agent Warrants exercisable for up to an aggregate of 97,216 Placement Agent
Warrant Shares, all of which Shares are being offered for resale in this offering, but is currently deemed to beneficially own
only an aggregate of 63,493 shares of Common Stock due to the 4.99% Beneficial Ownership Limitation provisions in each of the Placement
Agent Warrants and the Series C Certificate of Designation. John Lowry is the Chief Executive Officer of Spartan and may be deemed
to have sole voting and investment control over all such Shares and other Company securities held by Spartan, as applicable. Spartan’s
address is 45 Broadway, 19th Floor, New York, NY 10006. |
Material
Relationships with Selling Stockholders
No
material relationships exist between any of the Selling Stockholders and us, nor have any such material relationships existed
within the past three years, except, in either case, as identified below or otherwise disclosed below.
IPO
On
December 22, 2022, the Company closed its IPO of 1,217,391 shares of Common Stock (on a pre-Reverse Stock Split basis) for gross
proceeds to the Company of approximately $7,000,000. In connection with the IPO, Spartan acted as the underwriter and, as compensation,
received (i) underwriting discounts of 9.0% of the gross proceeds from the offering, and (ii) a cash reimbursement for reasonable
travel and other out-of-pocket expenses of $100,000. Spartan also received underwriter warrants to purchase up to an aggregate
of 5.0% of the total number of shares of Common Stock sold in the IPO at an exercise price equal to $7.1875 per share (on a pre-Reverse
Stock Split basis) (which was equal to 125% of the initial public offering price of $5.75 per share of Common Stock (on a pre-Reverse
Stock Split basis)). Eric Meyer is a registered representatives of Spartan and also participated in the IPO. In addition, all
of the other Selling Stockholders listed in the table above, excluding Michael D. Dunham, GSB Holdings Inc, John Geddes Parsons,
Elvis Rizvic and Aleksandr Simma, participated in the IPO.
USE
OF PROCEEDS
The
Selling Stockholders will receive all of the proceeds from the sale of the Shares under this prospectus and we will not receive
any of such proceeds. We may receive up to $97,216 in aggregate gross proceeds from cash exercises of the Placement Agent Warrants,
if exercised in full, based on the per share exercise price of the Placement Agent Warrants. Any proceeds we receive from the
exercise of the Placement Agent Warrants will be used for working capital and general corporate purposes. The Selling Stockholders
will pay any agent’s commissions and expenses they incur for brokerage, accounting, tax or legal services or any other expenses
that they incur in disposing of the shares of Common Stock. We will bear all other costs, fees and expenses incurred in effecting
the registration of the shares of Common Stock covered by this prospectus and any prospectus supplement. These may include, without
limitation, all registration and filing fees, SEC filing fees and expenses of compliance with state securities or “blue
sky” laws. We cannot predict when or if the Series B Preferred Stock or Series C Preferred Stock will be converted, or if
the Placement Agent Warrants will be exercised, and it is possible that the Series B Preferred Stock or Series C Preferred Stock
may never be converted and the Placement Agent Warrants may expire and never be exercised. In addition, the Placement Agent Warrants
may be exercised on a cashless basis if there is not an effective registration statement covering the resale of the Placement
Agent Warrant Shares, or the prospectus contained therein is not available for the issuance of the Placement Agent Warrant Shares,
so long as the closing price of the Common Stock on the applicable principal trading market on the date immediately preceding
such exercise date is greater than $1.00 per share. As a result, we may never receive meaningful, or any, cash proceeds from the
exercise of the Placement Agent Warrants, and we cannot plan on any specific uses of any proceeds we may receive beyond the purposes
described herein.
See
“Plan of Distribution” elsewhere in this prospectus for more information.
DESCRIPTION
OF SECURITIES THAT THE SELLING STOCKHOLDERS ARE OFFERING
The
Selling Stockholders are offering for resale (i) up to an aggregate of 972,151 shares of Common Stock issuable upon full conversion
of the shares of Series B Preferred Stock, (ii) up to an aggregate of 303,041 shares of Common Stock issuable upon full conversion
of the shares of Series C Preferred Stock, and (iii) up to an aggregate of 97,216 shares of Common Stock issuable upon exercise
of the Placement Agent Warrants. The following description of our Common Stock, certain provisions of our Certificate of Incorporation,
the Company’s Bylaws (the “Bylaws”), and Delaware law are summaries. You should also refer to our Certificate
of Incorporation and our Bylaws, which are listed as exhibits to the Resale Registration Statement.
General
The
Company is authorized to issue 220,000,000 shares of its capital stock consisting of (a) 200,000,000 shares of Common Stock and
(b) 20,000,000 shares of “blank check” preferred stock, par value $0.0001 per share, (i) 144,000 shares of which are
designated as Series B Preferred Stock, 25,975 shares of which are issued and outstanding, and (ii) 1,050,000 shares of which
are designated as Series C Preferred Stock, 303,041 shares of which are issued and outstanding.
As
of January 15, 2025, 1,208,919 shares of our Common Stock were issued and outstanding, held by 14 stockholders of record (which
do not include shares of Common Stock held in street name), which number excludes the following as of such date: (i) the exercise
of outstanding warrants to purchase up to an aggregate of 214,177 shares of Common Stock with an approximate weighted average
exercise price and remaining life in years of $13.40 and 2 years, respectively, and (ii) the exercise of outstanding options to
purchase up to an aggregate of 361,625 shares of Common Stock at a weighted average exercise price of $19.74 per share. In addition,
as of January 15, 2025, 25,975 shares of our Series B Preferred Stock were issued and outstanding, held by 26 stockholders of
record, and 303,041 shares of Series C Preferred Stock were issued and outstanding, held by two stockholders of record.
Common
Stock
Voting
Rights
The
holders of shares of Common Stock vote together as one class on all matters as to which holders of Common Stock are entitled to
vote. Except as otherwise required by applicable law, all voting rights are vested in and exercised by the holders of Common Stock
with each share of Common Stock being entitled to one vote, including in all elections of directors. The vote of the holders of
a majority of the issued and outstanding shares of Common Stock entitled to vote thereon is sufficient to authorize, affirm, ratify
or consent to such act or action, except as otherwise provided by law.
Dividend
Rights
Subject
to the rights of holders of outstanding shares of preferred stock, if any, holders of Common Stock are entitled to receive such
dividends and distributions and other distributions in cash, stock or property of the Company when, as and if declared thereon
by the board of directors from time to time out of assets or funds of the Company legally available therefor.
Liquidation
Rights
Subject
to the rights of holders of outstanding shares of preferred stock, if any, upon our liquidation, dissolution or winding up, the
holders of our Common Stock will be entitled to share ratably in the net assets and funds legally available for distribution to
stockholders after the payment of all of our debts and other liabilities.
Other
Rights and Preferences
Holders
of our Common Stock have no preemptive rights or other subscription rights, conversion rights, registration rights, redemption
or sinking fund provisions by virtue of only holding such shares.
Anti-Takeover
Provisions
Provisions
of the DGCL, our Charter, and our Bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest
or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons
seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection
of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals
could result in improved terms for our stockholders.
Section
203 of the DGCL. We are subject to Section 203 of the DGCL, which generally prohibits a publicly held Delaware corporation
from engaging in any “business combination” with any interested stockholder for a period of three (3) years after
the date that such stockholder became an interested stockholder, with the following exceptions:
| ● | before
such date, the board of directors of the corporation approved either the business combination or the transaction that resulted
in the stockholder becoming an interested stockholder; |
| ● | upon
completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes
of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares
owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;
or |
| ● | on
or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting
of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that
is not owned by the interested stockholder. |
In
general, Section 203 of the DGCL defines a “business combination” to include the following:
| ● | any
merger or consolidation involving the corporation and the interested stockholder; |
| ● | any
sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; |
| ● | subject
to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; |
| ● | any
transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or |
| ● | the
receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation. |
In
general, Section 203 of the DGCL defines an “interested stockholder” as an entity or person who, together with the
person’s affiliates and associates, beneficially owns, or within three (3) years prior to the time of determination of interested
stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Anti-Takeover
Effects of Certain Provisions of our Bylaws
Our
Bylaws provide that directors may be removed by the stockholders with or without cause upon the vote of a majority of the holders
of Common Stock then entitled to vote. Except as otherwise provided in our Bylaws and our Charter, any vacancies or newly created
directorships on our board of directors resulting from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director.
Our
Bylaws also provide that only our chairman of the board of directors, chief executive officer, president or one or more stockholders
holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting may call a special meeting
of stockholders.
The
combination of these provisions makes it more difficult for our existing stockholders to replace our board of directors as well
as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to
retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party
to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board
of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt
to change our control.
These
provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its
policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce
our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions
could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes
in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of our Common
Stock that could result from actual or rumored takeover attempts. We believe that the benefits of these provisions, including
increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure the Company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals
could result in an improvement of their terms.
Listing
Our
Common Stock is listed on the Nasdaq Capital Market under the symbol “LIPO”.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Common Stock is Nevada Agency and Transfer Company. The transfer agent’s address is
50 West Liberty Street, Suite 880, Reno NV 89501 and its telephone number is (775) 322-0626.
EXECUTIVE
COMPENSATION
The
following table sets forth all plan and non-plan compensation for the last two fiscal years paid to individuals who served as
the Company’s principal executive officers and the Company’s two other most highly compensated executive officers
serving as executive officers at the end of the last completed fiscal year, as required by Item 402(m)(2) of Regulation S-K of
the Securities Act. We refer to these individuals collectively as our “named executive officers.”
| Name and Principal Position |
|
Year |
|
Salary |
|
|
Bonus |
|
|
Stock
Awards |
|
|
Option
Awards (1) |
|
|
Non-Equity
Incentive
Plan Compensation |
|
|
Nonqualified
deferred
compensation
earnings |
|
|
All
Other
Compensation |
|
|
Total |
|
| Jonathan Kaufman, |
|
2024 |
|
$ |
233,300 |
|
|
|
— |
|
|
|
— |
|
|
$ |
44,000 |
(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
277,300 |
|
| Chief Executive Officer |
|
2023 |
|
$ |
204,133 |
|
|
|
— |
|
|
|
— |
|
|
$ |
119,250 |
(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
323,383 |
|
| Michael Chancellor, |
|
2024 |
|
$ |
225,000 |
|
|
|
— |
|
|
|
— |
|
|
$ |
44,000 |
(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
269,000 |
|
| Chief Medical Officer |
|
2023 |
|
$ |
195,868 |
|
|
|
— |
|
|
|
— |
|
|
$ |
119,250 |
(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
315,118 |
|
| Douglas Johnston, |
|
2024 |
|
$ |
165,000 |
|
|
|
— |
|
|
|
— |
|
|
$ |
27,500 |
(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
192,500 |
|
| Chief Financial Officer |
|
2023 |
|
$ |
165,000 |
|
|
$ |
20,000 |
|
|
|
— |
|
|
$ |
75,000 |
(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
260,000 |
|
| (1) |
Amounts reflect
the aggregate grant date fair value of the stock options granted to each named executive officer during the fiscal year ended
December 31, 2023 and 2024, as computed in accordance with Financial Accounting Standards Board ASC 718. |
| (2) |
During the fiscal
year ended December 31, 2024, the Company granted Dr. Kaufman stock options exercisable for up to an aggregate of 10,000 shares
of Common Stock, which had a grant date fair value of $4.40 per share. During the fiscal year ended December 31, 2023, the
Company granted Dr. Kaufman stock options exercisable for up to an aggregate of 9,938 shares of Common Stock, which had a
grant date fair value of $12.00 per share. |
| (3) |
During the fiscal
year ended December 31, 2024, the Company granted Dr. Chancellor stock options exercisable for up to an aggregate of 10,000
shares of Common Stock, which had a grant date fair value of $4.40 per share. During the fiscal year ended December 31, 2023,
the Company granted Dr. Chancellor stock options exercisable for up to an aggregate of 9,938 shares of Common Stock, which
had a grant date fair value of $12.00 per share. |
| (4) |
During
the fiscal year ended December 31, 2024, the Company granted Mr. Johnston stock options exercisable for up to an aggregate
of 6,250 shares of Common Stock, which had a grant date fair value of $4.40 per share. During the fiscal year ended December
31, 2023, the Company granted Mr. Johnston stock options exercisable for up to an aggregate of 6,250 shares of Common Stock,
which had a grant date fair value of $12.00 per share. |
Employment
Agreements
Jonathan
Kaufman
On
July 17, 2020, Dr. Kaufman and the Company entered into an employment agreement appointing Dr. Kaufman as Chief Executive Officer
of the Company (the “Kaufman Agreement”). The Kaufman Agreement establishes an employment term of two years beginning
on July 17, 2020, which term will be automatically extended for successive one-year periods unless either party notifies the other
party of its intention not to renew upon at least 90 days’ written notice prior to the applicable renewal date. The Kaufman
Agreement provides Dr. Kaufman with an annual base salary of $183,300. In addition, Dr. Kaufman may be entitled to receive equity
awards under the company’s stock incentive plans, as well as reimbursement of business expenses and bonus compensation,
at the discretion of the board of directors, depending upon relevant factors, including but not limited to fundraising success,
continued ongoing grant revenue, successful progress in the clinic and the Company’s financial position. The Kaufman Agreement
also provides that Dr. Kaufman will participate in employee benefits plans, practices and programs maintained by the Company.
On August 4, 2023, the Company and Dr. Kaufman entered into an amendment agreement, dated August 4, 2023 (the “Kaufman Amendment”),
to the Kaufman Agreement. The Kaufman Amendment amended the Kaufman Agreement solely to increase Dr. Kaufman’s annual base
salary by $50,000, to $233,300.
Pursuant
to the Kaufman Agreement, either party may terminate such agreement for any reason upon 90 days’ advance written notice.
In the event that Dr. Kaufman is terminated by the Company for Cause or by Dr. Kaufman Without Good Reason (as such terms are
defined in the Kaufman Agreement), Dr. Kaufman is entitled to any accrued but unpaid base salary, employee benefits and reimbursement
of unreimbursed expenses incurred until the date of termination. In the event that Dr. Kaufman is terminated by the Company for
Without Cause or by Dr. Kaufman for Good Reason (as such terms are defined in the Kaufman Agreement), Dr. Kaufman is entitled
to his base salary for six months following such date of termination and all unvested stock options held by Dr. Kaufman under
the Company’s stock incentive plans will immediately vest. Additionally, in the event of termination without Cause by the
Company or for Good Reason by Dr. Kaufman within 12 months of a Change in Control (as defined in the Kaufman Agreement), Dr. Kaufman
is entitled to a receive a lump sum payment of two times the annual base salary within 60 days following such termination and
reimbursement for certain health insurance premium payments.
Michael
Chancellor
On
July 17, 2020, Dr. Chancellor and the Company entered into an employment agreement appointing Dr. Chancellor as Chief Medical
Officer of the Company (the “Chancellor Agreement”). The Chancellor Agreement establishes an employment term of two
years beginning on July 17, 2020, which term will be automatically extended for successive one-year periods unless either party
notifies the other party of its intention not to renew upon at least 90 days’ written notice prior to the applicable renewal
date. The Chancellor Agreement provides that Dr. Chancellor was initially to be paid an annual base salary of $45,650, provided
that if the Company achieves adequate financial liquidity and net working capital in connection with a subsequent private offering,
such salary may be increased up to a maximum of $175,000. This amount is currently covered by federal grant revenue. In addition,
Dr. Chancellor may be entitled to receive equity awards under the Company’s stock incentive plans, as well as reimbursement
of business expenses and bonus compensation at the discretion of the board of directors. The Chancellor Agreement also provides
that Dr. Chancellor will participate in employee benefits plans, practices and programs maintained by the Company. On August 4,
2023, the Company and Dr. Chancellor entered into an amendment agreement, dated August 4, 2023 (the “Chancellor Amendment”),
to Chancellor Agreement. The Chancellor Amendment amended the Chancellor Agreement solely to increase Dr. Chancellor’s annual
base salary by $50,000, to $225,000.
Pursuant
to the Chancellor Agreement, either party may terminate such agreement for any reason upon 90 days’ advance written notice.
In the event that Dr. Chancellor is terminated by the Company for Cause or by Dr. Chancellor Without Good Reason (as such terms
are defined in the Chancellor Agreement), Dr. Chancellor is entitled to any accrued but unpaid base salary, employee benefits
and reimbursement of unreimbursed expenses incurred until the date of termination. In the event that Dr. Chancellor is terminated
by the Company for Without Cause or by Dr. Chancellor for Good Reason (as such terms are defined in the Chancellor Agreement),
Dr. Chancellor is entitled to his base salary for six months following such date of termination and all unvested stock options
held by Dr. Chancellor under the Company’s stock incentive plans will immediately vest. Additionally, in the event of termination
without Cause by the Company or for Good Reason by Dr. Chancellor within 12 months of a Change in Control (as defined in the Chancellor
Agreement), Dr. Chancellor is entitled to a receive a lump sum payment of two times the annual base salary within 60 days following
such termination and reimbursement for certain health insurance premium payments.
Douglas
Johnston
Effective
November 1, 2022, Mr. Johnston and the Company entered into an employment agreement appointing Mr. Johnston as Chief Financial
Officer of the Company (the “Johnston Agreement”). The Johnston Agreement establishes an employment term of two years
beginning on November 1, 2022, which term will be automatically extended for successive one-year periods unless either party notifies
the other party of its intention not to renew upon at least 90 days’ written notice prior to the applicable renewal date.
The Johnston Agreement provides that Mr. Johnston will be paid an annual base salary of $165,000. In addition, Mr. Johnston may
be entitled to receive equity awards under the Company’s stock incentive plans, as well as reimbursement of business expenses
and bonus compensation at the discretion of the board of directors. The Johnston Agreement also provides that Mr. Johnston will
participate in employee benefits plans, practices and programs maintained by the Company.
Pursuant
to the Johnston Agreement, either party may terminate such agreement for any reason upon 90 days’ advance written notice.
In the event that Mr. Johnston is terminated by the Company for Cause or by Mr. Johnston Without Good Reason (as such terms are
defined in the Johnston Agreement), Mr. Johnston is entitled to any accrued but unpaid base salary, employee benefits and reimbursement
of unreimbursed expenses incurred until the date of termination. In the event that Mr. Johnston is terminated by the Company for
Without Cause or by Mr. Johnston for Good Reason (as such terms are defined in the Johnston Agreement), Mr. Johnston is entitled
to his base salary for six months following such date of termination and all unvested stock options held by Mr. Johnston under
the Company’s stock incentive plans will immediately vest. Additionally, in the event of termination without Cause by the
Company or for Good Reason by Mr. Johnston within 12 months of a Change in Control (as defined in the Johnston Agreement), Mr.
Johnston is entitled to a receive a lump sum payment of two times the annual base salary within 60 days following such termination
and reimbursement for certain health insurance premium payments.
Stonewall
Finance, LLC, of which Mr. Johnston is a partner and co-founder, and the Company previously were party to an agreement, dated
October 14, 2021 and which terminated on October 22, 2022, pursuant to which Mr. Johnston had served and performed financial and
accounting services for the Company and pursuant to which Mr. Johnston received cash payments from the Company of $4,000 per month.
Outstanding
Equity Awards at 2024 Fiscal Year End
The
following table provides information relating to the vested and unvested option and stock awards held by our named executive officers
as of December 31, 2024. Each award to each named executive officer is shown separately. All such option awards were fully vested
at December 31, 2024.
| |
|
Option
Awards |
|
|
Stock
Awards |
|
Name and
Principal
Position |
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable |
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable |
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options |
|
|
Option
Exercise
Price |
|
|
Option
Expiration
Date |
|
Number
of
Shares
or Units
of Stock
Unvested |
|
|
Market
Value
of
Shares
of Units
of Stock
Unvested |
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Unvested
Shares |
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Unvested Shares |
|
| Jonathan Kaufman, |
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
|
|
10.00 |
|
|
10/14/2015 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Chief Executive Officer |
|
|
— |
|
|
|
— |
|
|
|
25,000 |
|
|
|
10.00 |
|
|
10/15/2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
12,500 |
|
|
|
10.00 |
|
|
10/12/2027 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
12,500 |
|
|
|
40.00 |
|
|
03/31/2031 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
20,000 |
|
|
|
40.00 |
|
|
09/03/2031 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
9,937 |
|
|
|
17.52 |
|
|
06/16/2033 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
|
|
6.16 |
|
|
03/15/2034 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Michael Chancellor, |
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
|
|
10.00 |
|
|
10/14/2015 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Chief Medical Officer |
|
|
— |
|
|
|
— |
|
|
|
25,000 |
|
|
|
10.00 |
|
|
10/15/2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
12,500 |
|
|
|
10.00 |
|
|
10/12/2027 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
12,500 |
|
|
|
40.00 |
|
|
3/31/2031 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
20,000 |
|
|
|
40.00 |
|
|
9/3/2031 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
9,937 |
|
|
|
17.52 |
|
|
06/16/2033 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
6.16 |
|
|
03/15/2034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Johnston,
Chief Financial Officer |
|
|
— |
|
|
|
— |
|
|
|
6,250 |
|
|
|
17.52 |
|
|
06/16/2033 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
— |
|
|
|
— |
|
|
|
6,250 |
|
|
|
6.16 |
|
|
03/15/2034 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Director
Compensation for Fiscal Year 2024
We
have not implemented a formal policy with respect to compensation payable to our non-employee directors. From time to time, we
have granted equity awards to attract individuals to join our board of directors and for their continued service thereon. During
the fiscal year ended 2024, our independent directors received no cash compensation. but our independent directors were granted
options to purchase an aggregate of 15,625 shares of Common Stock at fair market value as of the date of issuance, expiring ten
years from such issuance. In addition, we reimburse our directors for expenses associated with attending meetings of our board
of directors and its committees. Our board of directors is still in the process of considering the non-employee director compensation
policy.
| Name | |
Fees Earned
or Paid in
Cash
($) | | |
Stock
Awards
($) | | |
Stock
Option
Awards
($)(1) | | |
Non-Equity
Incentive
Plan
Compensation
($) | | |
Nonqualified
Deferred
Compensation
Earnings
($) | | |
All Other
Compensation
($)(2) | | |
Total
($) | |
| Byong (Christopher) Kim | |
| — | | |
| — | | |
| 13,750 | | |
| — | | |
| — | | |
| — | | |
| 13,750 | |
| Ryan Pruchnic | |
| — | | |
| — | | |
| 13,750 | | |
| — | | |
| — | | |
| — | | |
| 13,750 | |
| Naoki Yoshimura | |
| — | | |
| — | | |
| 13,750 | | |
| — | | |
| — | | |
| — | | |
| 13,750 | |
| Lori Birder | |
| — | | |
| — | | |
| 13,750 | | |
| — | | |
| — | | |
| — | | |
| 13,750 | |
| Daniel Cohen | |
| — | | |
| — | | |
| 13,750 | | |
| — | | |
| — | | |
| — | | |
| 13,750 | |
| (1) |
Each of our independent
directors received stock options to purchase up to 3,125 shares of Common Stock at an aggregate grant date fair value of $4.40
per share. Such options were fully vested as of December 31, 2024, at an exercise price of $6.16 per share. |
| (2) |
We reimburse our
directors for travel-related expenses. |
PLAN
OF DISTRIBUTION
Each
Selling Stockholder and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their Shares covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the
Shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use
any one or more of the following methods when selling Shares:
| |
● |
ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers; |
| |
|
|
| |
● |
block trades in
which the broker-dealer will attempt to sell the Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; |
| |
|
|
| |
● |
purchases by a broker-dealer
as principal and resale by the broker-dealer for its account; |
| |
|
|
| |
● |
an exchange distribution
in accordance with the rules of the applicable exchange; |
| |
|
|
| |
● |
privately negotiated
transactions; |
| |
|
|
| |
● |
settlement of short
sales; |
| |
|
|
| |
● |
in transactions
through broker-dealers that agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated
price per security; |
| |
|
|
| |
● |
through the writing
or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| |
|
|
| |
● |
a combination of
any such methods of sale; or |
| |
|
|
| |
● |
any other method
permitted pursuant to applicable law. |
The
Selling Stockholders may also sell Shares under Rule 144 or any other exemption from registration under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of the Shares,
from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440 and in the case of a principal
transaction a markup or markdown in compliance with FINRA IM-2440.
In
connection with the sale of the Shares or interests therein, the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in short sales of the Shares in the course of hedging
the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative
securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus,
which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the Shares.
The
Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the Shares. The Company
has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i) the date on which the Shares may be resold by the Selling Stockholders
without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement
for the Company to be in compliance with the current public information requirement under Rule 144 under the Securities Act or
any other rule of similar effect or (ii) all of the Shares have been sold pursuant to this prospectus or Rule 144 under the Securities
Act or any other rule of similar effect. The Shares will be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the Shares covered hereby may not be sold unless they
have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Shares may not simultaneously
engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases
and sales of the Common Stock by the Selling Stockholders or any other person. We will make copies of this prospectus available
to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior
to the time of the sale (including by compliance with Rule 172 under the Securities Act).
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
LEGAL
MATTERS
The
validity of the issuance of the Shares offered hereby will be passed upon for us by Sullivan & Worcester LLP of New York,
New York.
EXPERTS
The
consolidated financial statements of Lipella Pharmaceuticals Inc. as of December 31, 2023 and 2022 and for each of the two years
in the period ended December 31, 2023, incorporated in this prospectus by reference to the Annual Report on Form 10-K for the
year ended December 31, 2023 have been so incorporated in reliance on the report of Urish Popeck & Co., LLC, an independent
registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus constitutes a part of the Resale Registration Statement filed under the Securities Act. As permitted by the SEC’s
rules, this prospectus and any prospectus supplement, which form a part of the Resale Registration Statement, do not contain all
the information that is included in the Resale Registration Statement. You will find additional information about us in the Resale
Registration Statement and its exhibits. Any statements made in this prospectus or any prospectus supplement concerning legal
documents are not necessarily complete and you should read the documents that are filed as exhibits to the Resale Registration
Statement or otherwise filed with the SEC for a more complete understanding of the document or matter.
You
can read our electronic SEC filings, including the Resale Registration Statement, on the internet at the SEC’s website at
www.sec.gov. We are subject to the information reporting requirements of the Exchange Act, and we file reports, proxy statements
and other information with the SEC. These reports, proxy statements and other information will be available at the website of
the SEC referred to above. We also maintain a website at www.lipella.com, at which you may access these materials free
of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. However, the information
contained in or accessible through our website is not part of this prospectus or the Resale Registration Statement, and investors
should not rely on such information in making a decision to purchase the Shares in this offering.
INCORPORATION
BY REFERENCE
We incorporate by reference the filed documents
listed below (excluding those portions of any Current Report on Form 8-K that are not deemed “filed” pursuant to the
General Instructions of Form 8-K), except as superseded, supplemented or modified by this prospectus or any subsequently filed
document incorporated by reference herein as described below:
| |
● |
our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024; |
| |
● |
our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, filed with the SEC on May 9, 2024; |
| |
● |
our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, filed with the SEC on August 13, 2024; |
| |
● |
our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, filed with the SEC on November 14, 2024; |
| |
● |
our Definitive Proxy Statement on Schedule 14A for our annual meeting of stockholders held on September 10, 2024, filed with the SEC on August 12, 2024; |
| |
● |
our Current Reports on Forms 8-K and 8-K/A filed with the SEC on March 15, 2024, April 12, 2024, April 19, 2024, August 1, 2024, August 6, 2024, August 23, 2024, September 11, 2024, October 18, 2024, November 1, 2024, November 7, 2024, December 6, 2024, December 10, 2024, December 20, 2024, December 27, 2024, December 30, 2024, January 6, 2025 and January 13, 2025 ; and |
| |
● |
our registration statement on Form 8-A12B filed with the SEC on December 19, 2022, including any amendments or reports filed for the purpose of updating such description, and (ii) Exhibit 4.2 — Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024. |
We also incorporate by reference into this
prospectus additional documents we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act: (i) on or
after the date of the initial filing of the Resale Registration Statement and prior to effectiveness thereof, and (ii) on or after
the date of this prospectus but before the completion or termination of this offering (excluding any information not deemed “filed”
with the SEC). Any statement contained in a previously filed document is deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus or in a subsequently filed document incorporated by reference
herein modifies or supersedes the statement, and any statement contained in this prospectus is deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in a subsequently filed document incorporated by reference
herein modifies or supersedes the statement.
We will provide, without charge, to each
person to whom a copy of this prospectus is delivered, including any beneficial owner, upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein, but not delivered with such prospectus. Requests
should be directed to:
Lipella Pharmaceuticals Inc.
7800 Susquehanna St., Suite 505
Pittsburgh, PA 15208
(412) 894-1853
Copies of these filings are also available
through the “Investor Relations” section of our website at www.lipella.com. For other ways to obtain a copy
of these filings, please refer to “Where You Can Find More Information” above.
Up to 972,151 Shares of Common Stock
Issuable Upon Conversion of Shares of
Series B Preferred Stock
Up to 303,041 Shares of Common Stock
Issuable Upon Conversion of Shares of
Series C Preferred Stock
Up to 97,216 Shares of Common Stock
Issuable Upon Exercise of Placement Agent
Warrants
Lipella
Pharmaceuticals Inc.
PROSPECTUS
The date of this prospectus is January
15, 2025
Lipella Pharmaceuticals (NASDAQ:LIPO)
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