UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

ACT OF 1934

For the quarterly period ended: June 30, 2025

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

ACT OF 1934

For the transition period from _____to ______

Commission File Number: 001-41575

Lipella Pharmaceuticals Inc.

(Exact name of registrant as specified in its charter)

Delaware		20-2388040
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7800 Susquehanna St., Suite 505

Pittsburgh, PA 15208

(Address of principal executive offices) (Zip Code)

(412) 894-1853

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		LIPO		The Nasdaq Stock Market LLC*

*Trading of the registrant’s common stock on Nasdaq was suspended on June 20, 2025. The registrant’s common stock is currently quoted on the OTCID Market operated by OTC Markets Group Inc. under the symbol “LIPO”.

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

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

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

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

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

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

As of August 13, 2025, there were 4,620,837 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Lipella Pharmaceuticals Inc.

Form 10-Q

June 30, 2025

Table of Contents

		Page
Part I	FINANCIAL INFORMATION	1

Item 1	Financial Statements.	1

	Condensed Balance Sheets as of June 30, 2025 (Unaudited) and December 31, 2024	1

	Condensed Statements of Operations (Unaudited) for the Three Months and Six Months Ended June 30, 2025 and 2024	2

	Condensed Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) for the Three and Six Months Ended June 30, 2025 and 2024	3

	Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2025 and 2024	4

	Notes to Condensed Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	27

Item 4.	Controls and Procedures.	27

Part II.	OTHER INFORMATION	28

Item 1.	Legal Proceedings.	28

Item 1A.	Risk Factors.	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	28

Item 3.	Defaults upon Senior Securities.	28

Item 4.	Mine Safety Disclosures.	28

Item 5.	Other Information.	28

Item 6.	Exhibits.	29

	Signatures	30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Lipella Pharmaceuticals Inc.

CONDENSED BALANCE SHEETS

	June 30, 2025
	(unaudited)			December 31, 2024
Assets
Current Assets
Cash and cash equivalents	$	2,781,828		$	2,184,863
Grants receivable		41,982			84,712
Prepaid expenses		613,437			347,676
Total Current Assets		3,437,246			2,617,252
Property and Equipment
Furniture, fixtures and equipment		140,294			140,294
Furniture, fixtures and equipment (Accumulated Depreciation)		(131,873	)		(130,430	)
Furniture and fixtures, net		8,420			9,864
Other Assets
Operating lease right of use asset		274,539			46,754
Total Assets		3,720,206			2,673,870
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		608,110			388,191
Accrued expenses		15,087			237,886
Operating lease liability		42,903			47,605
Payroll liability		80,798			80,735
Total Current Liabilities		746,898			754,417
Operating lease liability, net of current portion		231,636			—
Total Liabilities		978,534			754,417
Stockholders’ equity:
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized;
Series B preferred stock, $0.0001 par value per share, 72,000 shares authorized; 1,260 shares issued and outstanding at June 30, 2025 and 25,975 shares issued and outstanding at December 31, 2024	$	1		$	3
Series C preferred stock, $0.0001 par value per share, 1,050,000 shares authorized; 153,442 shares issued and outstanding at June 30, 2025 and 303,041 shares issued and outstanding at December 31, 2024		15			30
Common stock, $0.0001 par value per share, 200,000,000 shares authorized, 4,467,395 shares issued and outstanding at June 30, 2025 and 1,208,919 shares issued and outstanding at December 31, 2024		446			121
Additional paid-in capital		20,715,326			17,259,406
Accumulated deficit		(17,974,116	)		(15,340,107	)
Total stockholders’ equity		2,741,672			1,919,453
Total liabilities and stockholders’ equity	$	3,720,206		$	2,673,870

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

Lipella Pharmaceuticals Inc.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2025			2024			2025			2024
Grant revenues	$	86,727		$	136,431		$	216,117		$	282,311
Total revenues		86,727			136,431			216,117			282,311

Cost and expenses
Research and development		791,581			661,558			1,785,056			1,504,158
General and administrative		651,721			427,062			1,115,457			947,988
Total costs and expenses		1,443,302			1,088,620			2,900,513			2,452,146
Loss from operations		(1,356,575	)		(952,189	)		(2,684,396	)		(2,169,835	)

Other income (expense)
Interest income, net		29,089			14,043			50,387			39,880
Total other income/(expense)		29,089			14,043			50,387			39,880
Loss before income taxes		(1,327,486	)		(938,146	)		(2,634,009	)		(2,129,955	)
Provision for income taxes		—			—			—			—
Net Loss	$	(1,327,486	)	$	(938,146	)	$	(2,634,009	)	$	(2,129,955	)

Loss per share of Common Stock
Basic	$	(0.31	)	$	(0.99	)	$	(0.83	)	$	(2.29	)
Dilutive	$	(0.31	)	$	(0.99	)	$	(0.83	)	$	(2.29	)

Weighted-average of shares of Common Stock outstanding:
Basic		4,305,243			950,669			3,187,235			931,092
Dilutive		4,305,243			950,669			3,187,235			931,092

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

Lipella Pharmaceuticals Inc.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Series B Convertible Preferred Stock						Series C Convertible Preferred Stock						Common Stock				Additional paid-in			Accumulated
	Shares			Amount			Shares			Amount			Shares		Amount		capital			Deficit			Total
Balances, December 31, 2023		—		$	—			—		$	—		$	756,745		75		13,468,215.85			(10,323,843	)		3,144,448
Net loss		—			—			—			—			—		—		—			(1,191,809	)		(1,191,809	)
Share based compensation		—			—			—			—			—		—		208,639			—			208,639
Warrants converted to Common Stock		—			—			—			—			62,500		6		(6	)		—			—
Issuance of Common Stock		—			—			—			—			36,227		4		199,996			—			200,000
Shares issued for services		—			—			—			—			24,510		2		199,998			—			200,000
Balances, March 31, 2024		—			—			—			—			879,981		87		14,076,843			(11,515,652	)		2,561,278
Net loss		—			—			—			—			—				—			(938,146	)		(938,146	)
Share based compensation		—			—			—			—			—				80,666			—			80,666
Warrants exercised for shares of Common Stock		—			—			—			—			70,724		7		(7	)		—			—
Balances, June 30, 2024		—		$	—			—		$	—			950,705	$	95	$	14,157,501		$	(12,453,799	)	$	1,703,798

Balances, December 31, 2024		25,975		$	3			303,041		$	30			1,208,919	$	121	$	17,259,406		$	(15,340,107	)	$	1,919,453
Net loss		—			—			—			—			—		—		—			(1,306,523	)		(1,306,523	)
Warrants exercised for Common Stock		—			—			—			—			64,702		6		(6	)		—			—
Series B preferred stock converted to Common Stock		(25,975	)		(3	)		—			—			972,149		97		(94	)		—			0
Series C preferred stock converted to Common Stock		—			—			(303,041	)		(30	)		303,041		30		—			—			—
Issuance of warrants to purchase Series B preferred stock		—			—			—			—			—		—		9,000						9,000
Issuance of preferred stock and warrants, net of issuance costs of $382,800		46,025			5			536,959			54			—		—		3,457,217			—			3,457,275
Balances, March 31, 2025		46,025			5			536,959		$	53			2,548,811	$	254	$	20,725,522		$	(16,646,630	)		4,079,204
Net loss		—			—			—			—			—		—		—			(1,327,486	)		(1,327,486	)
Series B preferred stock converted to Common Stock		(44,765	)		(4	)		—			—			1,535,067		154		(149	)		—			—
Series C preferred stock converted to Common Stock		—			—			(383,517	)		(38	)		383,517		38		—			—			—
Issuance costs																		(10,047	)					(10,047	)
Balances, June 30, 2025		1,260			1			153,442		$	15			4,467,395	$	446	$	20,715,326		$	(17,974,116	)		2,741,672

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

Lipella Pharmaceuticals, Inc.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	The six months ended
	June 30,
	2025			2024
Cash flow from operating activities:
Net loss	$	(2,634,009	)	$	(2,129,955	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,443			1,443
Shares issued for services		—			200,000
Non-cash stock option expense		—			289,305
Changes in operating assets and liabilities:
Operating right of use asset		(849	)		252
Grants receivable		42,731			(3,046	)
Prepaid expense		(265,761	)		(755,732	)
Accounts payable		219,920			40,345
Accrued expenses		(222,800	)		49,719
Payroll liability		62			438
Net cash used in operating activities		(2,859,264	)		(2,307,231	)
Cash flow from investing activities:
Net cash used in investing activities		—			—
Cash flow from financing activities:
Proceeds from issuance of common stock, net of issuance costs		3,456,228			200,000
Net cash provided by financing activities		3,456,228			200,000
Net increase in cash, cash equivalents		596,965			(2,107,231	)
Cash, and cash equivalents at beginning of period		2,184,863			3,293,738
Cash, and cash equivalents at end of period	$	2,781,827		$	1,186,507

Supplemental disclosure of cash flow information:
Interest Paid	$	7,933		$	6,234
Income taxes paid		—			—

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

Lipella Pharmaceuticals Inc.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business and Basis of Presentation

Nature of Business

Lipella Pharmaceuticals Inc. (the “Company”, “we”, “us” or “our”) is 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. Our operations consist of research, preclinical development and clinical development activities, and our most advanced program is in Phase 2 clinical development. Since our inception in 2005, we have historically financed our operations through a combination of federal grant revenue, licensing revenue, manufacturing revenue, as well as equity and debt financing.

Basis of Presentation

The Company’s unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board.

In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to instructions, rules, and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with Securities and Exchange Commission (“SEC”) on March 28, 2025 (our “Annual Report”).

Note 2. Going Concern

The accompanying unaudited condensed financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs and will require significant additional capital to continue its research and development programs, including progressing clinical product candidates to commercialization and preparing for commercial-scale manufacturing and sales.

The Company’s net loss for the six months ended June 30, 2025 and fiscal year ended December 31, 2024 was $2,634,009 and $5,016,264, respectively. Since inception, the Company has incurred historical losses and has an accumulated deficit of $17,974,116 at June 30, 2025 and $15,340,107 at December 31, 2024, respectively. At June 30, 2025, the Company had available cash and cash equivalents of $2,781,828 and net working capital of $2,690,348. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to: research, development of product candidates, conducting preclinical studies and clinical trials, and administrative organization. These funds, and our funds available under existing government contracts, may not be sufficient to enable us to meet its obligations as they come due for a period of one year after the issuance date of these unaudited condensed financial statements.

If the Company is unable to obtain additional capital (which is not assured at this time), its long-term business plan may not be accomplished, and the Company may be forced to curtail or cease operations. These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed financial statements do not include any adjustments that may result from this uncertainty.

Note 3. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 3, “Accounting Policies,” in the Annual Report. There have been no material changes to the significant accounting policies during the three-month period ended June 30, 2025, except for items mentioned below.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these unaudited condensed financial statements. Actual results could differ from those estimates.

Adoption of New Accounting Pronouncements

During the three months ended June 30, 2025, no new accounting pronouncement was issued or became effective that had, or is expected to have, a material impact on these unaudited condensed financial statements.

Concentration of Credit Risk

The Company’s grant revenues and grant receivables are from the National Institute of Health (the “NIH”). The NIH is an agency of the United States Department of Health & Human Services, and the Company believes amounts are fully collectible from this agency. Contract revenues were $216,117 for the six months ended June 30, 2025, and $86,727 for the three months ended June 30, 2025.

Earnings Per Share

Basic net loss per share of common stock of the Company, par value $0.0001 per share (the “Common Stock”), is computed by dividing the net loss for the period by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss per share of Common Stock is computed giving effect to all dilutive Common Stock equivalents, consisting of stock options, preferred stock, and warrants. Diluted net loss per share of Common Stock for the three and six months ended June 30, 2025 and 2024 is the same as basic net loss per share, as the Common Stock equivalents were anti-dilutive due to the net loss.

At June 30, 2025 and 2024 the Common Stock equivalent shares were as follows:


	June 30,
	2025		2024
Shares of Common Stock issuable upon exercise of options		361,624		361,624
Shares of Common Stock issuable upon exercise of warrants		415,974		194,805
Shares of Common Stock issuable upon conversion of Series B preferred stock		53,096		—
Shares of Common Stock issuable upon conversion of Series C preferred stock		153,442		—
Shares of Common Stock issuable upon exercise of Warrants for Series B preferred stock and subsequent conversion to Common Stock		3,333,319		—
Common Stock equivalents excluded from diluted net loss per share		4,317,455		556,429

Note 4. Fair Value Measurements and Marketable Debt Securities

In accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), the Company measures its assets and liabilities at fair value. We apply the three-level valuation hierarchy as described in ASC 820, which is based upon the transparency of input as of the measurement date. The three levels of inputs as defined are:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

At June 30, 2025 and December 31, 2024, the Company’s financial instruments consist primarily of: cash and cash equivalents, accounts payable and accrued liabilities. For cash equivalents, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of June 30, 2025 and December 31, 2024 were considered representative of their fair values due to their short term to maturity.

The Company held no marketable securities at June 30, 2025 and December 31, 2024. For cash equivalents at June 30, 2025 and December 31, 2024, the fair value input levels are summarized below:

June 30, 2025	Level 1		Level 2		Level 3		Total
Cash Equivalents (maturity less than 90 days)
Commercial Paper		—		—		—		—
U.S. Government		—		—		—		—
Money market funds		2,628,237		—		—		2,628,237
Total Cash equivalents		2,628,237		—		—		2,628,237

Marketable Securities		—		—		—		—
Total Cash Equivalents and Marketable Securities	$	2,628,237		—		—	$	2,628,237

December 31, 2024	Level 1		Level 2		Level 3		Total
Cash Equivalents (maturity less than 90 days)
Commercial Paper		—		—		—		—
Corporate bonds		—		—		—		—
Money market funds		1,692,141		—		—		1,692,141
Total Cash equivalents		1,692,141		—		—		1,692,141

Marketable Securities		—		—		—		—
Total Cash equivalents and marketable securities	$	1,692,141		—		—	$	1,692,141

Note 5. Prepaid Expenses

At June 30, 2025, prepaid expenses were $613,437, and consisted primarily of prepaid insurance of $83,074, prepaid costs of issuance of $17,499, and an advance deposit with our clinical trial management partner of $384,907. The balance also included $127,597 in other prepaid expenses related primarily to professional services and annual subscriptions. At December 31, 2024, prepaid expenses consisted of $66,128 of prepaid operating expenses, $13,864 in pre-paid testing services related to our clinical trial, and $267,684 of deposits with a third party CRO for our current clinical trial.

Note 6. Accrued Expenses

At June 30, 2025, accrued expenses were $15,087, consisting of unbilled legal and franchise taxes. At December 31, 2024, accrued expenses consisted of $237,886 in accrued professional service expenses.

Note 7. Letter of Credit

The Company has a letter of credit with a bank for an aggregate available amount of $50,000 due upon demand. The letter of credit is collateralized by substantially all of the Company’s assets and personally guaranteed by Dr. Jonathan Kaufman, the Company’s Chief Executive Officer. The outstanding advances under the line of credit bear interest at the lending bank’s prime rate plus 3.10%. The outstanding balance was $0 at June 30, 2025 and December 31, 2024. The letter of credit has been paid in full since February 2023.

Note 8. Segment information

We report segment information based on ASC 280 Segment Reporting, which defines operating segments as components of a company that engage in activities from which it may recognize revenues and incur expenses, and for which operating results are regularly reviewed by the entity’s chief operating decision maker (“CODM”) to make decisions regarding resource allocation and assess performance, and for which discrete financial information is available. We determined that the Company is a single operating and reportable segment (“Products”) focused on treating the indications previously described through discovery, development, and commercialization of our novel therapeutics. Our chief executive officer acts as the CODM and allocates resources and assesses performance at a consolidated level.

Our Products segment measurement of profit is the consolidated loss from operations and its measure of total assets is consolidated total assets. There was no difference in our consolidated balance sheet and our segment balance sheet. Our CODM uses loss from operations predominantly in the annual budget and forecasting process to monitor variances in budget versus actual results along with consolidated total assets to determine resource allocation. The following is a summary of the significant revenue and expense categories, and net (loss) provided to the CODM during the three months ended June 30, 2025 and 2024:


	For the three months ended June 30,						For the six months ended June 30,
Segment Results	2025			2024			2025			2024
Revenue	$	86,727		$	136,431		$	216,117		$	282,311
General & Administrative Expense (G&A)
Salaries, Benefits, & Insurance		148,130			186,086			323,121			364,057
Outside Services		481,187			157,977			710,303			470,626
Stock option Expense		—			40,938			—			42,809
Facility and other overhead		2,404			42,061			82,034			70,496
Total G&A		651,721			427,062			1,115,457			947,988
Research & Development Expense (R&D)
Salaries, Benefits, & Insurance		260,105			224,497			659,538			449,397
Outside Services		418,727			279,618			905,061			529,383
Stock option Expense		—			39,728			—			246,496
Facility and other overhead		112,749			117,715			220,457			278,882
Total R&D		791,581			661,558			1,785,056			1,504,158
Total operating expenses		1,443,302			1,088,620			2,900,513			2,452,146
Loss from operations		(1,356,575	)		(952,189	)		(2,684,396	)		(2,169,835	)
Other income (expense)		29,089			14,043			50,3888			39,880
Segment loss from operations		(1,327,486	)		(938,146	)		(2,634,009	)		(2,129,955	)
Adjusting and reconciling items		—			—			—			—
Segment Loss from operations	$	(1,327,486	)	$	(938,146	)	$	(2,634,009	)	$	(2,129,955	)

Note 9. Stock Options

The Company has two stock incentive plans (the “Stock Option Plans”), each of which provides for the grant of both incentive stock options and nonqualified stock options. Under the terms of the Stock Option Plans, the maximum number of shares of Common Stock for which incentive and/or nonqualified options may be issued is 434,750 shares. This number is comprised of 134,750 options already issued and outstanding (non-expired) from the Lipella Pharmaceuticals Inc. 2008 Stock Incentive Plan, and 300,000 options as the maximum issuable under the Amended and Restated Lipella Pharmaceuticals Inc. 2020 Stock Incentive Plan. Incentive stock options are granted with an exercise price determined by the Board of Directors of the Company (the “Board”). Unless otherwise provided for in an associated board consent, vesting terminates once the optionee is no longer affiliated with the Company. These options generally expire 10 years from the date of the grant. Stock options are granted with an exercise price not less than the fair market value of the underlying Common Stock on the date of the grant. Unless otherwise specified by the Board, all grants vest fully over a three-year period, provided that the employee continues to be employed. Vesting terminates once the optionee is no longer an employee. If an employee leaves the Company prior to fully vesting their option awards, the remaining unvested portion is considered forfeited, and the earlier recognition of the unvested shares is reversed during the period of forfeiture. As of June 30, 2025, and December 31, 2024, there were no unrecognized compensation costs related to non-vested share-based compensation arrangements granted to be recognized over the remaining vesting period of less than one year.

The Company recognized $0 and $80,665 of compensation costs related to stock option vesting for the three months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025 and 2024, the Company recognized $0 and $289,305, respectively, of compensation costs related to stock option vesting.

The following is an analysis of options to purchase shares of Common Stock issued and outstanding as of June 30, 2025 and December 31, 2024:

	*Shares*		*Weighted* *Average* *Exercise* *Price Per* *Share ($)*		*Weighted* *Average* *Remaining* *Contractual* *Term* *(in Years)*		*Aggregate* *intrinsic* *value ($)*
Outstanding as of December 31, 2023		306,624	$	21.84		5.19		—
Granted		55,000	$	6.16				—
Expired		—
Cancelled		—
Exercised		—
Outstanding as of December 31, 2024		361,624	$	19.74		5.07		—
Granted		—		—		—		—
Expired		—		—		—		—
Cancelled		—		—		—		—
Exercised		—		—		—		—
Outstanding as of June 30, 2025		361,624	$	19.74		4.59		—
Vested as of June 30, 2025		361,624
Exercisable as of June 30, 2025		361,624
Exercisable as of December 31, 2024		361,624		—		—		—

A summary of the status of the Company’s non-vested stock options (exercisable for shares of Common Stock on a one-to-one basis) as of, and changes during, the nine months ended June 30, 2025 and 2024, is presented below:

	Number of Stock Options			Weighted- Average Fair Value Grant Date
Nonvested at December 31, 2023		22,582		$	5.74
Granted		55,000			4.40
Vested		(27,583	)		5.96
Expired		—			—
Nonvested at June 30, 2024		49,999		$	5.62

Nonvested at December 31, 2024		—			—
Granted		—			—
Vested		—			—
Expired		—			—
Nonvested at June 30, 2025		—			—

There were no stock options granted in the three and six months ended June 30, 2025. In the six months ended June 30, 2024, the Company granted options as described below.

Stock Option Grants - On March 15, 2024, the Company granted 55,000 stock options at a $6.16 strike price, vesting as follows: one third of such grant vested on April 1, 2024, one third of such grant vested on July 1, 2024, and one third of such grant vested on October 1, 2024.

The weighted-average fair value of stock options on the date of grant and the assumptions used to estimate the fair value of stock options granted during the three months ended June 30, 2025 and June 30, 2024 using the Black-Scholes option-pricing model are as follows:

Three months ended June 30,	2025		2024
Weighted-average fair value of options granted	$	—	$	4.40
Expected volatility		—		86.17	%
Expected life (in years)		—		5.17
Risk-free interest rate (range)		—		4.33	%
Expected dividend yield	$	—	$	—

Note 10. Preferred Stock

The Company’s Second Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), authorizes the issuance of 20,000,000 shares of preferred stock, par value $0.0001 per share. Below is a summary of the various series of preferred stock to date:

Series A: There were no shares of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), outstanding at June 30, 2025 or December 31, 2024. The Series A Preferred Stock was eliminated by the Company on April 11, 2024.

Series B: On December 20, 2024, the Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock (the “Series B Certificate of Designation”), authorizing 144,000 shares of Series B Non-Coting Convertible Preferred Stock, par value $0.0001 per share, of the Company (the “Series B Preferred Stock”) and establishing the rights, preferences, privileges, qualifications, restrictions, and limitations of the Series B Preferred Stock, became effective upon the Company’s filing with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) of the Series B Certificate of Designation and a Certificate of Correction to the Series B Certificate of Designation on such date, which corrected the effective date of the Series B Certificate of Designation to December 20, 2024.

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 Series B Preferred Stock being converted by such holder and (y) a stated value of $100 and (ii) the Minimum Price (as defined in Rule 5635(d)(1)(A) of The Nasdaq Stock Market LLC (“Nasdaq”) on the date of issuance of such shares of Series B Preferred Stock). 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.

The Company issued shares of Series B Preferred Stock at a purchase price of $100 per share, for aggregate gross proceeds of $7.2 million, in connection with a best-efforts private offering (the “Offering”) in the following closings:

	●	On December 23, 2024, we sold and issued 22,295 shares of Series B Preferred Stock for gross proceeds of $2,229,500. After closing costs, net proceeds to the Company were $1,794,485. Such shares are convertible into 854,205 shares of Common Stock at a conversion price of $2.61 per share.

	●	On December 31, 2024, we sold and issued 3,680 shares of Series B Preferred Stock for gross proceeds of $368,000. After closing costs, net proceeds to the Company were $305,440. Such shares are convertible into 117,946 shares of Common Stock, at a conversion price of $3.12 per share.

	●	On February 25, 2025, we sold and issued 34,750 shares of Series B Preferred Stock for gross proceeds of $3,475,000. After closing costs, net proceeds to the Company were $2,884,250. Such shares are convertible into 1,158,327 shares of Common Stock, at a conversion price of $3.00 per share.

	●	On February 26, 2025, we sold and issued 3,130 shares of Series B Preferred Stock for gross proceeds of $313,000. After closing costs, net proceeds to the Company were $239,790. Such shares are convertible into 100,000 shares of Common Stock, at a conversion price of $3.13 per share.

	●	On March 5, 2025, we sold and issued 7,260 shares of Series B Preferred Stock for gross proceeds of $726,000. After closing costs, net proceeds to the Company were $602,580. Such shares are convertible into 289,241 shares of Common Stock, at a conversion price of $2.51 per share.

●

On March 12, 2025, we sold and issued 885 shares of Series B Preferred Stock for gross proceeds of $88,500. After closing costs, net proceeds to the Company were $73,455. Such shares are convertible into 40,596 shares of Common Stock, at a conversion price of $2.18 per share.

In the three months ended June 30, 2025, 44,765 shares of Series B Preferred Stock were converted to 1,535,067 shares of Common Stock. There were 1,260 and 25,975 shares of Series B Preferred Stock outstanding as of June 30, 2025 and December 31, 2024, respectively.

Series C: On December 23, 2024, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Series C Certificate of Designation”), with the Delaware Secretary of State, authorizing 1,050,000 shares of the Company’s Series C Voting Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), establishing the rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Series C Preferred Stock. Pursuant to the Series C Certificate of Designation, each share of Series C Preferred Stock is convertible into one share of Common Stock. 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 all shares of 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.

On April 8, 2025, the Company filed a Certificate of Amendment to the Series C Certificate of Designation with the Delaware Secretary of State, to increase the number of designated shares of the Series C Preferred Stock from 1,050,000 shares to 1,260,000 shares.

The Company and Spartan Capital Securities, LLC (“Spartan”) entered into that certain (i) placement agent agreement, dated December 5, 2024, 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”), as further amended by that certain second amendment to placement agent agreement, dated February 23, 2025, by and between the Company and Spartan and (ii) consulting agreement and advisory agreement, made as of December 5, 2024, as amended by the Amendment, as further amended by that certain second amendment to consulting agreement and advisory agreement, dated February 28, 2025, by and between the Company and Spartan (collectively, the “Spartan Agreements”), pursuant to which Spartan agreed to provide placement agent and consulting services in connection with the Offering. Also in connection with the Spartan Agreements, pursuant to that certain irrevocable proxy and power of attorney between Spartan and Dr. Kaufman (the “Proxy”), Spartan agreed to grant to Dr. Kaufman all voting power over and power of attorney with respect to all such shares of Series C Preferred Stock, and all shares of Common Stock issuable upon conversion of such shares or exercise of common stock purchase warrants (each, a “Placement Agent Warrant”), issued or issuable to Spartan or its designee in connection with the Offering.

In accordance with the Spartan Agreements, the Company issued to Spartan and its designee the following:

●

On December 23, 2024, in connection with the initial closing of the Offering, an aggregate of 260,108 shares of Series C Preferred Stock.

●

On December 31, 2024, in connection with an additional closing of the Offering, the Company issued Spartan and its designee an aggregate of 42,933 shares of Series C Preferred Stock.

●

On February 25, 2025, in connection with an additional closing of the Offering, the Company issued Spartan and its designee an aggregate of 405,416 shares of Series C Preferred Stock.

●

On February 26, 2025, in connection with an additional closing of the Offering, the Company issued Spartan and its designee an aggregate of 36,517 shares of Series C Preferred Stock.

●

On March 5, 2025, in connection with an additional closing of the Offering, the Company issued Spartan and its designee an aggregate of 84,700 shares of Series C Preferred Stock.

●

On March 13, 2025, in connection with an additional closing of the Offering, the Company issued Spartan and its designee an aggregate of 10,326 shares of Series C Preferred Stock.

In the three months ended June 30, 2025, 383,517 shares of Series C Preferred Stock were converted to 383,517 shares of Common Stock. There were 153,442 and 303,041 shares of Series C Preferred Stock outstanding as of June 30, 2025 and December 31, 2024, respectively.

Note 11. Common Stock

The Certificate of Incorporation authorizes the issuance of 200,000,000 shares of Common Stock. After giving effect to the reverse stock split which occurred on November 7, 2024, there were 4,467,395 shares of Common Stock outstanding as of June 30, 2025 and 1,208,919 shares of Common Stock outstanding as of December 31, 2024.

In the three months ended June 30, 2025, an aggregate of 1,535,067 shares of Common Stock were issued upon the conversion of 44,765 shares of Series B Preferred Stock and 383,517 shares of Common Stock were issued upon the conversion of an equivalent number of shares of Series C Preferred Stock.

Notice of Failure to Satisfy Nasdaq Shareholder Approval and Voting Rights Requirements

As previously disclosed, on May 12, 2025, the Company received a written notification (the “May Letter”) from the Nasdaq Listing Qualifications staff (the “Staff”) notifying the Company that the Staff determined that the Company failed to comply with Nasdaq’s shareholder approval and voting rights requirements in connection with certain securities issued in connection with the Offering and the Subsequent Offering (as defined below). The May Letter required that the Company should present its views to a Nasdaq hearing panel (the “Panel”) with respect to these matters to the Panel in writing no later than May 19, 2025. The Company submitted a response to the May Letter in accordance with the instructions. Subsequently, the Panel issued a letter dated June 17, 2025, notifying the Company that its Common Stock would be de-listed from the Nasdaq Capital Market on June 20, 2025. The Common Stock was suspended as of the open of trading on June 20, 2025. As of June 20, 2025, the Common Stock has been quoted on the OTCID Market operated by OTC Markets Group Inc. under its existing symbol “LIPO .”

Note 12. Warrants

In connection with the Offering and in accordance with the Spartan Agreements, the Company issued to the Placement Agent and its designee the following Placement Agent Warrants:

●

On December 23, 2024, a Placement Agent Warrant to purchase up to 85,421 shares of Common Stock.

	●	On December 31, 2024, a Placement Agent Warrant to purchase up to 11,795 shares of Common Stock.

	●	On February 25, 2025, a Placement Agent Warrant to purchase up to 115,833 shares of Common Stock.

●

On February 26, 2025, a Placement Agent Warrant to purchase up to 10,000 shares of Common Stock.

●

On March 5, 2025, a Placement Agent Warrant to purchase up to 28,924 shares of Common Stock.

●

On March 12, 2025, a Placement Agent Warrant to purchase up to 4,060 shares of Common Stock.

The Placement Agent Warrants were immediately exercisable at a price of $1.00 per share of Common Stock, or through a cashless exercise according to a formula where the number of shares received is reduced by the difference in the fair market value per share and the exercise price per share. The Placement Agent Warrants expire five years from issuance. In addition, pursuant to the Proxy, Spartan agreed to grant to Dr. Kaufman all voting power over and power of attorney with respect to all shares of Common Stock issuable upon exercise of the Placement Agent Warrants. The Placement Agent Warrants qualified for equity accounting treatment, as they do not have any continuing or performance obligations, they are not linked to debt instruments, and do not require net cash settlement.

On January 23, 2025, 97,216 Placement Agent Warrants were exercised for 64,702 shares of Common Stock on a cashless exercise basis.

The Company had no warrant liabilities at June 30, 2025 and December 31, 2024.

On March 17, 2025, the Company issued warrants (the “Series B Warrants”) to purchase up to 72,000 shares of Series B Preferred Stock at a price per Series B Warrant equal to $0.125 in order to comply with applicable Nasdaq rules, with each Series B Warrant exercisable for shares of Series B Preferred Stock at $100 per share. The shares of Series B Preferred Stock issuable upon exercise of the Series B Warrants are convertible into shares of Common Stock at a conversion price equal to $2.16 per share, which was the Minimum Price of the Common Stock immediately prior to the execution of the subscription agreements for the purchase and sale of such warrants (the “Subsequent Offering”). There were 72,000 Series B Warrants outstanding as of June 30, 2025.

Note 13. Commitment and Contingencies

Operating Leases

Operating leases are recorded as right of use (“ROU”) assets and lease liabilities on our balance sheet. ROU assets represent our right to use the leased assets for the lease term, and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives.

The Company entered into a lease agreement beginning July 1, 2020, for the Company’s principal headquarters on the fifth floor of 7800 Susquehanna Street, Pittsburgh, Pennsylvania, which includes office space and sterile manufacturing operations (the “Lease”). The Lease has a five-year term and includes an option for renewal. The Company renewed the Lease at the end of its existing term on June 30, 2025. The renewal is for five years, beginning July 1, 2025. On July 26, 2023, the Company entered a second lease for additional space on the fourth floor of the same building (the “Fourth Floor Lease”), commencing August 1, 2023 and co-terminating with the existing Lease on September 30, 2025. Subsequently effective January 1, 2024, the Company terminated the Fourth Floor Lease early at no penalty upon mutual agreement with the landlord and replaced it with a lease of additional space that had become available immediately adjacent to our existing offices (the “Suite 504 Lease”, and together with the Lease, “the Leases”). The Suite 504 Lease term co-terminates with the Lease.

On March 20, 2025, we notified Bridgeway Development Corporation of our intent to renew our Leases for our headquarters at the end of their existing term on June 30, 2025. The renewal will be for five years beginning July 1, 2025, as per the terms of our existing lease agreements. Future minimum rent payments under the Leases as of June 30, 2025 are as follows:

Year ending December 31,
2025	$	30,087
2026		61,435
2027		63,957
2028		66,478
2029		68,999
2030		35,130
Total minimum lease payments		326,087
Less: amount representing interest		(51,548	)
Present value of minimum lease payments	$	274,539

The Leases are accounted for as a ROU asset and liability. As of June 30, 2025, the Company had an ROU asset of $274,539 and current and non-current operating lease liabilities of $42,903 and $231,636, respectively. As of December 31, 2024, the Company had an ROU asset of $46,754 and current and non-current operating lease liabilities of $47,605 and $0, respectively.

The lease expense for the three months ended June 30, 2025 and June 30, 2024 was $23,834 and $23,834, respectively. Cash paid for the amounts included in the measurement of lease liabilities for the three months ended June 30, 2025 and 2024 was $24,259 and $23,797, respectively.

The lease expense for the six months ended June 30, 2025 and June 30, 2024 was $47,668 and $47,845, respectively. Cash paid for the amounts included in the measurement of lease liabilities for the six months ended June 30, 2025 and 2024 was $48,519 and $47,594, respectively. The payments are included in the operating activities in the accompanying statement of cash flows. The discount rates used for our ROU leases range from 6.25% to 7.25%.

Contract Commitments

The Company enters into contracts in the normal course of business with contract research organizations (“CROs”), contract manufacturing organizations, universities, and other third parties for preclinical research studies, clinical trials, and testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancellable by us upon prior written notice, although purchase orders for clinical materials are generally non-cancellable. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation or upon the completion of a manufacturing run.

Note 14. Income Taxes

The provision for income taxes for the six months ended June 30, 2025 and 2024 was $0, resulting in an effective income tax rate of 0% for each period. The Company’s effective tax rate for the three months ended June 30, 2025 and 2024 was primarily due to the full valuation allowance against the Company’s net deferred tax assets.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be utilized. Because of our cumulative losses, substantially all of our deferred tax assets have been fully offset by a valuation allowance as of June 30, 2025, and December 31, 2024. We have not paid income taxes for the year ended December 31, 2024. The income tax provision attributable to loss before income tax benefit for the three months ended June 30, 2025 differed from the amounts computed by applying the U.S. federal statutory rate of 21% as a result of the following:


Statutory federal income tax rate	21.00	%
State taxes, net of federal benefit	6.31	%
Change in valuation allowance	(27.31	%)
Effective tax rate	0.00	%

The Company’s 2020 through 2024 tax years remain subject to examination by the Internal Revenue Service for federal tax purposes and the Commonwealth of Pennsylvania for state tax purposes.

Note 15. Subsequent Events

Subsequent events have been evaluated through the date on which these unaudited condensed financial statements were issued, and no material events were identified, except as disclosed below.

On August 12, 2025, 153,442 shares of Series C Preferred Stock were converted to 153,442 shares of Common Stock.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations for the three months ended June 30, 2025 should be read together with our unaudited condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025 (this “Form 10-Q”), as well as the audited financial statements, the related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 contained in our Annual Report on Form 10-K for the year ended December 31, 2024, that was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2025 (our “Annual Report”), and all risk factors disclosed herein and therein.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

	●	the success of our current or planned clinical trials through all phases of clinical development, including our ability to conduct and complete clinical trials in accordance with projected timelines, our ability to achieve the desired results, and our ability to successfully complete requisite regulatory review and approval processes;
	●	our ability to obtain the necessary financing to continue to conduct our business operations as planned, and to conduct our ongoing and planned trials, and continue and complete the planned development and commercialization of our product candidates;
	●	our ability to grow and manage growth economically;
	●	our ability to retain key executives and medical and science personnel;
	●	the possibility that our products in development succeed in or fail clinical trials or are not approved by the U.S. Food and Drug Administration or other applicable authorities;
	●	the possibility that we could be forced to delay, reduce or eliminate our planned clinical trials or development programs;
	●	our ability to obtain approval from regulatory agents in different jurisdictions for our current or future product candidates;
	●	changes in applicable laws or regulations;
	●	changes to our relationships within the pharmaceutical ecosystem;
	●	the performance of third-party suppliers and manufacturers and our ability to find additional suppliers and manufacturers and obtain alternative sources of raw materials;
	●	our current and future capital requirements to support our development and commercialization efforts and our ability to satisfy our capital needs;
	●	our ability to access capital on acceptable terms in a rising interest rate and tighter credit environment;
	●	expectations regarding our ability to continue as a going concern;
	●	the accuracy of our estimates regarding expenses and capital requirements, including estimated costs of our clinical studies;
	●	our history of operating losses in each year since inception and expectation that we will continue to incur operating losses for the foreseeable future;
	●	changes in the markets that we target;
	●	our ability to maintain or protect the validity of our patents and other intellectual property;
	●	our exposure to any liability, protracted and costly litigation or reputational damage relating to data security;
	●	the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;
	●	any disruption to our business that may occur on a longer-term basis should we be unable to remediate the material weaknesses we have identified in our internal controls;
	●	our ability to relist our common stock, par value $0.0001 per share (the “Common Stock”), on a national securities exchange; and
	●	the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements. Please see “Part II-Item 1A-Risk Factors” for additional risks which could adversely impact our business and financial performance.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-Q or the date of the document incorporated by reference into this Form 10-Q. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

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.

Consistent with our strategy, we are currently addressing two indications via development of our product candidates, which we have designated as LP-10 for the indication of hemorrhagic cystitis (“HC”) and LP-310 for the indication of oral lichen planus (“OLP”). HC is chronic, uncontrolled urinary blood loss that results from certain chemotherapies (such as alkylating agents) or pelvic radiation therapy (also called “radiation cystitis”). Many radiation cystitis patients experience severe morbidity (and in some cases, mortality), and currently, there is no therapy for their condition approved by the U.S. Food and Drug Administration (“FDA”), or, to our knowledge, any other regulatory body.

LP-310 employs a formulation similar to LP-10, for the treatment of OLP. OLP is a chronic, T-cell-mediated, autoimmune oral mucosal disease, and LP-310 contains tacrolimus which inhibits T-lymphocyte activation. Symptoms of OLP include painful burning sensations, bleeding and irritation with tooth brushing, painful, thickened patches on the tongue, and discomfort when speaking, chewing or swallowing. These symptoms frequently cause weight loss, nutritional deficiency, anxiety, depression, and scarring from erosive lesions. OLP can also be a precursor to cancer, predominately squamous cell carcinoma, with a malignant transformation rate of approximately one percent.

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 HC.

LP-310 is the development name of our oral, liposomal formulation of tacrolimus (the same approved generic active agent in LP-10) specifically optimized for local delivery to oral mucosa. We believe that our approach of using metastable liposomal tacrolimus as a treatment for OLP is novel. 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 fourth quarter of 2024, we announced the completion of dosing for the first cohort in a multi-center Phase 2a clinical trial of LP-310. No product-related serious adverse events were reported. Pharmacokinetic data demonstrated that whole blood tacrolimus levels in all patients were either undetectable or minimal, highlighting LP-310’s potential to deliver localized therapeutic effects while minimizing systemic exposure. Additionally, all patients tolerated LP-310 without significant adverse reactions. The trial is expected to be completed in the third quarter of 2025. The top line data from the first two dose cohorts of this trial was presented at the 2025 American Association of Oral Medicine and European Association of Oral Medicine Joint Meeting that was held in Las Vegas, NV on May 15, 2025.

In a third program, we are developing an oral, liposomal formulation of tacrolimus, LP-410, 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. Oral GVHD is a rare and serious disease, with a prevalence of approximately 30,000 patients in the US annually in 2023 (Bachier et al., 2019; Bachier et al., 2021, Orphanet 2023). GVHD remains a major cause of morbidity and mortality for patients who undergo HCT treatment, with chronic GVHD being the leading cause of non-malignant fatality for such patients who receive such HCT treatment. Topical and local management of symptomatic oral GVHD can reduce oral symptoms that can interfere with oral function and quality of life and can reduce the need for more intensive immunosuppressive systemic therapies. However, there is currently no FDA approved local drug treatment of oral GVHD (Martini et al., 2022). We developed LP-410 for the topical delivery directly to the mouth surface, targeting the underlying mechanisms of oral GVHD, potentially providing a safe and effective treatment option for affected individuals. On November 11, 2023, we received “orphan drug” designation from the FDA for LP-410 for oral GVHD. We received investigational new drug approval from the FDA for LP-410’s treatment of oral GVHD on March 5, 2024.

In a fourth program, we are also developing an intravesical formulation of immunoglobulins including checkpoint inhibitors, referred to as LP-50, for the treatment of non-muscle invasive bladder cancer, offering the potential for increasing efficacy while minimizing systemic toxicity. Additional information regarding this preclinical program is included in the International Journal of Molecular Sciences 2024, 25(9), 4945, titled “Enhancing Therapeutic Efficacy and Safety of Immune Checkpoint Inhibition for Bladder Cancer: A Comparative Analysis of Injectable vs. Intravesical Administration,” as well as in US patent publication number 2024/0115503 titled “Intravesical Delivery of Hydrophilic Therapeutic Agents Using Liposomes.”

Our Platform includes proprietary drug delivery technologies optimized for use with epithelial tissues that coat lumenal surfaces, such as the colon, the various tissues lining the mouth and esophagus, and the tissues lining the bladder and urethra. We have two issued patents in the United States that should exclude competitors from making, selling or using our LP-10 and LP-310 formulations in the United States until July 11, 2035. We also have issued patents in Australia, Canada, and Europe that do not expire until October 22, 2034. Corresponding patent applications are pending in the United States Patent Offices. We also have a pending United States patent application on an improvement to the technology. In some jurisdictions, such as the US, Europe, Canada, and some Asian countries, such patents may be extendable for regulatory delay. Market data exclusivity may also be available for the approved products.

Since our inception in 2005, we have focused primarily on business planning, progressing our lead product candidates, including progressing LP-10 through clinical development, raising capital, organizing and staffing our Company.

Dr. Jonathan Kaufman, our Chief Executive Officer, and Dr. Michael Chancellor, our Chief Medical Officer, co-founded the Company in 2005. On December 22, 2022, we completed our initial public offering, receiving approximately $5.0 million in aggregate net proceeds. Our principal executive offices are located at 7800 Susquehanna Street, Suite 505, Pittsburgh, PA 15208 and include our Facility. Our telephone number is (412) 894-1853. We maintain an Internet website at www.lipella.com. The information contained on our website is not incorporated by reference into this Form 10-Q.

Recent Developments

ATM Offering

On April 4, 2025, we entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC (“Wainwright”) to sell shares of Common Stock having an aggregate offering price of up to $2,641,881, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent (the “ATM Offering”). As of the date of this Form 10-Q, no shares of Common Stock have been sold in connection with the ATM Offering. Due to the delisting from Nasdaq, the Company does not intend to utilize the ATM Offering.

Amendment to Certificate of Designation

On April 8, 2025, we filed a Certificate of Amendment (the “Series C Certificate of Amendment”) to the Certificate of Designation of Preferences, Rights and Limitations of Series C Voting Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series C Certificate of Amendment amended the Series C Certificate of Designation to increase the number of designated shares of our Series C Voting Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), from 1,050,000 shares to 1,260,000 shares.

Nasdaq Notification

As previously disclosed, on May 12, 2025, we received a written notification (the “May Letter”) from the Listing Qualifications Department (the “Staff”) notifying us that the Staff determined that we failed to comply with Nasdaq’s shareholder approval and voting rights requirements in connection with our issuances of shares of our Series C Preferred Stock and warrants (the “Series B Warrants”) to purchase shares of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), as partial compensation to Spartan Capital Securities, LLC (“Spartan”) for placement agent and related consulting and advisory services received in connection with our private placement transactions conducted between December 2024 and March 2025. The May Letter provided that we should present its views to the Nasdaq Hearings Panel (the “Panel”) with respect to these matters to the Panel in writing no later than May 19, 2025, which response the Company submitted to the Nasdaq Panel.

On June 20, 2025, we received a letter (the “June Letter”) from the Panel indicating that the Panel had determined to delist the Common Stock from the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5100, which permits Nasdaq to use its discretionary authority for public interest concerns, due to the Company’s non-compliance with (i) Nasdaq Listing Rule 5635(d), which requires prior shareholder approval for the issuance, other than in a public offering, of 20% or more of a company’s outstanding shares at a per share price less than the Minimum Price (as defined in such rule), and (ii) Nasdaq Listing Rule 5640, which prohibits voting rights of existing shareholders from being disparately reduced or restricted. The June Letter cited our issuances of shares of our Series C Preferred Stock and the Series B Warrants as the reason for such non-compliance and Nasdaq’s determination.

The Common Stock was suspended as of the open of trading on June 20, 2025. As of June 20, 2025, the Common Stock has been quoted on the OTCID Market operated by OTC Markets Group Inc. under its existing symbol “LIPO.”

Results of Operations

Comparison of the Three Months Ended June 30, 2025 and 2024

The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024 (in thousands):

	For the three months ended
	June 30,						Increase
	2025			2024			(Decrease)
(in thousands)
Revenue	$	87			136		$	(49	)
Operating expenses:
R&D		792			662			130
General and administrative		652			427			225
Total operating expenses		1,443			1,089			354
Loss from operations		(1,357	)		(952	)		(405	)
Other income		29			14			15
Net loss	$	(1,327	)	$	(938	)	$	(389	)

Grants and Other Revenue

We have not yet commercialized any products, and we do not expect to generate revenue from sales of any product candidates for several years. For the three months ended June 30, 2025 and 2024, we recognized revenue from a grant awarded by the National Institutes of Health (“NIH”) in September of 2022 (the “2022 NIH Grant”), which was an award of an aggregate of $673,000. NIH approved an additional year of funding under the 2022 NIH Grant in June 2023, increasing the total funding provided under the 2022 NIH Grant to $1,353,000.

We recognize revenue from grants when the related costs are incurred and the right to payment is realized. For the three months ended June 30, 2025, we recognized $86,727 of revenue in connection with the 2022 NIH Grant, compared with $136,431 of revenue in the three months ended June 30, 2024. The decrease in grant revenue was due to the fact that the funds awarded under the grant were fully depleted during the quarter ended June 30, 2025.

Operating Expenses

Our operating expenses consist of (i) R&D expenses and (ii) general and administrative expenses.

Research and Development Expenses

R&D costs primarily consist of direct costs associated with consultants and materials, biologic storage, third party CRO costs and contract development and manufacturing expenses, salaries and other personnel-related expenses. R&D costs are expensed as incurred. More specifically, these costs include:

●

costs of funding research performed by third parties that conduct research and development and nonclinical and clinical activities on our behalf;

●

costs of manufacturing drug supply and drug product;

●

costs of conducting nonclinical studies and clinical trials of our product candidates;

●

consulting and professional fees related to research and development activities, including equity-based compensation to non-employees;

●

costs related to compliance with clinical regulatory requirements; and

●

employee-related expenses, including salaries, benefits and stock-based compensation expense for our research and development personnel.

Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data, such as information provided to us by our vendors, and analyzing the progress of our nonclinical and clinical studies or other services performed. Significant judgment and estimates are made in determining the accrued expense balances at the end of any reporting period. Advance payments that we make for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

We expect that our R&D expenses will increase substantially in connection with our clinical development activities for our LP-10 and LP-310 programs, and other product candidates. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of, or obtain regulatory approval for, any of our current or future product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the specific factors set forth in the section of our Annual Report titled “Risk Factors.” If any events described in the applicable risk factors included in the section of our Annual Report titled “Risk Factors” occur, then the costs and timing associated with the development of any of our product candidates could significantly change. We may never succeed in obtaining regulatory approval for, of commercialization of, LP-10, LP-310, or any of our other product candidates.

R&D expenses increased by approximately $130,000, to $791,581, for the three months ended June 30, 2025, as compared to $661,558 for the three months ended June 30, 2024. The increase in R&D expenses was primarily attributable to an increase in outside services of approximately $139,000 for our current clinical trial for LP-310. Indirect costs related to operational overhead and employee benefits increased $30,000, while stock option expense decreased $39,000.

General and Administrative Expenses

General and administrative expenses consist primarily of management and overhead expenses, such as rent and utilities, software and regulatory compliance costs, business consultants and other related costs. General and administrative expenses also include board of directors’ expenses, stock based compensation costs, and professional fees for legal, patent, consulting, accounting, auditing and tax services, and insurance costs.

General and administrative expenses were $651,721 for the three months ending June 30, 2025, compared to $427,062 for the three months ended June 30, 2024, an increase of approximately $225,000. The increase was primarily due to professional and outside services costs which were higher by $323,000, including in legal, accounting, and investor relations. This was offset by decreases in employee costs of $38,000, stock option expense of $41,000, and facility and overhead costs of $20,000.

Net Other Income (Expense)

Net other income for the three months ended June 30, 2025 was $29,089, as compared to $14,043 for the three months ended June 30, 2024. There was an approximately $15,000 increase in interest income on the Company’s short-term investment portfolio, due to a higher investment balance during the period.

Comparison of the Six Months Ended June 30, 2025 and 2024

The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024 (in thousands):

	For the six months ended
	June 30,						Increase
	2025			2024			(Decrease)
(in thousands)
Revenue	$	216			282		$	(66	)
Operating expenses:
R&D		1,785			1,504			281
General and administrative		1,115			948			167
Total operating expenses		2,901			2,452			449
Loss from operations		(2,684	)		(2,170	)		(514	)
Other income		50			40			10
Net loss	$	(2,634	)	$	(2,130	)	$	(504	)

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SEC Form 10-Q filed by Lipella Pharmaceuticals Inc.