Valion Bio, Inc S-1, filed Mar 29, 2024
Valion Bio, Inc. (VBIO)
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(State or Other Jurisdiction of Incorporation) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
| Christopher L. Tinen, Esq. Caitlin Murphey, Esq. Procopio, Cory, Hargreaves & Savitch LLP 12544 High Bluff Drive, Suite 400 San Diego, California 92101 (858) 720-6320 |
Barry I. Grossman, Esq. Matthew Berstein, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas, 11th Floor New York, NY 10105 (212) 370-1300 |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
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The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED MARCH 29, 2024 |
Tivic Health Systems, Inc.
Up to Shares of Common Stock
Up to Pre-Funded Warrants Up
to Common Warrants
Up to Shares of Common Stock Underlying the Common Warrants
and Pre-Funded Warrants
We are offering on a best efforts basis up to shares of our common stock, par value $0.0001 per share, and up to common warrants to purchase shares of our common stock (the “Common Warrants”), to be sold together with each share of common stock, at an assumed combined public offering price of $ per share and Common Warrant (based upon the last reported sale price of our common stock on the Nasdaq Capital Market on , 2024). Each Common Warrant will have an exercise price of $ per share (100% of the combined public offering price per share of common stock and Common Warrant), will become exercisable commencing on the date of issuance, and will expire five years from the date of issuance.
We are also offering to those purchasers, if any, whose purchase of common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, pre-funded warrants (“Pre-Funded Warrants”) in lieu of shares common stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of common stock. The purchase price of each Pre-Funded Warrant will be equal to the combined public offering price per share of common stock and Common Warrant sold in this offering minus $0.001, the exercise price per share of common stock of each Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
For each Pre-Funded Warrant we sell, the number of shares of common stock we are offering will be decreased on a one-for-one basis. Because we will issue a Common Warrant for each share of common stock and each Pre-Funded Warrant sold in this offering, the number of Common Warrants sold in this offering will not change as a result of a change in the mix of shares of common stock and Pre-Funded Warrants sold. The shares of common stock (or Pre-Funded Warrants) and the accompanying Common Warrants can only be purchased together in this offering, but the securities will be immediately separable upon issuance and will be issued separately. The shares of common stock issuable from time to time upon exercise of the Common Warrants and the Pre-Funded Warrants are also being offered by this prospectus.
The actual combined public offering price per share of common stock (or Pre-Funded Warrant) and Common Warrant will be determined between us, the placement agent and the investors in the offering at the time of pricing, and may be at a discount to the current market price of our common stock. Therefore, the assumed combined public offering price used throughout this prospectus may not be indicative of the final offering price.
Our common stock is traded on The Nasdaq Capital Market tier of The Nasdaq Stock Market, LLC under the symbol “TIVC.” The last reported sale price of our common stock on the Nasdaq Capital Market on March 22, 2024 was $1.39 per share. There is currently no established trading market for the offered Common Warrants or Pre-Funded Warrants. We do not intend to list the Common Warrants or Pre-Funded Warrants on the Nasdaq Capital Market or any other national securities exchange or nationally recognized trading system. Without an active trading market, the liquidity of the Common Warrants and Pre-Funded Warrants will be limited.
The securities will be offered at a fixed price and are expected to be issued in a single closing. We expect this offering to be completed not later than two business days following the commencement of this offering and we will deliver all securities to be issued in connection with this offering delivery versus payment/receipt versus payment upon receipt of investor funds received by us. Accordingly, neither we nor the placement agent have made any arrangements to place investor funds in an escrow account or trust account since the placement agent will not receive investor funds in connection with the sale of the securities offered hereunder.
We have engaged Maxim Group LLC (“Maxim” or the “placement agent”) as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The placement agent is not purchasing or selling any of the securities we are offering and is not required to arrange for the purchase or sale of any specific number or dollar amount of the securities. We have agreed to pay the placement agent the placement agent fees set forth in the table below, which assumes that we sell all of the securities offered by this prospectus. See the section of this prospectus entitled “Plan of Distribution” beginning on page 98 of this prospectus for more information.
| Per Share of Common Stock and Accompanying Common Warrant |
Per Pre-Funded Warrant Accompanying Common Warrant |
Total | ||||||||||
| Public offering price(1) |
$ | $ | $ | |||||||||
| Placement Agent Fees(2) |
$ | $ | $ | |||||||||
| Proceeds to us, before expenses |
$ | $ | $ | |||||||||
| (1) | The assumed combined public offering price is $ per share of common stock and accompanying Common Warrant and $ per Pre-Funded Warrant and accompanying Common Warrant. |
| (2) | Represents a cash fee equal to 7.0% of the gross proceeds of this offering. In addition, we have agreed (i) to issue to the placement agent or its designees warrants (the “Placement Agent Warrants”) to purchase a number of shares of our common stock equal to 4.0% of the aggregate number of shares of common stock and Pre-Funded Warrants sold in this offering at an exercise price equal to 110% of the combined public offering price of shares of our common stock (or Pre-Funded Warrants in lieu thereof) and Common Warrants sold in this offering, or $ per share, and (ii) to reimburse certain expenses of the placement agent in connection with this offering. See “Plan of Distribution” beginning on page 98 of this prospectus for a description of the compensation to be received by the placement agent. |
We are an “emerging growth company” and a “smaller reporting company,” each as defined under the federal securities laws and, as such, have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings. See the section of this prospectus entitled “Implications of Being an Emerging Growth Company and a Smaller Reporting Company.”
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 11 of the prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before you invest.
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.
Maxim Group LLC
The date of this prospectus is , 2024
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY |
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| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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| DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES |
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission (the “Commission”). We have not, and the placement agent has not, authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. When you make a decision about whether to invest in our securities, you should not rely upon any information other than the information in this prospectus or in any free writing prospectus that we may authorize to be delivered or made available to you. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful.
For investors outside the United States: We have not taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby and the distribution of this prospectus outside the United States.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management’s estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management’s estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management’s estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section of this prospectus entitled “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See the sections of this prospectus entitled “Risk Factors” and “Cautionary Statement on Forward-Looking Statements.”
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
Tivic Health Systems, Inc., the Tivic Health Systems logo, ClearUP and other trademarks or service marks of Tivic Health Systems appearing in this prospectus are the property of Tivic Health Systems, Inc. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
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PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision in our securities. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” “Company,” and “Tivic Health” refer to Tivic Health Systems, Inc.
Business Overview
Tivic Health is a health tech company focused on bioelectronic medicine. Bioelectronic medicine is a branch of the global neuromodulation market that treats disease and conditions by modulating the electrical signals carried along various nerve pathways. The field grew out of the neuromodulation industry and relied, historically, on implantable devices (e.g., pacemakers, spinal implants, deep brain stimulators). IDTechEx has identified several fast-growing areas in the bioelectronic medicine field, including peripheral nerve stimulation, which it has indicated is forecasted to grow at a 35% CAGR from 2019 through 2029. Tivic currently has two non-invasive bioelectronic platforms designed to deliver therapeutic benefits via manipulation of such signals without the use of traditional implanted technology.
Commercial Platforms
Tivic has developed two complementary platforms. Tivic’s first commercial platform is a handheld design that interfaces non-invasively with the trigeminal, sympathetic, and other facial and cranial nerve structures. This platform is the basis for Tivic’s existing product, currently marketed with FDA approval as ClearUP Sinus Pain Relief for the treatment of sinus pain and congestion.
The second platform is a research-stage platform directed to vagus nerve stimulation, which is currently undergoing clinical evaluation.
First Commercial Product
Tivic Health currently markets one commercial product under the brand name “ClearUP Sinus Pain Relief.” ClearUP is built on our patented, handheld neuromodulation design and was developed by Tivic Health for the treatment of sinus and allergy-related conditions. It uses ultra-low current electrical waves to relieve sinus pain and congestion symptoms that are prevalent in nasal allergies, sinus infections, chronic sinusitus, cold and flu and other disease conditions. ClearUP had U.S. FDA approval for the treatment of sinus pain and congestion, and is the first FDA-approved bioelectronic treatment of the foregoing indications. Additionally, ClearUP has E.U. CE Mark approval for the treatment of sinus pain, pressure and congestion.
The FDA initially provided clearance to our ClearUP product under a 510(k) as an allergy treatment in January 2019. The FDA granted ClearUP a subsequent De Novo clearance in March 2021, which expanded ClearUP’s label, enabling marketing of ClearUP for allergies, sinusitis, cold, flu, and any inflammatory condition involving congestion.
A 2023 study with over 2,000 representative consumers conducted by Intellego Insights (commissioned by Tivic Health) identified that approximately 85 million U.S. adults experience inflammation-related symptoms related to allergies, congestion, head pain, and sinus issues. Of the consumers that participated in the study, 58% of sufferers try to avoid medication, if at all possible.
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Customers can purchase ClearUP products directly from Tivic via our own website and through major online stores, including Amazon, Walmart, BestBuy, FSAStore and HSA Store. The Company has also entered distribution agreements with McKesson, Cardinal Health and Amerisource Bergen.
A sham-controlled clinical trial is in progress with the Icahn School of Medicine at Mount Sinai, to extend the use of Tivic’s handheld monopolar platform to the management of pain resulting from functional endoscopic sinus surgery and other facial surgeries. If successful, the Company may develop additional products addressing this clinical use case, which would require new regulatory clearances for a novel indication.
We have also previously evaluated the market opportunity for use of ClearUP as part of a migraine treatment toolkit. While we believe that both clinical and market rationale are positive for such use, we have, for the time being, determined to down-prioritize any clinical studies of migraine-related indications based on the aggressive competition among entrenched incumbents and limited uptake, to date, of existing devices for the treatment and/or prevention of migraine.
Expanding Our Technology Portfolio
Tivic has also developed a proprietary non-invasive approach to precision vagus nerve stimulation (“VNS”) based on our experience building evidence-based bioelectronic therapies. The vagus nerve is the tenth cranial nerve and the longest autonomic nerve in the body. The vagus nerve is responsible for regulating several bodily functions including digestion, heart rate, breathing, cardiovascular activity, and visceral reflexes. Since the vagus nerve regulates many organ systems associated with chronic disease, modulating activity in this nerve pathway is of significant interest in academic research and in industry.
Electrical VNS is currently indicated for treatment-resistant epilepsy and depression, cluster headache, migraine headache, and stroke rehabilitation and is being studied for other neurological, cardiac, and immune conditions. Currently, there are both invasive implantable VNS devices and non-invasive VNS devices in market. There is room for meaningful improvement in how VNS devices can be used to more precisely target and stimulate the vagus nerve to achieve intended biological and clinical outcomes.
Our approach to non-invasive VNS aims to leverage improvements in engineering, circuitry, and stimulation parameters to augment efficacy and reliability compared to the current state of the art. We have conducted proof of principle experiments demonstrating effects on the autonomic nervous system and have initiated a clinical research program with the Feinstein Institute for the Bioelectronic Medicine at Northwell Health to further characterize the autonomic, cardiovascular, and neurological effects of our intervention.
Given our deep expertise and relationships in the field of bioelectronic medicine and adjacent diagnostic fields, we are continuously monitoring and evaluating options to add complementary product opportunities into our product portfolio.
Market Opportunity and Regulatory Clearances
The FDA provided clearance to our ClearUP product under a 510(k) for the temporary relief of sinus pain associated with allergic rhinitis in January 2019. As a treatment for allergy-related sinus pain, we believe that the available market for ClearUP is approximately 45 million U.S. adults.
The FDA then granted ClearUP a subsequent De Novo clearance in March 2021 for the temporary relief of moderate to severe congestion, expanding ClearUP’s label and enabling marketing of ClearUP for allergies, sinusitis, cold, flu, and any inflammatory condition involving congestion. As a treatment for moderate to severe congestion, we believe the available target market for ClearUP is approximately 85 million U.S. adults.
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Additionally, we have received a CE Mark for international marketing of ClearUP. The CE Mark for ClearUP covers a broad set of conditions related to sinonasal inflammation with the symptoms pain, pressure and congestion. The CE Mark allows sales in European Union Member states and certain other countries that recognize the CE Mark for regulatory governance. We believe that there are international opportunities for the sale of ClearUP.
Competition
Sinus pain, pressure and congestion are typically managed with over-the-counter pharmaceuticals and saline irrigation of the sinus and nasal cavities. Analgesic medications (e.g., ibuprofen/Advil, acetaminophen/Tylenol, naproxen sodium/Aleve) are often used to treat sinus pain/pressure. Congestion is often managed with antihistamines (e.g., loratadine/Claritin), oral decongestants (e.g., phenylephrine/Sudafed) and intranasal decongestants (e.g., oxymetazoline/Afrin), and intranasal glucocorticoids (e.g., fluticasone propionate/Flonase).
Over the counter pharmaceuticals have historically had the greatest market share for sinus pain and congestion treatments; however, according to Mintel Group Ltd.’s 2020 report on Cough, Cold, Flu, and Allergy Remedies, there is increasing interest among consumers to reduce reliance on drugs and to find non-drug solutions. Non-drug competitors for sinus pain and congestion treatment include nasal irrigation products such as Sinus Rinse and Navage Nasal Care. We believe that other companies selling non-pharmaceutical treatments, specifically nasal irrigation products, represent our closest competitors. ClearUP is an emerging new product offering, and currently has a small market share.
Barriers to Entry
As a commercial-stage company that has invested our energy into patent protection and regulatory clearances, we believe we have built competitive advantages that include:
| • | Six issued U.S. patents and 21 additional international and U.S. patents pending; |
| • | Three regulatory clearances: (US FDA 510(k) number K182025, US FDA De Novo number DEN200006 and EU CE Mark Certificate number CE 704687) for use of ClearUP to treat sinus pain, pressure and congestion; and |
| • | Published, peer-reviewed studies in high-impact academic journals |
Government Regulation
Our products are subject to extensive and rigorous regulation by the FDA and other federal, state and local authorities, as well as foreign regulatory authorities. The FDA regulates, among other things, the research, development, testing, design, manufacturing, approval, labeling, storage, recordkeeping, advertising, promotion and marketing, distribution, post approval monitoring and reporting and import and export of medical devices in the United States to assure the safety and effectiveness of medical devices for their intended use. The Federal Trade Commission (“FTC”) also regulates the advertising and labeling of our device in the United States. Further, we are subject to laws directed at preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny.
Risks Associated with our Business
An investment in our securities involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary. These risks include, but are not limited to, the following:
| • | our limited operating history; |
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| • | our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months, which raises substantial doubt about our ability to continue as a going concern; |
| • | the volatility of our operating results; |
| • | our ability to manage growth as the business scales; |
| • | we have identified a material weakness in our internal control over financial reporting associated with staffing levels, which is common for the stage and size of the Company; |
| • | our history of net losses; |
| • | our need for additional capital, which may not be available on favorable terms, if at all; |
| • | our ability to generate revenues sufficient to achieve profitability and positive cash flow; |
| • | competition in our industry and our ability to compete effectively; |
| • | our ability to attract, recruit, retain and develop key personnel and qualified employees; |
| • | economic uncertainty, capital markets disruption, international conflicts, supply chain constraints, inflation, and a potential recession, among other things; |
| • | risks related to laws, regulations and industry standards; |
| • | risks related to the medical device industry; |
| • | reliance on significant third-party service providers; |
| • | reliance on our management team; |
| • | this is a reasonable best efforts offering, in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans; |
| • | resales of our shares of our common stock in the public market by investors in this offering may cause the market price of our shares of common stock to fall; |
| • | this offering may cause the trading price of our shares of common stock to decrease; |
| • | investors in this offering will experience immediate and substantial dilution in the net tangible book value per share of the shares of common stock they purchase in this offering; |
| • | our management will have broad discretion over the use of the net proceeds from this offering, you may not agree with how we use the proceeds, and the proceeds may not be invested successfully; |
| • | there is no public market for the Pre-Funded Warrants or the Common Warrants being offered in this offering; |
| • | we may not receive any additional funds upon the exercise of the Common Stock Warrants or Pre-Funded Warrants; and |
| • | the other factors described in “Risk Factors.” |
Operational Updates
In 2023, we invested in our marketing, product design, distribution relationships, and quality systems as follows:
| • | In February, Tivic received successful recertification to ISO 13485, the international standard for medical device quality systems. This allowed Tivic, in early 2023, to recertify under the European Union Medical Device Certificate (CE-Mark). |
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| • | In March, we completed supplier qualification and first article inspections at ALOM Technologies Corporation (“ALOM”) and Microart Services Inc. (“Microart”), allowing Tivic to reduce assembly production costs by 40% and improve gross margins substantively by end of year. |
| • | In April, we completed a 2000-person marketing segmentation study to inform our advertising and pricing structure. We subsequently implemented a price increase for ClearUP that negatively impacted direct sales and retail order volumes in Q2, but substantively improved gross profit throughout the course of the year. |
| • | In May, we launched a B2B portal to support our strategy to increase physician and healthcare provider engagement, including physician resale and recommendation programs for ClearUP. |
| • | In late June, we entered into a non-exclusive distribution agreement with Cardinal Health for our products. |
| • | In late August, we entered into a non-exclusive agreement with AmerisourceBergen, soon to be Cencora, to make our products available on AmerisourceBergen’s third-party marketplace. |
| • | In late September, we entered into an agreement with InStep Health® to introduce ClearUP to over 2,500 healthcare providers and their patients. |
| • | In Q3, we initiated and subsequently launched a printed circuit board redesign to address charging issues associated with a purchased component used in ClearUP. The redesigned circuitry began shipping in late December 2023 and launched formally as ClearUP 2.0 in January 2024. |
In 2023, we also invested in our product innovation and development programs as follows:
| • | In early April, we filed our first patent in Vagus Nerve Stimulation with the USPTO, expanding our IP portfolio into new clinical targets. |
| • | In mid-April, we announced a research collaboration with The Feinstein Institutes for Medical Research to conduct a pilot clinical study that will test a novel non-invasive bioelectronic device approach for vagus nerve stimulation. |
| • | In July, we announced that the USPTO had issued us a sixth patent for our bioelectronic platform, expanding our IP portfolio to include the proprietary contacts, conductive circuitry design, and algorithms to optimize therapy delivery in our handheld monopolar design. |
| • | In August, we received study approval from the Institutional Review Board (“IRB”) of The Feinstein Institutes for Medical Research and initiated study recruitment and enrollment for our vagus nerve program. |
| • | We expanded our post-operative pain clinical study to include Otolaryngology and Facial Plastic Surgery patients. This study aims to investigate the potential benefits of a drug-free alternative to traditional post-operative pain management methods. |
As a result of these programs, the Company was named to Fast Company’s prestigious annual list of the World’s Most Innovative Companies for 2023 in the Medical Device category. Additionally, in 2022, Global Health & Pharma named Tivic Health the Most Pioneering Bioelectronic Medicine Company of 2022.
In the first quarter of 2024:
| • | We launched ClearUP 2.0 with improved charging circuitry, which also incorporated cost and usability improvements previously undertaken in 2022 and 2023. |
| • | We completed enrollment in the vagus nerve study at The Feinstein Institutes for Medical Research and anticipate final data read-outs in early Q2 of 2024. |
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We have continued to intentionally maintain a small core team at this stage of the Company, including decreasing our headcount to reduce operating expenses. We have relied, and continue to rely, heavily on third-party service providers, including marketing agencies, contract manufacturing organizations, software-as-a-service platforms, clinical research organizations, academic research partnerships, finance and accounting support, and legal support to carry out our operations.
Corporate Information
The Company was incorporated in California in September 2016 and reincorporated as a Delaware corporation in June 2021. Our principal executive offices are located at 25821 Industrial Blvd., Suite 100, Hayward, California 94545. Our telephone number is (888) 276-6888 and our corporate website is www.tivichealth.com. Unless expressly noted, none of the information on our corporate website is part of this prospectus or any prospectus supplement.
Where You Can Find More Information
For additional information regarding our business, properties and financial condition, please refer to the documents cited in the section of this prospectus entitled “Where You Can Find More Information.”
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THE OFFERING
| Shares of common stock outstanding before this offering |
1,473,592 shares. |
| Common stock offered by us |
Up to shares. |
| Common Warrants offered by us |
Common Warrants to purchase up to shares of our common stock. Each Common Warrant will have an exercise price of $ per share, will be exercisable commencing on the date of issuance and will expire five years from the date of issuance. The shares of common stock and Common Warrants will be sold together, with each share of common stock to be sold together in a fixed combination with a Common Warrant to purchase a shares of common stock. This offering also relates to the shares of common stock issuable upon exercise of Common Warrants sold in this offering. To better understand the terms of the Common Warrants, you should carefully read the section of the prospectus entitled “Description of Securities We Are Offering–Common Warrants.” You should also read the form of Common Warrant, which is filed as an exhibit to the registration statement of which this prospectus forms a part. |
| Pre-Funded Warrants offered by us |
We are also offering to those purchasers, if any, whose purchase of common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, Pre-Funded Warrants in lieu of shares common stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of common stock. This offering also relates to the shares of common stock issuable upon exercise of any Pre-Funded Warrant sold in this offering. |
| For each Pre-Funded Warrant that we sell, the number of shares of common stock that we are offering will be decreased on a one-for-one basis. |
| The purchase price of each Pre-Funded Warrant will be equal to the combined public offering price per share of common stock and Common Warrant sold in this offering minus $0.001, the exercise price per share of common stock of each Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. To better understand the terms of the Pre-Funded Warrants, you should carefully read the section of the prospectus entitled “Description of Securities We Are Offering–Pre-Funded |
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| Warrants.” You should also read the form of Pre-Funded Warrant, which is filed as an exhibit to the registration statement of which this prospectus forms a part. |
| Common stock to be outstanding after this offering |
Up to shares, assuming no sales of Pre-Funded Warrants, which, if sold, would reduce the number of shares of common stock that we are offering on a one-for-one basis, and no exercise of Common Warrants sold in this offering or Placement Agent Warrants issued in connection with this offering. |
| Reasonable Best Efforts Offering |
We have agreed to issue and sell the securities offered hereby to the purchasers through the placement agents. The placement agent is not required to buy or sell any specific number or dollar amount of the securities offered hereby, but will use their reasonable best efforts to solicit offers to purchase the securities offered by this prospectus. See the section entitled “Plan of Distribution” beginning on page 98 of this prospectus. |
| Use of proceeds |
Assuming all of the shares of common stock (or Pre-Funded Warrants in lieu thereof) and accompanying Common Warrants we are offering under this prospectus are sold at an assumed combined public offering price of $ per share (or Pre-Funded Warrant) and Common Warrant, we estimate that the net proceeds to us from this offering will be approximately $ million, after deducting placement agent fees and estimated offering expenses payable by us. However, this is a reasonable best efforts offering with no minimum number of securities or amount of proceeds as a condition to closing, and we may not sell all or any of the securities offered pursuant to this prospectus; as a result, we may receive significantly less in net proceeds. |
| We intend to use the net proceeds of this offering for working capital and general corporate purposes. We have not determined the amount of net proceeds to be used specifically for any of such purposes, will have broad discretion in the way that we use the net proceeds of this offering. |
| For additional information, please refer to the section entitled “Use of Proceeds” on page 37 of this prospectus. |
| Placement Agent’s Warrants |
The registration statement of which this prospectus is a part also registers for sale warrants to purchase shares of our common stock (the “Placement Agent Warrants) which we will issue to the placement agent or its designees as compensation payable to the placement agent in connection with this offering. Please see the section of this prospectus entitled “Plan of Distribution” for a description of the Placement Agent Warrants. |
| Risk factors |
You should read the “Risk Factors” section of this prospectus beginning on page 11 and the other information in this prospectus |
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| for a discussion of factors to consider carefully before deciding to invest in our securities. |
| Market Symbol and trading |
Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “TIVC.” We do not intend to apply for a listing of the Pre-Funded Warrants or the Common Warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Pre-Funded Warrants and Common Warrants will be limited. |
| (1) | The number of shares of our common stock to be outstanding after this offering, as set forth above, is based on 1,473,592 shares of our common stock outstanding as of March 22, 2024. The number of shares of our common stock to be outstanding after this offering, as set forth above, excludes the following: |
| • | 54,369 shares of common stock issuable upon exercise of options to purchase shares of common stock outstanding as of March 22, 2024, with a weighted-average exercise price of approximately $34.52 per share; |
| • | 59,497 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock, with a weighted-average exercise price of approximately $29.34 per share; |
| • | shares of common stock issuable upon exercise of Placement Agent Warrants to be issued to the placement agent or its designees as compensation in connection with this offering at an exercise price equal to 110% of the combined public offering price of the shares of common stock (or Pre-Funded Warrants in lieu thereof) and Common Warrants being offered hereunder; and |
| • | 32,786 shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan (“2021 Plan”). |
Unless otherwise indicated, this prospectus reflects and assumes the following:
| • | the sale and issuance of the maximum number of shares of common stock (or Pre-Funded Warrants in lieu thereof) and accompanying Common Warrants being offered hereunder; |
| • | no exercise or forfeiture of outstanding stock options or warrants after March 22, 2024; |
| • | no exercise of the Common Warrants to be issued in connection with this offering; |
| • | no exercise of the Placement Agent Warrants to be issued upon consummation of this offering; |
| • | an assumed combined public offering price of $ per share (or Pre-Funded Warrant) and accompanying Common Warrant, based on the closing price of our common stock on the Nasdaq Capital Market on , 2024. The actual number of shares of common stock, Pre-Funded Warrants and Common Warrants we will offer will be determined based on the actual public offering price. |
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our securities. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and/or growth prospects. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other companies, such as competition, labor relations, general economic conditions, inflation, supply chain constraints, geopolitical changes, and international operations. We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. Additional risks not currently known to us or that we currently believe are immaterial also may impair our business operations and our liquidity. The risks described below could cause our actual results to differ materially from those contained in the forward-looking statements we have made in this prospectus, the information incorporated herein by reference, and those forward-looking statements we may make from time to time. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties
Risk Factor Summary
Below is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information included in this prospectus.
| • | We have a relatively limited operating history and may not be able to execute on our business strategy. |
| • | Our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months, which raises substantial doubt about our ability to continue as a going concern. |
| • | Our operating results may be volatile and may not be a reliable indicator of our future performance. |
| • | If we fail to manage our growth effectively, including with respect to potential acquisitions of other companies, our business could be materially and adversely affected. |
| • | We have a history of net losses, and we may not achieve or maintain profitability in the future. |
| • | We have identified a material weakness in our internal control over financial reporting associated with staffing levels, which is common for the stage and size of the Company. |
| • | We expect that we will need additional capital, which, if obtainable, could dilute the ownership interest of investors. |
| • | Our business plan depends heavily on product revenues from our core technology, the clinical and consumer acceptance of which is at this time unproven. |
| • | We rely on third parties to supply and manufacture our devices, and we expect to continue to rely on third parties to manufacture and supply our devices. |
| • | We may be adversely affected by the effects of inflation. |
| • | We depend on our senior management team, and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel may impair our ability to grow our business. |
| • | Economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, could harm our financial condition and results of operations. |
| • | The guarantees and warranties we provide on our products could have a material adverse effect on our business, financial condition and results of operations. |
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| • | Our markets are undergoing continuous change, and our future success will depend on our ability to meet the changing needs of our customers. |
| • | Developing medical technology entails significant technical, regulatory and business risks. |
| • | The size and expected growth of our available market has not been established with precision and may be smaller than we estimate. |
| • | Our insurance may not adequately cover our operating risk. |
| • | Our business could be disrupted by catastrophic occurrences and similar events. |
| • | Changes in the regulatory landscape for our products could render our business model contrary to applicable regulatory requirements, and we may be required to seek additional clearance or approval for our products. Additionally, we have relied on guidance documents from FDA and our EU Notified Body to make determinations about the regulatory pathway for future products, which may be interpreted to a different effect by the governing regulatory bodies. |
| • | We are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business, and changes in such regulations or laws could require us to modify our products or marketing or advertising efforts. |
| • | Our reliance on vendors in foreign countries, including China, subjects us to risks and uncertainties relating to foreign laws and regulations and changes in relations between the United States and such foreign countries. |
| • | We are highly dependent on our intellectual property (“IP”) and our methods of protecting our IP may not be adequate or could be costly. In addition, we may face risks of claims for IP infringement. We may be unable to enforce our intellectual property rights throughout the world. |
| • | Our stock price has fluctuated significantly since our IPO, and may continue to fluctuate significantly, and investors may not be able to resell the securities that they purchase at or above the price at which they purchased them. An active trading market for our common stock may never develop or be sustained. |
| • | We do not expect to pay any cash dividends for the foreseeable future. |
| • | Future issuances of stock or other securities could dilute the holdings of our stockholders and could materially affect the price of our common stock. |
| • | We are an “emerging growth company” and a “smaller reporting company,” and the reduced public company reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors. |
| • | If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline. |
| • | If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline. |
| • | This is a reasonable best efforts offering, in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans. |
| • | Resales of our shares of our common stock in the public market by investors in this offering may cause the market price of our shares of our common stock to fall. |
| • | You will experience immediate and substantial dilution in the net tangible book value per share of the shares of common stock you purchase in this offering. |
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| • | There is no public market for the Pre-Funded Warrants or Common Warrants being offered in this offering. |
| • | Holders of the Pre-Funded Warrants or the Common Warrants will have no rights as holders of Common Stock until such warrants are exercised. |
| • | The Pre-Funded Warrants and Common Warrants are speculative in nature. |
| • | Holders of the Pre-Funded Warrants and Common Warrants purchased in this offering will have no rights as common stockholders until such holders exercise such warrants and acquire shares of our common stock. |
| • | Our management will have broad discretion over the use of the net proceeds from this offering, you may not agree with how we use the proceeds, and the proceeds may not be invested successfully. |
Risks Related to Our Financial Condition and Business Model
We have a relatively limited operating history and may not be able to execute on our business strategy.
We were originally incorporated in 2016 and began selling our first product in 2019. Accordingly, we have a limited operating history, which makes an evaluation of our future prospects and execution ability difficult. Our revenue and income-producing potential is unproven, and our business model and strategy may continue to evolve. Future revenues are contingent upon several factors, including, without limitation, our ability to successfully develop and scale-up sales of the ClearUP line and future products, our ability to develop relationships with channel partners and customers, as well as the clinical and market acceptance of our technology. We may need to make business decisions that could adversely affect our operating results, such as modifications to our pricing strategy, business structure or operations.
Our operating results will likely be volatile and may not be a reliable indicator of our future performance.
Our future expenses, revenues and operating results may vary significantly from quarter to quarter due to a number of factors, including, without limitation:
| • | receptiveness of the market to a fundamentally new way of treating target conditions; |
| • | intrinsic variability in spending patterns associated with the conduct of clinical trials; |
| • | disruptions to the global supply chain and inflationary pressures; |
| • | fluctuations in demand for our technology, including seasonal variations; and |
| • | delays in introducing new technology to market, including product design, manufacturing, marketing cycles, sales and distribution related delays. |
We expect that our revenues may be volatile as we develop new technology and obtain new customers in the future. The volume and timing of commercial outcomes are difficult to estimate, as the adoption of bioelectronic treatments is immature, and the sales cycle may vary substantially from forecasts.
If we fail to manage our growth effectively, our business could be materially and adversely affected.
We will not be successful unless we are able to generate additional revenues and grow our business, which will likely require us to hire additional employees and expand our technology, product, development and sales and marketing teams in order to achieve our business plan. Our management systems are emergent. The continued growth of our business may place demands on our management, financial, operational, technological and other resources, and we expect that our growth will require us to continue developing and improving our operational, financial and other internal controls. We may not be able to address these challenges in a cost-effective manner, or at all. If we do not effectively manage our growth, we may not be able to execute on our business plan,
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respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements or maintain high-quality product offerings, which could have a material adverse effect on our business, financial condition and results of operations.
We have a history of net losses and we may not achieve or maintain profitability in the future.
We have incurred net losses since inception. For the years ended December 31, 2023 and 2022, we incurred net losses of $8.2 million and $10.1 million, respectively, and at December 31, 2023, we had working capital of $3.3 million and an accumulated deficit of $37.9 million. During the years ended December 31, 2023 and 2022, we used $8.5 million and $8.9 million of cash, respectively, for operating activities. The net losses we incur may fluctuate significantly from quarter to quarter and may increase as a result of macroeconomic factors. Additionally, future costs relating to product development and operating activities may be significantly higher than our historical costs.
Management expects to incur substantial additional operating losses for the foreseeable future to expand our markets, complete development of new products, obtain regulatory approvals, launch and commercialize our products and continue research and development programs.
Our future capital requirements will depend upon many factors, including, without limitation, progress with developing, manufacturing and marketing our technologies; the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights; our ability to successfully execute our acquisition strategy, including the closing of potential acquisitions and integrating new business into our own; our ability to establish collaborative arrangements; marketing activities; and competing technological and market developments. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products and services from customers currently identified in our sales pipeline as well as new customers. We will also be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, will require significant uses of working capital. There can be no assurance that we will generate revenue and cash as expected in our current business plan. We expect that we will need to raise additional capital to continue operating our business and fund our planned operations, including to execute on our acquisition strategy, research and development, clinical trials and, if regulatory approval is obtained, commercialization of future product candidates. We may seek additional funds through equity or debt offerings and/or borrowings under notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially and adversely affect our business, financial conditions, or results of operations.
Our long-term success is dependent upon our ability to successfully develop, commercialize and market our products, earn revenue, obtain additional capital when needed and, ultimately, to achieve profitable operations. We will need to generate significant additional revenue to achieve profitability. Future products may require substantially higher levels of investment than initial products, including investments in research, development, regulatory and/or marketing and sales. It is possible that we will not achieve profitability or that, even if we do achieve profitability, we may not maintain or increase profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
There is substantial doubt about our ability to continue as a going concern.
Because we have incurred operating losses since inception, and based on our current cash levels and burn rate, amongst other things, we believe our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months, which raises substantial doubt about our ability to continue as a going concern within one year from the issuance date of the financial statements included elsewhere in the registration
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statement of which this prospectus is a part. These losses are expected to continue for at least a period of time. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the fiscal years ended, December 31, 2023 and 2022, describing the existence of substantial doubt about our ability to continue as a going concern. The financial statements included elsewhere in the registration statement of which this prospectus is a part have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern within one year after the date the financial statements are issued.
In the event that we raise the maximum amount of cash proceeds in this offering, and assuming that our operations do not materially change, we currently expect that we would have sufficient cash to fund our operating expenses and capital expenditure requirements for twelve months after closing. However, in the event that we do not raise the maximum amount of cash proceeds in this offering, we may require additional funding to continue as a going concern for the next twelve months.
Our ability to obtain additional financing, if and when needed, will depend on a number of factors, including, among others, the condition of the capital markets and the other risks described in these risk factors. If any one of these factors is unfavorable, we may not be able to obtain additional funding, in which case, our business could be jeopardized and we may not be able to continue our operations or pursue our strategic plans. If we are forced to scale down, limit or cease operations, our shareholders could lose all or part of their investment in our Company.
We have identified a material weakness in our internal control over financial reporting.
In connection with the audit of our financial statements for the years ended December 31, 2023 and 2022, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In 2022, we remediated deficiencies related to inventory cost accounting procedures, and to the extent possible, the segregation of duties. In addition, we completed our internal control design and formalized various internal control processes and procedures during the year ended December 31, 2022. However, due to the small size of our accounting and financial reporting team, as well as recent staff turnover even with processes and procedures in place to mitigate the risk of a material misstatement, we believe that there is still a reasonable possibility that a material misstatement of our annual or interim financial statements may not be prevented or detected on a timely basis. If we are unable to remedy our material weakness, or if we generally fail to establish and maintain effective internal controls appropriate for a public company, we may be unable to produce timely and accurate financial statements, and we may continue to conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.
We expect that we will need additional capital, which, if obtainable, could dilute the ownership interest of investors.
We anticipate we will need additional capital to market our products, develop additional products and fund our operations, which we may raise through the sale and issuance of equity, equity-related or convertible debt, or other securities. Our future capital requirements depend on many factors including our need to market our products, acquire or develop additional products and fund our operations. We cannot be certain that additional financing will be available to us on acceptable terms when required, or at all.
If we issue additional equity securities or securities convertible into equity securities, our existing stockholders will be subject to dilution. Additionally, sales of substantial amounts of our equity securities could have an adverse effect on the value of our equity and our ability to raise additional capital through future capital increases.
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Our business plan depends heavily on revenues from our initial products, the clinical and consumer acceptance of which is unproven at this time.
Our future growth depends on the commercial success of our technology and initial products. It is not certain that our target customers will choose our technology for technical, cost, support or commercial reasons. If our target customers do not widely adopt and purchase our technology, our future growth will be limited. Further, our resources and investments may not be adequate to achieve the targeted level of manufacturing and sales set out in our business plan.
Cybersecurity risks and cyber incidents, as well as other significant disruptions of our information technology networks and related systems and resources, could adversely affect our business, disrupt operations and expose us to liabilities to employees, customers, governmental regulators, and other third parties.
We use information technology and other computer resources to carry out important operational activities and to maintain our business records. As part of our normal business activities, we permit certain employees to perform some or all of their business activities remotely, we collect and store certain personal identifying and/or confidential information relating to our employees, customers, vendors and suppliers, and we maintain operational and financial information related to our business. Furthermore, we rely on products and services provided by third-party suppliers to operate certain critical business systems, including without limitation, cloud-based infrastructure, encryption and authentication technology, email, and other functions, which exposes us to supply-chain attacks or other business disruptions.
We face risks associated with security breaches through cyber-attacks or cyber-intrusions, malware, computer viruses and malicious codes, ransomware, attachments to e-mail, unauthorized access attempts, denial of service attacks, phishing, social engineering, persons with access to systems inside our organization, and other significant disruptions of our information technology networks and related systems. The risk of a security breach has generally increased as the frequency, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques, tools and tactics used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers, disaster recovery or other preventative or corrective measures, and thus it is impossible for us to entirely counteract this risk or fully mitigate the harms after such an attack.
We have implemented certain systems and processes intended to address ongoing and evolving cybersecurity risks, secure our information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data. Although we and our service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, fraud, hacking, employee error, system error, and faulty password management. Additionally, we rely on third-parties for virtually all of our operating infrastructure, who may themselves have standards of materiality of cybersecurity risks that differ from the materiality standards of Tivic itself.
Our ability to conduct our business may be impaired if our or our services providers’ information technology networks, systems or resources, including our and their websites or e-mail systems, are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, fraud, intentional penetration or disruption of our or their information technology resources by:
| • | a third party, |
| • | natural disaster, |
| • | a failure of hardware or software due to a design or programmatic flaw, |
| • | a failure of hardware or software security controls, |
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| • | telecommunications system failure, |
| • | service provider error or failure, |
| • | fraudulent transactions, |
| • | intentional or unintentional personnel actions, |
| • | lost connectivity to our networked resources, or |
| • | a failure of disaster recovery system. |
A significant and extended disruption could damage our business or reputation and cause, amongst other things, loss of revenues or customer relationships, unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information, and us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues. Our disaster recovery procedures and contingency planning rely heavily on third-party providers and may prove insufficient to fully protect Tivic operations and business interests
The release of confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings and cause us reputational harm and/or could have a material and adverse effect on our business, financial position or results of operations.
We rely on third parties to supply and manufacture our devices, which could cause supply shortages, and we expect to continue to rely on third parties to manufacture and supply our devices.
We encountered disruptions in our supply of various materials and components, and electronic components during 2022 due to the well-documented shortages and constraints in the global supply chain. This was exacerbated by the resurgence of the COVID-19 pandemic in certain parts of China, which resulted in the temporary closure of manufacturing facilities, including those that make electronic parts like those that we included in our products, in certain parts of China. Although the supply chain constraints that we faced during the pandemic have primarily subsided, no assurances can be provided that we will not face similar disruptions in the future. If we experience similar constraints in the future, the supply or manufacture of our devices could be stopped, delayed or made less profitable if any of these third parties fail to provide us with sufficient quantities at acceptable quality levels or prices, or fail to maintain or achieve satisfactory regulatory compliance.
We rely on, and expect to continue to rely on, third-party providers for the supply and manufacturing of our devices, including components and electronic parts. Lead times for ordered components may vary significantly, and some components used to manufacture our products are provided by a limited number of sources.
We are continuously evaluating alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. In the event that we are unable source sufficient components and materials from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production of our products. To the extent our current manufacturers or suppliers, or any manufacturers and suppliers that we engage in the future, are unable to meet our requirements in a timely and cost-effective manner, we may not be able to obtain an adequate supply of electronic parts or components for our products. Any shortage of materials caused by any disruption or unavailability of supply or an increase in the demand for our products, could harm our ability to satisfy customer demand, delay deliveries of our products to customers, lead to customer cancellations and returns, delay the development and launch of new products, or increase our costs and decrease our revenue. Any such impacts or delays could adversely affect our sales, customer satisfaction, profitability, cash flows and financial condition. and our business may be adversely affected. Our efforts to mitigate supply chain weaknesses may not be successful or may have unfavorable effects.
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We do not control the operational processes of the contract manufacturing organizations with whom we contract and are dependent on these third parties for the production of our devices in accordance with relevant regulations, which include, among other things, quality control, quality assurance and the maintenance of records and documentation.
We may be adversely affected by the effects of inflation.
Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred.
We depend on our senior management team and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel may impair our ability to grow our business.
Our future success depends heavily upon the continued services of our executive officers and key personnel. The Company is headquartered in California, which is an at will employment state. Accordingly, the employment agreements that we have entered into with our executive officers and other key personnel do not require them to continue to work for us for any specified period and, therefore, they may terminate employment with us at any time, for any reason and with no advance notice. The replacement of members of our senior management team or other key personnel would likely involve significant time and costs, and the loss of these employees may significantly delay or prevent the achievement of our business objectives.
In addition, our ability to recruit and retain talent in all areas of the business, including but not limited to skilled hires in marketing, product development, regulatory, clinical, quality, logistics, and finance, faces significant competition. We may not be able to hire or retain the type and number of managerial, sales and technical personnel necessary for future success. We will need to devote considerable resources to ensure that we retain our employees in the face of a highly competitive market for talented personnel. If we fail to attract and retain the skilled employees required, this could harm our business and hamper future expansion of our business operations.
We rely on third parties for sales, marketing, manufacturing, distribution, and other business operations.
For us to be successful, third parties providing us with sales, marketing, manufacturing, distribution and other business operations services must be able to provide us with such services in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs, and on a timely basis. While our service providers have generally met our expectations in the past, their ability and willingness to continue to do so going forward, and the ability and willingness of any new service provider to meet our expectations in the future, may be limited for several reasons, including our relative importance as a customer. Additionally, we rely on third-party online retailers such as Amazon, BestBuy, Walmart, FSAStore and other specialty online retailers, as well as the parties that we have entered into distribution agreements with, to sell our products. We do not have long-term agreements in place with certain of these third parties and there is no guarantee that such third parties will continue to allow us to sell our products through their platforms or channels. Accordingly, we may be exposed to disruptions or reduced qualify of services, including access to distribution channels, due to factors beyond our direct control, which may impact our ability to operate successfully.
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We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, and record inflation. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine and the Middle East, geopolitical tensions or record inflation.
U.S. and global markets are experiencing volatility and disruption and the global economy has been, and may continue to be, negatively impacted by Russia’s ongoing military conflict with Ukraine. As a result of Russia’s invasion of Ukraine in February 2022, the U.S., the European Union, the United Kingdom, other G7 countries, as well as various other countries, have imposed substantial financial and economic sanctions on certain industry sectors and parties in Russia. Broad restrictions on exports to Russia have also been imposed. These measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions limiting Russia’s ability to import various goods. Russian military actions and the resulting sanctions could continue to adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Addition, in October 2023, Hamas militants and members of certain other organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Shortly thereafter, Israel’s security cabinet declared war against Hamas and launched an aerial bombardment of various targets within the Gaza Strip. It is possible that other countries and/or regional organizations will join the hostilities as well, including without limitation Hezbollah in Lebanon, and Palestinian military organizations in the West Bank, resulting in further expansion of the conflict. The conflict between Israel and Hamas is ongoing, and the length and impact of the ongoing military conflict is highly unpredictable.
There are also current geopolitical tensions with China. Recently, the Biden administration has signed multiple executive orders regarding China, including certain executive orders that may impact the pharmaceutical industry and other similar industries in the U.S. Moreover, both the U.S. and China have recently imposed sanctions upon certain companies and individuals based in the other country, and have also imposed certain import and export restrictions and tariffs on products originating from the other country. Any additional executive action, legislative action or potential sanctions with China could materially impact our current manufacturing partners and our agreements with them.
Although our business has not been materially impacted by the ongoing military conflicts between Russia and Ukraine or Israel and Hamas, geopolitical tensions, or record inflation to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the conflicts in Ukraine and the Middle East, geopolitical tensions, record inflation, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
We may not be able to successfully identify, consummate or integrate acquisitions or to successfully manage the impacts of such transactions on our operations.
Part of our business strategy includes investigating growth through acquisitions. We may expand our business by making strategic acquisitions and seeking suitable acquisition targets to enhance our growth. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing business activities; (iii) incurring additional indebtedness; (iv) the anticipated benefits and cost savings of those transactions not being realized fully, or at all, or taking longer to realize than anticipated; (v) an increase in the scope and complexity of our operations; (vi) exposure to unknown liabilities; and (vii) the loss or reduction of control over certain of our assets.
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The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We may incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions, which may divert management’s attention from our day-to-day business.
Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours. Achieving the anticipated benefits of any acquisition will depend in significant part upon whether we integrate such acquired businesses in an efficient and effective manner. We may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of our acquisitions within the anticipated timing, or at all. The benefits from any acquisition will be offset by the costs incurred in integrating the businesses and operations. We may also assume liabilities in connection with acquisitions to which we would not otherwise be exposed. An inability to realize any or all of the anticipated synergies or other benefits of an acquisition as well as any delays that may be encountered in the integration process, which may delay the timing of such synergies or other benefits, could have an adverse effect on our business, results of operations and financial condition.
The guarantees and warranties we provide on our products could have a material adverse effect on our business, financial condition and results of operations.
We provide product guarantees to our customers, pursuant to which we allow for the return of products from customers within 60 days after the original sale. We also provide a one-year warranty for any defective product. Existing and future product guarantees and warranties place us at the risk of incurring future returns and repair and/or replacement costs. While we engage in product quality programs and processes, including monitoring and evaluating the quality of our components sourced from our suppliers, our guaranty and warranty obligation is affected by actual product defect rates, parts and equipment costs and service labor costs incurred in correcting a product defect. During the years ended December 31, 2023 and 2022, we accrued return reserves equal to approximately 12% and 10%, respectively, of gross revenues. We believe our reserve as of December 31, 2023 is adequate. However, our reserves set aside to cover warranty returns and customer returns may be inadequate due to an unanticipated number of customer returns, undetected product defects, unanticipated component failures or changes in estimates for material, labor and other costs we may incur to replace projected product defects. As a result, if actual customer returns, product defect rates, parts and equipment costs or service labor costs exceed our estimates, it could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business and Markets
Our ability to compete in the sinus, cold and allergy market is unproven.
We currently compete in the sinus, cold and allergy market segment, a segment with large, entrenched players. We expect to experience competition from current and potential new competitors, some of which may be better established and have significantly greater financial, technical, marketing and distribution resources. We encounter competition from larger, well-established and well-financed entities that may continue to acquire, invest in, or form joint ventures with producers of alternate sinus care technologies.
Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we can. Our market position could erode rapidly as a result of the development of new, superior products and technology by competitors. In addition, current and potential competitors may have greater name recognition, broader physician reach and more extensive customer bases. Increased competition could result in price reductions, lower volume sales, and reduced gross margins. There can be no assurance that we will be able to compete successfully against our current or future competitors or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.
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Our markets are undergoing continuous change, and our future success will depend on our ability to meet the changing needs of our customers.
For our business to survive and grow, we must continue to enhance and improve our products and technology to address a broader range of customers’ needs. If customer behavior or new industry standards or practices emerge, our existing technology may become obsolete. Our future success will depend upon, among other things, our ability to:
| • | develop and license new technologies that address the increasingly sophisticated and varied needs of prospective customers; |
| • | stay ahead of technological advances and emerging industry standards and practices on a cost-effective and timely basis; and |
| • | monitor and stay ahead of shifts in the competitive landscape. |
Developing medical technology entails significant technical, regulatory and business risks.
We may fail to adapt our technology to user requirements or emerging treatment standards. Microcurrent and other neuromodulation therapies are not currently considered standard of care for inflammation and may not ever be considered standard of care. Treatment standards may not evolve to incorporate our product. New industry standards for the development, manufacture and marketing of medical devices may evolve and we may not be able to conform to the changes, meet new standards in a timely fashion or maintain a competitive position in the market. In particular, regulatory standards for bioelectronic treatments of medical conditions are evolving. If we face material delays in introducing our products and new technology, we may fail to attract new customers.
Customer or third-party complaints or negative reviews or publicity about our company or our products could harm our reputation and brand.
We are heavily dependent on customers who use our ClearUP device to provide good reviews and word-of-mouth recommendations to contribute to our growth. Customers who are dissatisfied with their experiences with our products or services may post negative reviews. We may also be the subject of blog, forum or other media postings that include inaccurate statements and/or create negative publicity. In addition, any negative news regarding bioelectronic medicine may adversely impact our business. Any negative reviews or publicity, whether real or perceived, disseminated by word-of-mouth, by the general media, by electronic or social networking means or by other methods, could harm our reputation and brand and could severely diminish consumer confidence in our products.
We may face risks associated with expanding to international markets.
We may pursue marketing and selling our products internationally, which would likely be primarily done through e-commerce accelerators, distribution arrangements and regional licensing. We have limited experience operating outside the United States, and we will likely need to rely heavily on distributors and licensees in the event that we expand internationally. Expansion into international markets may expose us to, among other things, the following additional risks:
| • | strain on our managerial resources; |
| • | pricing pressure that we may experience internationally; |
| • | a shortage of high-quality e-commerce accelerators, distributors, and licensees; |
| • | competitive disadvantage to competition with established business and customer relationships; |
| • | foreign currency exchange rate fluctuations; |
| • | the imposition of additional U.S. and foreign governmental controls or regulations; |
| • | economic instability; |
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| • | changes in duties and tariffs, license obligations and other non-tariff barriers to trade; |
| • | the imposition of restrictions on the activities of foreign agents, representatives and distributors; |
| • | scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us; |
| • | laws and business practices favoring local companies; |
| • | difficulties in maintaining consistency with our internal guidelines; |
| • | difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; |
| • | the imposition of costly and lengthy new export licensing requirements; |
| • | the imposition of U.S. or international sanctions against a country, company, person or entity with whom we do business that would restrict or prohibit continued business with the sanctioned country, company, person or entity; and |
| • | the imposition of new trade restrictions. |
The size and expected growth of our available market has not been established with precision and may be smaller than we estimate.
Our data on the available market for our current products and future products is based on a number of internal and third-party research reports, estimates and assumptions. While we believe that such research, our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct. In addition, the statements in this prospectus relating to, among other things, the expected growth in the market for our ClearUP device are based on a number of internal and third-party data, estimates and assumptions, and may prove to be inaccurate. If the actual number of consumers who would benefit from our products, the price at which we can sell future products or the available market for our products is smaller than we estimate, it could have a material adverse effect on our business, financial condition and results of operations.
Our insurance may not adequately cover our operating risk or litigation exposure.
We have insurance to protect our assets, operations and employees. While we believe our insurance coverage addresses the material risks to which we are exposed and is adequate and customary in our current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. Also, our insurance may be insufficient to cover the costs of any securities-related or other lawsuits or litigation, regardless of the merits of any such lawsuits or litigation. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable or affordable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected.
Our business could be disrupted by catastrophic occurrences and similar events.
Our headquarters are located in the San Francisco Bay Area, and we are vulnerable to interruption from catastrophic occurrences, such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, criminal acts, sabotage, other intentional acts of vandalism and misconduct, geopolitical events, disease, such as the COVID-19 pandemic, and similar events. The San Francisco Bay Area is a region known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of our suppliers and vendors could result in disruptions and other performance and quality problems. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and/or to execute successfully on those plans in the event of a disaster or emergency, our business would be seriously harmed.
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Risks Related to Legal and Regulatory Matters
Changes in the regulatory landscape for our products could render our business model contrary to applicable regulatory requirements, and we may be required to seek additional clearance or approval for our products.
Our ClearUP device is a US FDA Class II device with FDA clearance for over-the-counter purchase. We continue to expand our product offerings within the ClearUP brand based on the architecture used in the ClearUP product line. Such expansions may include design modifications of the ClearUP device. Given that current improvements to the ClearUP product line are a line extension of the ClearUP device, and based on the approval by our designated EU Notified Body and our assessment of relevant FDA guidance (Guidance for Industry and Food and Drug Administration Staff “Deciding When to Submit a 510(k) for a Change to and Existing Device” October 25, 2017), we have determined that such current expansions of the ClearUP product line are covered under the same regulatory clearances as ClearUP. If the FDA were to determine that our products or product candidates do not properly satisfy the conditions for FDA clearance as Class II devices, or that our ClearUP product line expansion is not covered by the same regulatory clearances as our existing ClearUP device, we could be required to cease distribution of our products until we obtain regulatory clearance or approval, abandon new product launch plans, and/or we could be subject to additional enforcement action by the FDA. All existing FDA clearances, including those covering our ClearUP device, could be subject to change based on subsequent FDA review or changes in FDA regulations. In addition, many states have laws regarding the provision of medical devices, and if we are found to be in violation of the laws of any state in which our devices are sold, we could be subject to further sanctions at the state level.
The laws and regulations applicable to the industries in which we operate are continuously evolving. Changes in our regulatory and legal landscape could substantially increase the costs of compliance, increase the time and resources required to bring new products to market, or otherwise negatively impact our business. There can be no assurance that new legislation or regulations will not impose significant additional costs or burdens on our business or subject us to additional liabilities. We may be or become subject to claims that our operations violate these laws or regulations.
Our business is subject to risks arising from epidemic diseases, such as the recent COVID-19 pandemic.
The occurrence of regional epidemics or a global pandemic such as COVID-19 may adversely affect our operations, financial condition, and results of operations. The COVID-19 pandemic had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices from 2020 into 2023. The extent to which global pandemics, including as a result of the lingering effects of COVID-19 on the global economy, impact our business going forward will depend on various factors such as the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability.
Measures taken by the governments of countries affected by future pandemics could adversely impact our business, financial condition, or results of operations. Potential disruptions may include, without limitations, delays in processing registrations or approvals by applicable state or federal regulatory bodies, delays in product development efforts and/or clinical trials, and additional government requirements or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of our ClearUP device or other products.
We are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business, and changes in such regulations or laws could require us to modify our products or marketing or advertising efforts.
In connection with the marketing or advertisement of our products, we could be the target of claims relating to false, misleading, deceptive or otherwise noncompliant advertising or marketing practices, including under the
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auspices of the FTC and state consumer protection statutes. If we rely on third parties to provide any marketing and advertising of our products, we could be liable for, or face reputational harm as a result of, their marketing practices if, for example, they fail to comply with applicable statutory and regulatory requirements.
If we are found to have breached any consumer protection, advertising, unfair competition or other laws or regulations, we may be subject to enforcement actions that require us to change our marketing and business practices in a manner that may negatively impact us. This could also result in litigation, fines, penalties and adverse publicity that could cause reputational harm and loss of customer trust, which could have a material adverse effect on our business, financial condition and results of operations.
Our reliance on vendors in foreign countries, including China, subjects us to risks and uncertainties relating to foreign laws and regulations and changes in relations between the United States and such foreign countries.
Electronic components for our ClearUP devices are sourced primarily from China, and we may in the future source components from vendors located in other foreign countries. Under its current leadership, the government of China has been pursuing economic reform policies, including by encouraging foreign trade and investment. However, there is no assurance that the Chinese government will continue to pursue such policies, that such policies will be successfully implemented, that such policies will not be significantly altered, or that such policies will be beneficial to our partnerships in China. China’s system of laws, as well as the laws of other foreign countries where we may source components, can be unpredictable, especially with respect to foreign investment and foreign trade.
The United States government has called for substantial changes to foreign trade policy with China and has raised, and has proposed to further raise in the future, tariffs on several Chinese goods. China has retaliated with increased tariffs on United States goods. Moreover, China’s legislature has adopted a national security law to substantially change the way Hong Kong has been governed since the territory was handed over by the United Kingdom to China in 1997. This law increases the power of the central government in Beijing over Hong Kong, limits the civil liberties of residents of Hong Kong and could restrict the ability of businesses in Hong Kong to continue to conduct business or to continue to with business as previously conducted. The U.S. State Department has indicated that the U.S. no longer considers Hong Kong to have significant autonomy from China. The U.S. State Department previously enacted sanctions related to China’s governing of Hong Kong, and the U.S. may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. Any further changes in United States trade policy could trigger retaliatory actions by affected countries, including China, resulting in trade wars.
Changes to Chinese regulations affecting the manufacture of electronic components may also be unpredictable. For example, the Uyghur Forced Labor Prevention Act bans imports from China’s Xinjiang Uyghur Autonomous Region unless it can be shown that the goods were not produced using forced labor and this legislation may have an adverse effect on global supply chains which could adversely impact our business and results of operations. Additionally, China has recently implemented significant restrictions on the export of gallium and germanium, both of which are used for the manufacture of computer chips. Changes to regulations in China and/or any other country where we may source components in the future may also be unpredictable and could affect the manufacture of electronic components in such countries and our ability to purchase components on a cost-effective basis. Any regulatory changes and changes in United States and China relations, or changes in relations with the United States any other country where we may source components in the future, may have a material adverse effect on our vendors in China and other such countries which could materially harm our business and financial condition.
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International trade disputes could result in tariffs and other protectionist measures that could have a material adverse effect on our business, financial condition and results of operations.
Tariffs, and in particular tariffs imposed on materials imported from China, could increase the cost of our products and raw materials that go into making them. These increased costs could adversely impact the gross margin that we earn on our products. Tariffs could also make our products more expensive for customers, which could make our products less competitive and reduce consumer demand. Countries may also adopt other protectionist measures that could limit our ability to source components for our products or to offer our products. Political uncertainty surrounding international trade disputes and protectionist measures could also have a negative effect on consumer confidence and spending, which could have a material adverse effect on our business, financial condition and results of operations.
We may in the future become subject to the requirements of the Sunshine Act.
We are not currently subject to the Physician Payment Sunshine Act (“Sunshine Act”), which was enacted as part of the Affordable Care Act. However, if we begin selling our products directly to governmental entities or our products become reimbursable by Medicare or Medicaid, then we may become subject to the Sunshine Act, which will require us to report annually to the Secretary of Health and Human Services: (i) payments or other transfers of value made by us, or by a third-party as directed by us, to physicians and teaching hospitals or to third parties on behalf of physicians or teaching hospitals; and (ii) physician ownership and investment interests in our company. The payments required to be reported include the cost of meals provided to a physician, travel reimbursements and other transfers of value, including those provided as part of contracted services such as speaker programs, advisory boards, consultation services and clinical trial services. Failure to comply with the reporting requirements can result in significant civil monetary penalties ranging from $1,000 to $10,000 for each payment or other transfer of value that is not reported (up to a maximum per annual report of $150,000) and from $10,000 to $100,000 for each knowing failure to report (up to a maximum per annual report of $1.0 million). Additionally, becoming subject to the Sunshine Act and the information we disclose could lead to greater scrutiny, which could result in modifications to established practices and additional costs. Additionally, similar reporting requirements have also been enacted on the state level domestically, and an increasing number of countries worldwide have either adopted or are considering adopting similar laws requiring transparency of interactions with healthcare professionals.
Risks Related to Our Intellectual Property
We are highly dependent on our IP, and our methods of protecting our IP may not be adequate or could be costly.
We rely on a combination of patent and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our IP rights. We are building our IP portfolio, and may not be able to secure sufficient protection to prevent competition from entering the market or from creating competing products.
We cannot be certain that we will be able to obtain patent protection on the key components of our technology or that we will be able to obtain patents in key jurisdictions, such as the United States, Europe and Asia. We cannot give assurances that we will develop new products or technologies that are patentable or (to the extent applicable) that any new products will be covered by existing patents, that any issued patent will provide us with any competitive advantages or will not be challenged by third parties, or that the patents of others will not impair our ability to do business.
We cannot guarantee that the applicable governmental authorities will approve any of our future trademark applications. Even if the applications are approved, third parties may seek to oppose or challenge these registrations. A failure to obtain trademark registrations in key jurisdictions could limit our ability to use our trademarks and impede our marketing efforts in those jurisdictions.
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Despite our efforts to protect our IP, unauthorized parties may attempt to copy or obtain and use our technology. Policing the unauthorized use of our technology on a global basis is difficult, and there can be no assurance that the steps taken by us will prevent misappropriation of our technology.
We cannot give assurances that our measures for preserving the secrecy of our trade secrets and confidential information will be sufficient to prevent others from obtaining our trade secrets.
We generally require our employees, consultants and corporate partners to sign confidentiality and non-disclosure agreements prohibiting them from disclosing any of our trade secrets. Our employment agreements and consulting agreements also contain confidentiality undertakings, as well as non-compete provisions, which prohibit employees, advisors and consultants from acting contrary to our interests during the period of their relationship with us.
Despite our efforts to preserve the secrecy of our trade secrets and confidential information, we may not have adequate remedies to preserve our trade secrets or to compensate us fully for our loss if employees, consultants or corporate partners breach confidentiality agreements with us. We cannot give assurances that our trade secrets will provide any competitive advantage, as they may become known to, or be independently developed by, competitors, regardless of the success of any measures we may take to try to preserve their confidentiality.
Any failure or inability to protect any of our IP or confidential information, or to enforce our rights against any infringement or misappropriation of our IP or confidential information, could have a material adverse effect on our business, financial condition and results of operations. Additionally, we may be forced to litigate to enforce or defend our IP, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary rights. Any such litigation could be very costly and could distract our management from focusing on operating our business. The existence and/or outcome of any such litigation could harm our business.
We may face risks of claims for IP infringement.
Our competitors or other persons may have already obtained or may in the future obtain patents or other rights relating to one or more aspects of our technology. Because we have not conducted a formal freedom to operate analysis for patents related to our technology, we may not be aware of issued patents that a third party might assert are infringed by our current or any future technology, which could materially impair our ability to commercialize our current or any future technology. Even if we diligently search third-party patents for potential infringement by our current or any future technology, we may not successfully find patents that our current or any future technology may infringe. If we are unable to secure and maintain freedom to operate, others could preclude us from commercializing our current or future technology. We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and any future technology, whether or not we are actually infringing, misappropriating or otherwise violating the rights of third parties. If we are sued for patent or other intellectual property right infringement, we may be forced to incur substantial costs in defending our self.
If litigation were to result in a judgment that we infringed a valid and enforceable patent or other intellectual property right, a court may order us to pay substantial damages to the owner of the patent or other intellectual property right and to stop using any infringing technology or products. This could cause a significant disruption in our business and force us to incur substantial costs to develop and implement alternative, non-infringing technology or products, or to obtain a license from the patent or other intellectual property right owner.
We cannot give assurance that we would be able to develop non-infringing alternatives at a reasonable cost that would be commercially acceptable, or that we would be able to obtain a license from any patent or other intellectual property right owner on commercially reasonable terms, if at all.
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We may be unable to enforce our IP rights throughout the world.
The laws of some foreign countries do not protect IP rights to the same extent as the laws of the United States. The area of bioelectronic medicine, specifically, is a nascent and emerging industry. To the extent we demonstrate novel means to manage physiological functions, the nature and degree of IP protection we can obtain throughout the world may vary. Many companies have encountered significant problems in protecting and defending IP rights in certain foreign jurisdictions. This could make it difficult for us to stop infringement of our foreign patents, if obtained, or the misappropriation of our other IP rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the enforceability of patents against certain third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our IP rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of our IP.
General Risk Factors
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.
The market price and trading volume of our common stock is heavily influenced by the way analysts interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.
We have and will continue to incur increased costs and are subject to heightened regulations and requirements as a result of becoming a public company, which could lower our profits or make it more difficult to run our business.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act, and related rules implemented by the Commission, and the Nasdaq Capital Market. The expenses generally incurred by public companies for reporting and corporate governance purposes have been increasing. These rules and regulations have increased and will continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costlier, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations may also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as our executive officers. Furthermore, if we are unable to satisfy our ongoing obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action and potentially civil litigation.
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Actual or perceived failures to comply with applicable data privacy and security laws, regulations, policies, standards, contractual obligations and other requirements related to data privacy and security and changes to such laws, regulations, standards, policies and contractual obligations could adversely affect our business, financial condition and results of operations.
The global data protection landscape is rapidly evolving, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. We are subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, transmission, use, disclosure, storage, retention and security of personal and personally-identifying information, such as information that we may collect in connection with conducting our business in the United States and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards or perception of their requirements may have on our business. This evolution may create uncertainty in our business; affect our ability to operate in certain jurisdictions; or to collect, store, transfer use and share personal information; necessitate the acceptance of more onerous obligations in our contracts; result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures, or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, fines, imprisonment of company officials and public censure, claims by third parties, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition and results of operations.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.
U.S. generally accepted accounting principles (“GAAP”) and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, revenue recognition, stock-based compensation, trade promotions and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported results.
We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws could subject us to criminal or civil liability and harm our business, financial condition, and results of operations.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), U.S. domestic bribery laws, the UK Bribery Act 2010, and other anti-corruption and anti-money laundering laws in the countries in which we conduct business. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. As we increase our international sales and business and sales to the public sector, we may engage with business partners and third-party intermediaries to market our products and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, there is a risk that our employees and agents will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. As we expand internationally, our risks under these laws may increase.
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Detecting, investigating, and resolving actual or alleged violations of anti-corruption laws can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties or injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our business, financial condition, and results of operations could be harmed.
Risks Related to Our Securities
We expect that our stock price may fluctuate significantly, and investors may not be able to resell their shares at or above the price at which they purchased them. An active trading market for our common stock may never develop.
Prior to our initial public offering, you could not buy or sell our common stock publicly. Even though our common stock is now listed on the Nasdaq Capital Market, an active trading market for our shares may not develop or be sustained following our initial public offering. If an active market for our common stock does not develop or is not maintained, it may be difficult for you to sell your shares depressing the market price for the shares, or at all. An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling additional shares of our common stock and may impair our ability to acquire other companies or technologies by using shares of our common stock as consideration.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
| • | the effect of macroeconomic factors on our business and operations and on market conditions generally; |
| • | the success of our products and of competitive products or technologies; |
| • | regulatory or legal developments in the United States and other countries; |
| • | the level of expenses related to our products or development programs; |
| • | announcements by us, our partners or our competitors of new products or therapies, significant contracts, strategic partnerships, joint ventures, collaborations, commercial relationships, or capital commitments; |
| • | failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; |
| • | issuance of new or updated research or reports by securities analysts or recommendations for our stock; |
| • | disputes or other developments related to proprietary rights (including patents), litigation matters, and our ability to obtain patent protection for our technologies; |
| • | commencement of, or our involvement in, litigation; |
| • | fluctuations in the valuation of companies perceived by investors to be comparable to us; |
| • | manufacturing disputes or delays; |
| • | any future sales of our common stock or other securities; |
| • | any change to the composition of the board of directors or key personnel; |
| • | general economic conditions and slow or negative growth of our markets; |
| • | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
| • | announcement or expectation of additional debt or equity financing efforts; and |
| • | other factors described in this section of the Report. |
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These and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance. In addition, the stock market in general, and medical device companies in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have on occasion instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.
We do not expect to pay any cash dividends for the foreseeable future.
We do not expect to pay dividends to our stockholders at any time in the foreseeable future. Anyone considering investing in our stock should not rely on such investment to provide dividend income. Instead, we plan to retain any earnings to establish, maintain and expand our operations and product offerings. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our stock. Accordingly, investors must rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any return on their investment.
Future issuances of stock or other securities could dilute the holdings of stockholders and could materially affect the price of the shares of our common stock.
In the year ended December 31, 2023, we sold an aggregate of 1,369,230 shares of our common stock to certain investors through registered public offerings, which resulted in aggregate net proceeds of approximately $8.5 million. We anticipate that we will issue additional shares of capital stock in conjunction with future funding requirements. Any issuance of shares of our common stock, or securities exercisable for or convertible into shares of our common stock, for the purpose of securing capital will result in the dilution of the ownership interests of our existing stockholders.
We have used and intend to continue to use equity incentives for employees, advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights will result in the dilution of the ownership interests of our existing stockholders.
In addition, we may in the future decide to offer additional stock or other securities in order to finance new capital-intensive projects, in connection with unanticipated liabilities or expenses or for any other purposes. There is no assurance that we will not decide to conduct offerings of securities in the future. Depending on the structure of any future offering, certain existing stockholders may not have the ability to purchase additional equity securities. If we raise additional funds by issuing additional equity securities, the holdings and voting interests of existing stockholders could be diluted.
We are an “emerging growth company” and a “smaller reporting company,” and the reduced public company reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to public companies that are not emerging growth companies. These provisions include, but are not limited to: being permitted to have 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; an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”); not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm
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rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements and proxy statements; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We intend to take advantage of certain of the exemptions discussed above.
In addition, we are currently a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended (“Exchange Act”), and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller reporting company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an “emerging growth company” may continue to be available to us as a “smaller reporting company,” including exemption from compliance with the auditor attestation requirements pursuant to the Sarbanes-Oxley Act and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller reporting company” until we have more than $250 million in public float (based on our common stock) measured as of the last business day of our most recently completed second fiscal quarter or, in the event we have no public float (based on our common stock), annual revenues of more than $100 million during the most recently completed fiscal year.
As a result, the information we provide will be different than the information that is available with respect to other public companies. In this prospectus, we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock may be more volatile.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. In addition, we are required to furnish a report by management on the effectiveness of our internal controls over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act. As of December 31, 2023, based on an analysis completed by management, our internal controls were not effective due to the existence of a material weakness. The process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation is time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting (as we have for the year ended December 31, 2023), if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decline, and we could also become subject to investigations by the stock exchange on which our common stock is listed, the Commission or other regulatory authorities, which could require additional financial and management resources.
If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline.
We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance
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we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.
Anti-takeover provisions in our charter documents, and under Delaware law, could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
Provisions in our amended and restated certificate of incorporation, as amended (“Charter”), and amended and restated bylaws, as amended (“Bylaws”), may have the effect of delaying or preventing a change of control or changes in our management. Our Charter and Bylaws include provisions that:
| • | authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; |
| • | require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; |
| • | specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our Chief Executive Officer or our President (in the absence of a Chief Executive Officer); |
| • | establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; |
| • | prohibit cumulative voting in the election of directors; |
| • | establish that our board of directors will be divided into three classes—Class I, Class II, and Class III—with each class serving staggered three-year terms; |
| • | provide that, so long as our board of directors is classified, directors may only be removed for cause; |
| • | provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and |
| • | require the approval of our board of directors or the holders of two-thirds of our outstanding shares of voting stock to amend our Bylaws and certain provisions of our Charter. |
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
Our Charter and Bylaws provide that the Court of Chancery of the State of Delaware or the federal district court for the District of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could result in increased costs for our stockholders to bring a claim and could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our Charter and Bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is
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the exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by, or other wrongdoing by, any director, officer, employee or agent of the Company to the Company or our stockholders, creditors or other constituents; (iii) any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Charter or our Bylaws; (iv) any action to interpret, apply, enforce or determine the validity of our Charter or our Bylaws; or (v) or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act, Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, or the Company consents in writing to the selection of an alternative forum, such action may be brought in another state or federal court sitting in the State of Delaware. Our Charter and Bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act or Exchange Act. Nothing in our Charter or Bylaws preclude stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, this choice of forum provision could result in increased costs for our stockholders to bring a claim and could may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision that will be contained in our Charter and Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Risks Related to this Offering
This is a reasonable best efforts offering, in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans.
The placement agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering, and there can be no assurance that the offering contemplated hereby will ultimately be consummated. Even if we sell securities offered hereby, because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount is not presently determinable and may be substantially less than the maximum amount set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us. Thus, we may not raise the amount of capital we believe is required for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us
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Resales of our shares of our common stock in the public market by investors in this offering may cause the market price of our shares of our common stock to fall.
We are registering up to shares of common stock offered under this prospectus, as well as up to shares of common stock issuable upon exercise of Common Warrants and Placement Agent Warrants being offered under this prospectus. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our shares of common stock. The issuance of new shares of common stock in this offering or in the future could result in sales of shares of our common stock by our current stockholders concerned about the potential ownership dilution of their holdings. Furthermore, in the future, we may issue additional shares of common stock or other equity or debt securities exercisable or convertible into shares of common stock. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.
This offering may cause the trading price of shares of our common stock to decrease.
The price per share, together with the number of shares of common stock being offered hereby, may result in an immediate decrease in the market price of our shares. This decrease may continue after the completion of this offering.
You will experience immediate and substantial dilution in the net tangible book value per share of the shares of common stock you purchase in this offering.
Because the price per share being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering. Assuming a combined public offering price of $ per share and Common Warrant, which is the last reported sales price of our shares of common stock on the Nasdaq on , 2024, if you purchase shares of common stock in this offering, you will experience an immediate decrease of approximately $ per share in the net tangible book value of the shares of common stock as of December 31, 2023. In addition, if previously issued options or warrants to acquire shares of our common stock are exercised at prices below the offering price, you will experience further dilution. See the section of this prospectus entitled “Dilution” for a more detailed discussion of the dilution you may incur in connection with this offering.
You may experience future dilution as a result of future equity offerings.
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 shares of our common stock that could result in further dilution to investors purchasing our securities in this offering or result in downward pressure on the price of our shares of common stock. We may sell shares of common stock or other securities in any other offering at prices that are higher or lower than the prices paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders.
There is no public market for the Pre-Funded Warrants or Common Warrants being offered in this offering.
There is no established public trading market for the Pre-Funded Warrants or Common Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Pre-Funded Warrants or Common Warrants on any securities exchange or nationally recognized trading system, including the Nasdaq Capital Market. Without an active market, the liquidity of the Pre-Funded Warrants and Common Warrants will be limited.
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Holders of the Pre-Funded Warrants or the Common Warrants will have no rights as holders of Common Stock until such warrants are exercised.
Until you acquire shares of common stock upon exercise of your Pre-Funded Warrants or the Common Warrants, you will have no rights with respect to the shares of common stock issuable upon exercise of your Pre-Funded Warrants or Common Warrants. Upon exercise of your Pre-Funded Warrants or the Common Warrants, you will be entitled to exercise the rights of a holder of shares only as to matters for which the record date occurs after the exercise date.
The Pre-Funded Warrants and Common Warrants are speculative in nature.
The Pre-Funded Warrants and Common Warrants offered hereby do not confer any rights of ownership of our shares of common stock on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders of the Pre-Funded Warrants may acquire shares of common stock issuable upon exercise of such warrants at an exercise price of $0.0001 per share of common stock and holders of Common Warrants may acquire shares of common stock issuable upon exercise of such warrants at an exercise price of $ per share of common stock. Moreover, following this offering, the market value of the Pre-Funded Warrants and Common Warrants is uncertain, and there can be no assurance that the market value of the Pre-Funded Warrants or Common Warrants will equal or exceed the combined public offering price.
We will not receive any meaningful amount of additional funds upon the exercise of the Pre-Funded Warrants.
Each Pre-Funded Warrant will be exercisable until it is fully exercised and by means of payment of the nominal cash purchase price upon exercise. Accordingly, we will not receive any meaningful additional funds upon the exercise of the Pre-Funded Warrants.
Holders of the Pre-Funded Warrants and Common Warrants purchased in this offering will have no rights as common stockholders until such holders exercise such warrants and acquire shares of our common stock.
Until holders of the Pre-Funded Warrants and Common Warrants acquire shares of our common stock upon exercise thereof, holders of such Pre-Funded Warrants and Common Warrants will have no rights with respect to the shares of our common stock underlying such Pre-Funded Warrants and Common Warrants. Upon exercise of the Pre-Funded Warrants and Common Warrants, such holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.
Our management will have broad discretion over the use of the net proceeds from this offering, you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.
We have not designated any portion of the net proceeds from this offering to be used for any particular purpose. Accordingly, our management will have broad discretion as to the use of the net proceeds from this offering and could use them for purposes other than those contemplated at the time of commencement of this offering. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest the net proceeds in a way that does not yield a favorable, or any, return for our company. Our management’s judgment may not result in positive returns on your investment and you will not have the opportunity to evaluate the economic, financial or other information upon which our management bases its decisions.
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain “forward-looking” statements, as such term is defined by the Commission in its rules, regulations and releases, which represent our expectations or beliefs, including but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the Company and its subsidiaries, volatility of stock price, commercial viability of our product candidates and any other factors discussed in this and other registrant filings with the Commission.
These risks and uncertainties and other factors include, but are not limited to those set forth under “Risk Factors” of this prospectus. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this prospectus or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this prospectus.
This prospectus contains forward-looking statements, including statements regarding, among other things:
| • | our anticipated needs for working capital; |
| • | our need and ability to secure additional financing; |
| • | our business plans and strategies, including our product development efforts; |
| • | regulatory or legal developments in the United States and other countries; |
| • | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
| • | the level of expenses related to our product development and operations; and |
| • | our efforts to expand our products and our business. |
Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under the section of this prospectus entitled “Risk Factors” and matters described in prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this prospectus will in fact occur. We caution you not to place undue reliance on these forward-looking statements. In addition to the information expressly required to be included in this prospectus, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.
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USE OF PROCEEDS
Assuming a combined public offering price of $ per share and Common Stock Warrant (the last reported sale price of our common stock on the Nasdaq Capital Market on , 2024), and that we sell all of the securities offered under this prospectus, we estimate that the net proceeds to us from this offering will be approximately $ million, after deducting the placement agent fees and estimated offering expenses payable by us and excluding the proceeds, if any, from the subsequent exercise of the Pre-Funded Warrants and Common Warrants. We intend to use the net proceeds from this offering for working capital and general corporate purposes, which may include operating expenses, research and development, and pending and future acquisitions. We do not expect such intended uses to change in the event that we do not sell all of the securities offered under this prospectus. We have not determined the amount of net proceeds to be used specifically for any of such purposes.
Although we may, from time to time, evaluate potential strategic investments and acquisitions, we do not have any definitive agreements in place to make any such acquisitions at this current time.
Our expected use of net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. As a result, we cannot predict with any certainty our use of the net proceeds from this offering or the amounts that we will actually spend on each area of use set forth above. Our management will retain broad discretion over the allocation of the net proceeds from this offering. Accordingly, we will have discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the proceeds of this offering.
Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
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MARKET FOR OUR COMMON STOCK
Market Information
Our common stock, par value $0.0001 per share, is listed on the Nasdaq Capital Market under the ticker symbol “TIVC.”
There is currently no established trading market for the offered Pre-Funded Warrants or Common Warrants. We do not intend to list the Pre-Funded Warrants or Common Warrants on the Nasdaq Capital Market or any other national securities exchange or nationally recognized trading system. Without an active trading market, the liquidity of the Pre- Funded Warrants and Common Warrants will be limited.
Holders
As of March 22, 2024, there were approximately 99 shareholders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers, and other financial institutions.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We currently intend to retain our future earnings, if any, for use in our business and therefore do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, and current and anticipated cash needs. Investors should not purchase our common stock with the expectation of receiving cash dividends.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2023:
| • | on an actual basis; and |
| • | on an as adjusted basis, to give effect to the sale of an aggregate of shares of our common stock and Common Warrants to purchase an aggregate of shares of our common stock in this offering at an assumed combined public offering price of $ per share of common stock and accompanying Common Warrant (which was the closing price of our common stock on the Nasdaq Capital Market on , 2024), and after deducting placement agent fees and estimated offering expenses payable by us. The as adjusted figures assume the sale of the maximum number of securities being offered hereby and no sale of Pre-Funded Warrants, and excludes the proceeds, if any, from the exercise of any Common Warrants and Placement Agent Warrants to be issued in this offering. |
The as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual combined public offering price and other terms of this offering determined at pricing. You should consider this table in conjunction with sections of this prospectus entitled “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company,” as well as our financial statements and the notes to those financial statements for the year ended December 31, 2023 included elsewhere in this prospectus.
| As of December 31, 2023 | ||||||||
| Actual | As Adjusted(1) |
|||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands, except share and per share amounts) |
||||||||
| Cash and Cash Equivalents |
$ | 3,395 | $ | |||||
|
|
|
|
|
|||||
| Stockholders’ Equity (Deficit): |
||||||||
| Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding, actual and as adjusted |
$ | — | $ | |||||
| Common stock, $0.0001 par value, 200,000,000 shares authorized; 1,466,092 shares issued and outstanding, actual; issued and outstanding, as adjusted |
$ | — | $ | |||||
| Additional Paid-in Capital |
$ | 41,466 | $ | |||||
| Accumulated Deficit |
$ | (37,886 | ) | $ | ||||
|
|
|
|
|
|||||
| Total Stockholders’ Equity |
$ | 3,580 | $ | |||||
|
|
|
|
|
|||||
| Capitalization |
$ | 3.580 | $ | |||||
|
|
|
|
|
|||||
| (1) | This as adjusted information is illustrative only and will depend on the actual combined public offering price and other terms of this offering determined at pricing. |
| (2) | Each $0.10 increase (decrease) in the assumed combined public offering price of $ per share of common stock and Common Warrant would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by approximately $ million, assuming no sale of Pre-Funded Warrants and the sale of the maximum number of securities offered under this prospectus, after deducting the estimated placement agent fees and estimated offering expenses payable by us. Similarly, an increase (decrease) of 0.5 million shares of common stock and Common Warrants offered by us would increase (decrease) the as adjusted amounts of each of our cash, cash equivalents, and short-term investments, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming no sale of Pre-Funded Warrants and that the assumed combined public offering price per share and Common Stock Warrants remains the same, and after deducting the estimated placement agent fees and estimated offering expenses payable by us. |
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The above discussion and table are based on 1,466,092 shares outstanding as of December 31, 2023. The discussion and table do not include, as of that date:
| • | 14,661 shares of common stock issuable upon exercise of options to purchase shares of common stock outstanding as of December 31, 2023, with a weighted-average exercise price of approximately $144.41 per share; |
| • | 59,497 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock, with a weighted-average exercise price of approximately $29.34 per share; |
| • | shares of common stock issuable upon exercise of Placement Agent Warrants to be issued to the placement agent or its designees as compensation in connection with this offering at an exercise price equal to 110% of the combined public offering price of the shares of common stock (or Pre-Funded Warrants in lieu thereof) and Common Warrants being offered hereunder; and |
| • | 7,190 shares of common stock reserved for future issuance under our 2021 Plan. |
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DILUTION
If you invest in our securities in this offering, your ownership interest will be immediately diluted to the extent of the difference between the combined public offering price per share of our common stock and Common Warrant and the as adjusted net tangible book value per share of our common stock immediately after this offering.
Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of shares of common stock then issued and outstanding.
Our historical net tangible book value (deficit) as of December 31, 2023 was $3.2 million, or $2.20 per share.
As adjusted net tangible book value is our net tangible book value after taking into account the issuance and sale by us of shares of common stock (and no sale of Pre-Funded Warrants) and Common Warrants in this offering at an assumed combined public offering price of $ per share and accompanying Common Warrant, after deducting the estimated placement agent fees and the estimated offering expenses payable by us. Our as adjusted net tangible book value as of December 31, 2023 would have been approximately $ , or $ per share. This amount represents an immediate increase in as adjusted net tangible book value of approximately $ per share to our existing stockholders, and an immediate dilution of $ per share to new investors participating in this offering. Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the combined public offering price per share and Common Warrant paid by new investors.
The following table illustrates the dilution to new investors on a per share basis:
| Assumed public offering price per share |
$ | |||||||
| Historical net tangible book value per share as of December 31, 2023 |
$ | 2.20 | ||||||
| Increase in net tangible book value per share attributable to this offering |
$ | |||||||
| As adjusted net tangible book value per share, after giving effect to this offering |
$ | |||||||
| Dilution in as adjusted net tangible book value per share to new investors in this offering |
$ | |||||||
|
|
|
A $0.10 increase (decrease) in the assumed combined public offering price of $ per share of common stock and Common Warrant would increase (decrease) the as adjusted net tangible book value per share by $ , and the dilution per share to new investors in this offering by $ , assuming no sale of Pre-Funded Warrants and that the number of shares of common stock and Common Warrants offered by us, as set forth on the cover page of this prospectus, remains the same and, assuming no sale of Pre-Funded Warrants and the sale of the maximum number of securities offered under this prospectus, after deducting the estimated placement agent fees and estimated offering expenses payable by us. Similarly, an increase (decrease) of 0.5 million shares of common stock and Common Warrants offered by us would increase (decrease) the as adjusted net tangible book value by $ per share and the dilution to new investors by $ per share, assuming no sale of Pre-Funded Warrants and that the assumed combined public offering price per share and Common Stock Warrant remains the same, and after deducting the estimated placement agent fees and estimated offering expenses payable by us.
The above discussion and table are based on 1,466,092 shares outstanding as of December 31, 2023. The discussion and table do not include, as of that date:
| • | 14,661 shares of common stock issuable upon exercise of options to purchase shares of common stock outstanding as of December 31, 2023, with a weighted-average exercise price of approximately $144.41 per share; |
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| • | 59,497 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock, with a weighted-average exercise price of approximately $29.34 per share; |
| • | shares of common stock issuable upon exercise of Placement Agent Warrants to be issued to the placement agent or its designees as compensation in connection with this offering at an exercise price equal to 110% of the combined public offering price of the shares of common stock (or Pre-Funded Warrants in lieu thereof) and Common Warrants being offered hereunder; and |
| • | 7,190 shares of common stock reserved for future issuance under our 2021 Plan. |
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OUR BUSINESS
Business Overview
Tivic Health is a health tech company focused on bioelectronic medicine. Bioelectronic medicine is a branch of the global neuromodulation market that treats disease and conditions by modulating the electrical signals carried along various nerve pathways. The field grew out of the neuromodulation industry and relied, historically, on implantable devices (e.g., pacemakers, spinal implants, deep brain stimulators). IDTechEx has identified several fast-growing areas in the bioelectronic medicine field, including peripheral nerve stimulation, which it has indicated is forecasted to grow at a 35% CAGR from 2019 through 2029. Tivic currently has two non-invasive bioelectronic platforms designed to deliver therapeutic benefits via manipulation of such signals without the use of traditional implanted technology.
Commercial Platforms
Tivic has developed two complementary platforms. Tivic’s first commercial platform is a handheld design that interfaces non-invasively with the trigeminal, sympathetic, and other facial and cranial nerve structures. This platform is the basis for Tivic’s existing product, currently marketed with FDA approval as ClearUP Sinus Pain Relief for the treatment of sinus pain and congestion.
The second platform is a research-stage platform directed to vagus nerve stimulation, which is currently undergoing clinical evaluation.
First Commercial Product
Tivic Health currently markets one commercial product under the brand name “ClearUP Sinus Pain Relief.” ClearUP is built on our patented, handheld neuromodulation design and was developed by Tivic Health for the treatment of sinus and allergy-related conditions. It uses ultra-low current electrical waves to relieve sinus pain and congestion symptoms that are prevalent in nasal allergies, sinus infections, chronic sinusitus, cold and flu and other disease conditions. ClearUP had U.S. FDA approval for the treatment of sinus pain and congestion, and is the first FDA-approved bioelectronic treatment of the foregoing indications. Additionally, ClearUP has E.U. CE Mark approval for the treatment of sinus pain, pressure and congestion.
The FDA initially provided clearance to our ClearUP product under a 510(k) as an allergy treatment in January 2019. The FDA granted ClearUP a subsequent De Novo clearance in March 2021, which expanded ClearUP’s label, enabling marketing of ClearUP for allergies, sinusitis, cold, flu, and any inflammatory condition involving congestion.
A 2023 study with over 2,000 representative consumers conducted by Intellego Insights (commissioned by Tivic Health) identified that approximately 85 million U.S. adults experience inflammation-related symptoms related to allergies, congestion, head pain, and sinus issues. Of the consumers that participated in the study, 58% of sufferers try to avoid medication, if at all possible.
Customers can purchase ClearUP products directly from Tivic via our own website and through major online stores, including Amazon, Walmart, BestBuy, FSAStore and HSA Store. The Company has also entered distribution agreements with McKesson, Cardinal Health and Amerisource Bergen.
A sham-controlled clinical trial is in progress with the Icahn School of Medicine at Mount Sinai, to extend the use of Tivic’s handheld monopolar platform to the management of pain resulting from functional endoscopic sinus surgery and other facial surgeries. If successful, the Company may develop additional products addressing this clinical use case, which would require new regulatory clearances for a novel indication.
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We have also previously evaluated the market opportunity for use of ClearUP as part of a migraine treatment toolkit. While we believe that both clinical and market rationale are positive for such use, we have, for the time being, determined to down-prioritize any clinical studies of migraine-related indications based on the aggressive competition among entrenched incumbents and limited uptake, to date, of existing devices for the treatment and/or prevention of migraine.
Expanding Our Technology Portfolio
Tivic has also developed a proprietary non-invasive approach to precision vagus nerve stimulation (“VNS”) based on our experience building evidence-based bioelectronic therapies. The vagus nerve is the tenth cranial nerve and the longest autonomic nerve in the body. The vagus nerve is responsible for regulating several bodily functions including digestion, heart rate, breathing, cardiovascular activity, and visceral reflexes. Since the vagus nerve regulates many organ systems associated with chronic disease, modulating activity in this nerve pathway is of significant interest in academic research and in industry.
Electrical VNS is currently indicated for treatment-resistant epilepsy and depression, cluster headache, migraine headache, and stroke rehabilitation and is being studied for other neurological, cardiac, and immune conditions. Currently, there are both invasive implantable VNS devices and non-invasive VNS devices in market. There is room for meaningful improvement in how VNS devices can be used to more precisely target and stimulate the vagus nerve to achieve intended biological and clinical outcomes.
Our approach to non-invasive VNS aims to leverage improvements in engineering, circuitry, and stimulation parameters to augment efficacy and reliability compared to the current state of the art. We have conducted proof of principle experiments demonstrating effects on the autonomic nervous system and have initiated a clinical research program with the Feinstein Institute for the Bioelectronic Medicine at Northwell Health to further characterize the autonomic, cardiovascular, and neurological effects of our intervention.
Given our deep expertise and relationships in the field of bioelectronic medicine and adjacent diagnostic fields, we are continuously monitoring and evaluating options to add complementary product opportunities into our product portfolio.
Market Opportunity
In December 2021, Precedence Research noted that the burden of various chronic diseases and infections is growing and so have people’s healthcare expenditures. In 2018, the per capita healthcare expenditure in the U.S. was over $10,500. U.S. health care spending grew 4.1 percent in 2022, reaching $4.5 trillion, or $13,493 per person.
Grand View Research projects that the non-invasive electroceutical devices segment will witness the highest growth through 2030. This is due to technological advancements and rising investments in research and development by companies for innovative product development.
Additionally, according to Mintel Group Ltd., over-the-counter allergy, cough, cold and flu treatments were projected to be an $11.1 billion market by 2025 in the U.S. alone.
The FDA provided clearance to our ClearUP product under a 510(k) for the temporary relief of sinus pain associated with allergic rhinitis in January 2019. As a treatment for allergy-related sinus pain, we believe that the available market for ClearUP is approximately 45 million U.S. adults.
The FDA then granted ClearUP a subsequent De Novo clearance in March 2021 for the temporary relief of moderate to severe congestion, expanding ClearUP’s label and enabling marketing of ClearUP for allergies, sinusitis, cold, flu, and any inflammatory condition involving congestion. As a treatment for moderate to severe congestion, we believe the available target market for ClearUP is approximately 85 million U.S. adults.
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We have also received a CE Mark for international marketing of ClearUP. The CE Mark for ClearUP covers a broad set of conditions related to sinonasal inflammation with the symptoms pain, pressure and congestion. The CE Mark allows sales in European Union Member states and certain other countries that recognize the CE Mark for regulatory governance. We believe that there are international opportunities for the sale of ClearUP.
In clinical research studies pertaining to ClearUP:
| • | 82% of participants indicated that they prefer it to their current treatments;(1) and |
| • | 77% of participants indicated that they would recommend ClearUP.(2) |
| (1) | Data from a 71-person randomized controlled study conducted by a third-party academic research center. |
| (2) | Data from a 30-person open label trial conducted by a third-party clinical research organization. |
In 2023, we completed, with Intellego Intelligence, a 2000-person market segmentation study that identified the following additional addressable markets in the United States, based on the Company’s current pricing structure for ClearUP:
| • | Individuals with severe sinus conditions representing a $0.9 billion addressable market, of which the Company has achieved less than 0.002% penetration. |
| • | Allergy sufferers seeking to avoid pharmaceutical side effects, representing $1.2 billion addressable market, of which the Company has achieved less than 0.002% penetration. |
| • | High-performance athletes seeking improved breathing to enhance performance, representing a $2.4 billion addressable market that the Company has not yet targeted. |
| • | CPAP and Sleep Apnea sufferers for whom congestion is a significant contributing factor to lack of quality sleep and/or CPAP compliance, representing a $0.6 billion addressable market. |
| • | Individuals for whom sinus conditions cascade into severe headaches and migraine, representing a $4.0 billion addressable market. Claims for migraine would require separate FDA submissions beyond the Company’s currently approved indications. |
Sales and Marketing
ClearUP is sold directly to consumers through our own website, Amazon, and Walmart. We also sell to major online retailers, such as BestBuy and FSAStore. In 2023, we also entered into distribution agreements with Cardinal Health and AmerisourceBergen, and subsequently, in 2024, established a relationship with McKesson-affiliate Simply Medical. Expansion of our ClearUP sales channels has been gradual and measured to maintain pricing integrity, cultivate consumer acceptance and establish strong channel relationships.
Our marketing strategy is built around customer segments, whose buying decisions may be driven by differentiated messages. We reach and convert our customers for ClearUP through a combination of press releases, advertising, retargeting and emails.
In Q4 of 2023, we also partnered with In-Step on a trial physician education program, reaching 2,500 physicians over four months with information about bioelectronic medicine, the clinical efficacy of ClearUP, and patient education materials.
Core Technology
Our technology combines proprietary algorithms, programmable stimulation parameters, and a patented delivery mechanisms to modulate nerve signals. We are researching the utility of this stimulation approach for other clinical conditions.
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Tivic currently has two non-invasive bioelectronic platforms designed to deliver therapeutic benefits via manipulation of such signals without the use of traditional implanted technology, one of which has been commercialized to date.
Key elements of our current commercial platform include:
| • | a proprietary algorithmic means of detecting areas of dense nerve innervation and blood vessels, which help guide a user to the optimal treatment locations; |
| • | a proprietary algorithmic means of adapting treatment currents and detection to the unique physiological attributes of the technology’s user at the time of use; |
| • | a proprietary algorithmic means of dynamically adjusting treatment levels to maintain both efficacy and comfort; |
| • | programmability of the stimulation protocols via firmware to deliver varied stimulation protocols for different physical and disease targets, providing accelerated opportunities for new product applications; and |
| • | a unique monopolar design that enables ultra-low currents to pass through skin and tissue while maintaining nearly imperceptible current levels. |
This combination creates a platform for non-invasively influencing peripheral activity in the facial region with an ultra-low current level.
Numerous inflammatory conditions are associated with trigeminal and peripheral nerve activity of the face, including:
| • | chronic quality-of-life conditions such as migraines (39 million U.S.), temporomandibular joint disorder (31 million U.S.), and tinnitus (50 million U.S.); |
| • | severe, life-altering conditions such as trigeminal neuralgia (150,000 U.S., severe condition); and |
| • | acute conditions such as ear infections (50% of children) and pain and swelling from facial and sinus surgeries (600,000 functional endoscopic surgeries annually, U.S.). |
Each of these applications would involve regulation of pain and inflammation-related mediators like those seen in sinus and nasal inflammation.
Our second platform is a research-stage platform directed to vagus nerve stimulation, which is currently undergoing clinical evaluation in partnership with Northwell Health, The Feinstein Institute for Bioelectronic Medicine. Multiple acute and chronic conditions could be the target for our non-invasive vagus nerve treatment platform, including:
| • | acute and chronic inflammation (e.g. sepsis, brain injury, major depressive disorder); |
| • | auto-immune inflammation (e.g. rheumatoid arthritis, Crohn’s disease); and |
| • | autonomic nervous system dysfunction (e.g. dysautonomia, post-traumatic stress disorder) |
We believe that this non-invasive, low-risk nature of Tivic’s approach to bioelectronic medicine has the potential to accelerate new product development by: (i) extending the device platforms to other clinical areas, thereby reducing research and development time, and (ii) continuing to benefit from low-risk non-invasive device designations and regulatory pathways by the FDA, which typically result in shorter time to approval when compared with invasive devices or new drugs. Although it is our intention to bring new products to market, medical device development is inherently uncertain and there is no guarantee that our research and development efforts will lead to approved products for other clinical indications.
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Competitive Landscape
Pharmaceutical Treatments
Sinus pain, pressure and congestion can be caused by allergic rhinitis (allergies), rhinosinusitis, sinus infections, cold and flu and are most often treated with over-the-counter products targeted symptomatically.
| • | Sinus pain/pressure is usually managed with analgesic medications (e.g., ibuprofen/Advil, acetaminophen/Tylenol, naproxen sodium/Aleve). Analgesic medications provide short periods of relief and are often associated with side effects including stomach pain, bleeding, ulcers, constipation, diarrhea, gas, bloating, heartburn, nausea, vomiting, dizziness, headache, nervousness, and rash. |
| • | Congestion is treated with a variety of approaches: |
| • | Antihistamine medications are often a first-line therapy for allergy-related symptoms and research indicates that they are effective for treating allergy symptoms such as itchiness, but are less effective for congestion. Antihistamine medications (e.g., loratadine/Claritin) are generally well-tolerated, but may have side-effects including headache, sleepiness, fatigue, dry mouth, and sore throat. |
| • | Oral decongestants (e.g., phenylephrine/Sudafed) used to treat congestion have been demonstrated to exert poor to moderate efficacy, and are associated with nervousness, restlessness, insomnia, dizziness, tachycardia, heart palpitations, syncope, headache, sweating, nausea or vomiting, trembling, paleness, and weakness. |
| • | Intranasal decongestants (e.g., oxymetazoline/Afrin) are more effective than oral decongestants. However, they have reduced effectiveness and rebound effects after three days of use and can lead to the development of a serious condition, rhinitis medicamentosa. Additionally, intranasal decongestants cause side effects including nose irritation or burning, sneezing, dizziness, increased blood pressure, tachycardia, heart palpitations, restlessness and insomnia. |
| • | Intranasal glucocorticoids (e.g., fluticasone propionate/Flonase) have been shown to have the most significant benefits, with some studies showing a 34% reduction in congestion severity after one week of use. Intranasal glucocorticoids have several side effects including epistaxis, dryness, stinging, burning in nose, headache, nausea, vomiting, diarrhea, dizziness, sore throat, and cough. |
Examples of companies developing drugs for pain and congestion include GlaxoSmithKline, Bayer, and Johnson & Johnson.
Limitations on Use of Pharmaceutical Treatments
Due to the side effect profiles of pharmaceuticals, many of the above-mentioned treatments carry warnings to discontinue use after two weeks or less according to the U.S. National Library of Medicine. Additionally, some carry warnings regarding use with certain medications or diseases such as high blood pressure.
In the Fall of 2023, a panel of U.S. health experts found that many widely used products containing phenylephrine are ineffective. According to a Yale School of Medicine news article, an FDA advisory committee unanimously concluded that phenylephrine, an ingredient found in popular nasal decongestants sold under such brand names as Sudafed and Dayquil, works no better than a placebo in treating cold and allergy symptoms.
Non-pharmaceutical Treatments
According to our 2023 Intellego Insight study, many consumers are seeking natural, non-pharmaceutical treatment options. Alternative options currently include, without limitation:
| • | Nasal irrigation with saline, rinsing the nasal passages with saline solution is a common non-pharmaceutical treatment. Example products include NeilMed Sinus Rinse, Navage Nasal Care |
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| and Vicks Sinex Severe. Nasal irrigation is understudied, but there is some evidence of improved quality of life and clearance of mucus. However, saline can irritate an already inflamed sinonasal tissue and nasal irrigation using tap water has been found to carry risk of parasite-driven encephalitis. |
| • | Bioelectronic devices. ClearUP is the first device to have been approved by the FDA under a de novo classification for the intended use for temporary relief of moderate to severe congestion. The Company also received FDA clearance for the intended use in treatment of sinus pain associated with allergic rhinitis. |
Examples of companies developing non-drug products for sinus pain and congestion include NeilMed, Rhinosystems Inc., and Vapore LLC.
ClearUP is a novel product offering in the non-drug category, an emerging bioelectronic medicine segment, and currently has small market share compared to the existing establishments, most of which offer pharmaceutical options.
Clinical Research on ClearUP
Allergic rhinitis is an inflammatory disease driven by IgE-mediated reactions to inhaled indoor or seasonal outdoor allergens. The resulting sinus and nasal inflammation may cause symptoms including sinus pain and pressure, nasal congestion, runny nose, sneezing, and nasal itching. Allergic rhinitis affects a significant number of U.S. adults, of which a vast majority experience sinus pain, pressure and congestion as a result of inflammation of the nasal and sinus mucosa.
Key Technical Features
| • | Treatment Point Detection. ClearUP employs an advanced treatment point detection algorithm that dynamically personalizes to each user. Haptic vibration indicates to the user to hold the device over these points to facilitate stimulation in areas that maximize therapeutic benefit. We have innovated by integrating dynamic measurement with neuromodulation technology to create this novel therapy. (Issued patents: US10625076, US11160978, and US10537738) |
| • | Monopolar Circuit. ClearUP delivers microcurrent stimulation via a monopolar circuit in which the rounded tip of the device is the active electrode and the conductive housing of the device serves as the return electrode. The monopolar design of ClearUP is a significant improvement over typical bipolar approaches to neuromodulation engineering and facilitates deeper delivery of current and sensitive treatment point detection. (Issued patents: US10625076, US11160978, and US10596374) |
| • | Proprietary Waveform Delivery. ClearUP delivers a specific frequency, waveform shape, and amplitude of microcurrent that was empirically determined to have fast-acting therapeutic effects on users with common sinonasal symptoms like pain and congestion. Additionally, we have developed an adaptive algorithm that ensures consistent and comfortable delivery of microcurrent treatment on different parts of the face that can have varying electrical properties. (Issued patents: US10625076, US11160978, and US10537738) |
| • | Ergonomic Design and Ease of Use. ClearUP’s design ensures the product is comfortable to hold and that the hand will always be in contact with the conductive housing of the monopolar circuit. The device shape has also been refined so that the user can navigate the treatment path with ease. Additionally, the single-button control and intuitive indicators make ClearUP Sinus Relief simple to use. Greater than 95% of users report that applying ClearUP Sinus Relief treatment is easy. (Issued patents: US10596374, US10576280) |
Two separate clinical trials have demonstrated the safety and efficacy of ClearUP Sinus Relief in treating sinus pain from allergic rhinitis and moderate to severe congestion.
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Pivotal Study: randomized, placebo-controlled, double-blinded clinical trial
In July 2018, the Stanford University Sinus Center conducted a double-blind randomized controlled clinical trial using the ClearUP bioelectronic device. 71 subjects suffering from sinus pain and congestion used either ClearUP or a sham device. The sham device was identical to ClearUP in every way except that it used a continuous DC output instead of the pulsed AC stimulation used by ClearUP.
Each subject used the real or sham device for a single five-minute treatment. Before and ten minutes after treatment, subjects completed questionnaires to quantify their symptoms. Subjects treated with ClearUP reported a rapid and clinically meaningful reduction in sinus pain (-29.6%) and congestion (-35%) at ten minutes after treatment.
This magnitude of change was significantly greater than that observed in sham device-treated subjects.
PUBLICATION: Maul, X. A., Borchard, N. A., Hwang, P. H., & Nayak, J. V. (2019, April). Microcurrent technology for rapid relief of sinus pain: a randomized, placebo-controlled, double-blinded clinical trial. In International forum of allergy & rhinology (Vol. 9, No. 4, pp. 352-356).
Open-label Prospective Trial
The Allergy and Asthma Associates of Santa Clara Valley Research Center conducted a 30-person study on the use of ClearUP over four weeks. Subjects with sinus pain and congestion used the ClearUP device for five minutes during the study visit and then took the device home with them with instructions to use the device one to four times daily for five minutes per treatment as needed for four weeks. Subjects rated their symptoms weekly using a questionnaire. After the first five-minute treatment with ClearUP, subjects reported reduced sinus pain that remained six hours later, the longest time interval tested in the study. Additionally, subjects reported that after four weeks of use, they experienced an average of 43% reduction in sinus pain and 44% reduction in congestion. This magnitude of change was equivalent to efficacy seen in studies of fluticasone propionate after two-weeks of use.
PUBLICATION: Goldsobel, A. B., Prabhakar, N., & Gurfein, B. T. (2019). Prospective trial examining safety and efficacy of microcurrent stimulation for the treatment of sinus pain and congestion. Bioelectronic medicine, 5(1), 1-9.
Safety
In the clinical studies and post-market surveillance, there have been no reports of any significant side effects and very few reports of minor side effects. Minor side effects have included reddening of skin (<0.02%), eyelid twitch (<0.01%), and headache (<0.01%), all of which resolved without intervention.
Research Initiatives: New Product Candidates
We combine proprietary algorithms, programmable stimulation parameters, and a patented monopolar delivery mechanism to modulate the nerve signals that control inflammation-driven symptoms like pain and congestion. This design has proven effective in treating sinus and nasal inflammatory conditions and we are researching the clinical utility of this stimulation approach for other clinical conditions. This platform has the potential to accelerate new product development by: (i) extending the existing device platform to other clinical areas, thereby reducing research and development time, and (ii) continuing to benefit from low-risk, non-invasive device designations and regulatory pathways by the FDA, which typically result in shorter time to approval when compared with invasive devices or new drugs.
Numerous inflammatory conditions are associated with peripheral nerve activity of the face, including:
| • | chronic quality-of-life conditions such as migraines (39 million U.S.), temporomandibular joint disorder (31 million U.S.), and tinnitus (50 million U.S.); |
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| • | severe, life-altering conditions such as trigeminal neuralgia (150,000 U.S., severe condition); and |
| • | acute conditions such as ear infections (50% of children) and pain and swelling from facial and sinus surgeries (600,000 functional endoscopic surgeries annually, U.S.). |
Each of these applications would involve regulation of pain and inflammation-related mediators like those seen in sinus and nasal inflammation. Firmware programming of ClearUP allows various stimulation protocols to be used for different disease and neural targets, providing accelerated opportunities for new product candidates at varying price points.
Activities are ongoing for two product candidates: (i) npdPP, an at home-use device for treating postoperative pain after sinus surgery, and (ii) npdMI, an at home-use device for treating migraine headaches. These product candidates are still in early stages of research and development and will require additional studies and regulatory clearances prior to bringing them to market.
npdPP: We completed a ten-person pilot study with the U.S. Institute for Advanced Sinus Care and Research (Cleveland, OH) to evaluate a new device for the treatment of postoperative pain after functional endoscopic sinus surgery (“FESS”). The pilot study was conducted to establish clinical feasibility and we subsequently began a double-blind randomized controlled trial with the Icahn School of Medicine at Mount Sinai to further test this application.
npdMI: We are in the process of investigating the area of migraine headaches, which impacts approximately 1 billion people worldwide and 39 million people in the U.S. As part of our research and development activities for migraine, we have been in communication with the FDA to determine the next steps and an appropriate regulatory pathway for expanding our indications. We have completed a market and technology assessment of a potential migraine indication. While we believe that both clinical and market rationale are positive for such use, we have, for the time being, determined to down-prioritize any clinical studies of migraine-related indications based on the aggressive competition among entrenched incumbents and limited uptake, to date, of existing devices for the treatment and/or prevention of migraine.
We believe our commitment to non-invasive bioelectronic medicine simplifies clinical trial approaches, improves the safety profile important in regulatory matters, and lowers barriers to adoption once in the market. These factors could afford us a unique opportunity for a rapid pace of innovation relative to other therapeutic companies. While it is our intention to bring new products to market, therapeutic development is inherently uncertain and there is no guarantee that our research and development efforts will lead to approved products for other clinical indications.
Component Sourcing and Manufacturing
The ClearUP device is comprised of conventional, off-the-shelf electronic components.
Certain of our electronic components are sourced primarily from China. To increase predictability in sourcing and pricing of electronic components used in our products, we maintain an agreement with Future Electronics, Inc., one of the largest global electronic component distributors. The contract has an initial term of 12 months that automatically renews for additional 12-month periods, subject to annual review, and provides for extended payment terms. Future Electronics may terminate the agreement upon 30 days prior written notice if it determines, in its sole discretion, that we are not meeting our minimum purchase requirement or we are otherwise not performing our obligations under the agreement.
Packaging production is divided between North America and China. The plastic enclosure components and sub-assemblies are produced in China. Materials for both packaging and plastics are commonly available and can be sourced from multiple vendors. Lead times may vary due to supply availability, customs and port management issues.
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Electronic components are assembled, tested, warehoused at, and distributed from North America.
The Company has ISO 13485 certification (70488) required to validate the internal processes being compliant with the FDA 21 CFR Part 820. The Company was re-certified in 2023, with certificates extended until the fourth quarter of 2026.
Intellectual Property / Barriers to Entry
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates and other discoveries, inventions, trade secrets and know-how that are critical to our business operations. Our success also depends in part on our ability to operate without infringing the proprietary rights of others, and in part, on our ability to prevent others from infringing our proprietary rights. A comprehensive discussion on risks relating to intellectual property is provided under the section of this prospectus entitled “Risk Factors—Risks Related to Our Intellectual Property.”
We rely primarily on a combination of patent, copyright, trademark, and trade secret laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights. Our patent strategy is to pursue broad protection for key technologies, supplemented by additional patent filings covering conceptual methods, specific aspects of current and proposed products, and forward-looking applications and technological developments. We also engage in strategic analysis of our owned patent assets, and pursue additional patent claims from our existing portfolio that may provide us with market advantages. We do not rely heavily on trade secret protection, but do maintain a certain amount of in-house know-how that is not disclosed publicly.
Our intellectual property portfolio currently consists of:
| • | 6 issued U.S. patents. |
| • | 21 patents pending in the U.S. and abroad. |
| • | 7 trademarks granted in the U.S. and China. |
| • | 2 trademark applications have been filed in the U.S. |
Our intellectual property portfolio includes a large number of disclosures that cover enhanced cost and manufacturability, performance, ergonomics, comfort, ease of use, system expansion, and treatments performed. Identity is protected by way of trademarks. Various aspects of design and function that cannot be readily reverse engineered are held as trade secrets.
In most jurisdictions in which we file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. However, the term of U.S. patents may be extended for delays incurred due to compliance with FDA requirements or by delays encountered during prosecution that are caused by the United States Patent and Trademark Office (“USPTO”). We intend to seek patent term extensions in any jurisdiction where these are available and where we also have a patent that may be eligible; however, there is no guarantee that the applicable authorities will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.
Other Barriers to Entry
We have published high-quality clinical research in high-impact peer reviewed journals, establishing Tivic Health as an evidence-based company. Our first-to-market position has secured a high volume and proportion of positive reviews on our websites and other ecommerce channels. We believe that each of these assets, in addition to our intellectual property and regulatory clearances, will create barriers to entry for competitors.
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Government Regulation
ClearUP is a U.S. FDA Class II and EU Class IIa medical device that has received three regulatory clearances: (US FDA 510(k) number K182025, US FDA De Novo number DEN200006 and EU CE Mark Certificate number CE (704687). Our EU CE Mark Certificate expires in June 2024 and we are in the process of applying for a new EU CE Mark Certificate under the new EU Medical Device Regulations (MDR) 2017/745. We expect to be compliant with the new regulations prior to the EU CE Mark Certificate expiry date.
Regulation by the FDA
In the United States, the Federal Food, Drug, and Cosmetic Act (“FD&C Act”), as well as FDA regulations and other federal and state statutes and regulations, govern medical device design and development, preclinical and clinical testing, device safety, premarket clearance, grant, and approval, establishment registration and device listing, manufacturing, labeling, storage, record-keeping, advertising and promotion, sales and distribution, export and import, recalls and field safety corrective actions, and post-market surveillance, including complaint handling and medical device reporting of adverse events.
The FDA classifies medical devices into three classes (Class I, II or III) based on the degree of risk associated with a device and the level of regulatory control deemed necessary to ensure its safety and effectiveness. Class I devices are those for which safety and effectiveness can be assured by adherence to the FDA’s general controls for medical devices. Class II devices are subject to the FDA’s general controls and any other special controls the FDA deems necessary to ensure the safety and effectiveness of the device. Class III devices are those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury.
De Novo classification is a risk-based classification process. The De Novo process provides a pathway to classify novel medical devices for which general controls alone, or general and special controls, provide reasonable assurance of safety and effectiveness for the intended use, but for which there is no legally marketed predicate device. De Novo classified devices fall either into Class I or Class II and may be marketed and used as predicates for future premarket notification 510(k) submissions.
In 2019, the FDA issued guidance stating that it does not intend to examine low risk general wellness products to determine whether they are devices within the meaning of the FD&C Act or, if they are devices, whether they comply with the premarket review and post-market regulatory requirements for devices under the FD&C Act and implementing regulations. For purposes of its guidance, the FDA defined general wellness products as “products that meet the following two factors: (1) are intended for only general wellness use, as defined in this guidance, and (2) present a low risk to the safety of users and other persons.” Although the FDA classifies our peripheral nerve stimulation platform as a Transcutaneous Electrical Nerve Stimulator (“TENS”) regulated as a Class II medical device, we also intend to pursue development and marketing of general wellness claims and assess if our products fall within the general wellness FDA guidelines.
ClearUP Sinus Relief was cleared under 510(k) number K182025 based on clinical data supporting its safety and efficacy for the temporary relief of sinus pain associated with allergic rhinitis. We were subsequently granted the rights to market ClearUP for the temporary relief of moderate to severe congestion under De Novo number DEN200006.
Labeling
All medical devices commercially distributed in the U.S. must comply with specific FDA labeling requirements. These requirements address the labeling (e.g., device label, Instruction for Use, package label, etc.) that must be affixed to the device or packaging and, in the case of devices used by the consumer, provided to all users of the device. Our ClearUP labeling has been reviewed by the FDA as part of our regulatory clearances and our quality management system provides for control of documents to prevent changes that might invalidate FDA’s review.
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Quality System Regulation
The devices that we commercially distribute in the U.S. are subject to pervasive and continuing regulation by the FDA and certain state agencies. This includes product listing and establishment registration requirements, which facilitate FDA inspections and other regulatory actions. We adhere to applicable current good manufacturing practice, or cGMP, requirements, as set forth in the 21 CFR 820 QSR, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and manufacturing process. We are also required to verify that our suppliers maintain facilities, procedures and operations that comply with applicable quality and regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of contractors. FDA regulations also require investigation and correction of any deviations from the QSR and impose reporting and documentation requirements upon us and our third-party manufacturers.
Post-market surveillance
We must also comply with post-market surveillance regulations, including medical device reporting (“MDR”), requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury, and any incident in which our device has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur. We must also comply with medical device correction and removal reporting regulations, which require manufacturers to report to the FDA corrections and removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act that may present a risk to health. Although we may undertake recall actions voluntarily, we must submit detailed information on any recall action to the FDA, and the FDA can order a medical device recall in certain circumstances. To date, we have not been made aware of any reportable incidents that would require us to submit a medical device report to the FDA or any competent authority globally.
In addition to post-market quality and safety actions, labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the FTC. Medical devices approved, cleared, or granted by the FDA may not be promoted for outside their respective Indication for Use, otherwise known as “off-label” promotion.
Other healthcare laws and regulations
The healthcare industry is also subject to federal and state fraud and abuse laws, including anti-kickback, self-referral, false claims and physician payment transparency laws, as well as patient data privacy and security and consumer protection and unfair competition laws and regulations. Our operations are also subject to certain state and local laws, including manufacturing license, sales and marketing practices, interactions with consumers, consumer incentive and other promotional programs, and state corporate practice and fee-splitting prohibitions.
Currently, ClearUP is not reimbursed by any government or private healthcare program, limiting our exposure under certain laws such as the Sunshine Act.
CE Mark – European Union and other jurisdictions that recognize the CE Mark
In 2020 we secured the CE Mark CE 704687 allowing sales and marketing of ClearUP in the European Union and in any country that recognizes CE Mark certificate for relief of sinus pain, pressure and congestion, without regard to the cause of pain, pressure and congestion. Sales in such jurisdictions will expose our operations to additional regulations.
To the extent that any of our products are sold in a foreign country, we may become subject to foreign laws, which may include, for example, applicable post-marketing requirements, including post-market clinical follow
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up, safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals. We must operate our business within the requirements of these laws.
Coverage and reimbursement
Our current product is purchased on a cash-pay basis and is not covered by government healthcare programs and/or other third-party payors. However, we monitor federal and state legislation and regulatory changes that could affect our results of operations.
Privacy and security
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their implementing regulations, imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health care providers, health plans and health care clearinghouses), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
Even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
In addition, certain states and non-U.S. laws, such as the GDPR, govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. For example, California recently enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020 and was amended and expanded by the California Privacy Rights Act, or CPRA, which took effect on January 1, 2023. The CCPA, as amended by the CPRA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information and the right to access information about how their data is being used.
Environmental Matters
Our operations, properties and products are subject to a variety of U.S. and foreign environmental laws and regulations governing, among other things, use of manufacturing components containing substances below established threshold, air emissions, wastewater discharges, management and disposal of hazardous and non-hazardous materials and waste and remediation of releases of hazardous materials. We believe, based on current information that we are in material compliance with environmental laws and regulations applicable to us and rely heavily on our outsourced design and manufacturing partners to assist in maintaining compliance.
Facilities
Our principal executive office is located at 25821 Industrial Blvd., Suite 100, Hayward, California 94545. On November 17, 2021, we entered into a sublease agreement for approximately 9,091 square feet of office and warehouse space. The term of the sublease will expire on October 31, 2025.
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Human Capital Resources
As of December 31, 2023, we had 9 full-time employees and four contractors. None of our employees are represented by a labor union, and we consider our employee relations to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.
Legal Proceedings
We are not currently a party to any material legal proceedings. We may, however, in the ordinary course of business face various claims brought by third parties, and we may, from time to time, make claims or take legal actions to assert our rights, including intellectual property rights as well as claims relating to employment matters and the safety or efficacy of our products. Any of these claims could subject us to costly litigation. If this were to happen, the payment of any such awards could have a material adverse effect on our business, financial condition and results of operations. Additionally, any such claims, whether or not successful, could damage our reputation and business.
Corporate Information
The Company was incorporated in California in September 2016 and reincorporated as a Delaware corporation in June 2021. Our principal executive offices are located at 25821 Industrial Blvd., Suite 100, Hayward, California 94545. Our telephone number is (888) 276-6888. Our website address is www.tivichealth.com. Information contained on, or that can be accessible through, our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in “Risk Factors” and in other parts of this prospectus.
Overview
Tivic is a bioelectronic medicine company developing and commercializing drug-free treatments for various diseases and conditions. Bioelectronic medicine, also referred to as electroceuticals or neuromodulation, is the treatment of disease and conditions by preferentially activating electrical functions of the body to modify central or peripheral nerve activity. ClearUP is our first commercial product, and is FDA-approved for the treatment of sinus pain and congestion. It has also been granted a CE-Mark as a medical device for the treatment of sinus pain, pressure and congestion. ClearUP is currently sold in the U.S. directly to consumers on various platforms and through reseller channels. The Company has also recently announced the expansion of its IP portfolio and research programs related to vagus nerve stimulation to expand its applications in non-invasive bioelectronic medicine.
Business Overview
Bioelectronic medicine is an emerging market. Since our formation in September 2016, we have devoted substantially all of our efforts to the development and marketing of our proprietary technology platform to provide noninvasive, drug-free treatments and treatment candidates for various diseases and conditions. In 2019, we launched ClearUP in the U.S. market. ClearUP is approved by the FDA for sale in the U.S. for the two FDA-approved indications noted above and has a CE Mark (which covers a third indication of sinus pressure and gives us commercial access to European Union Member states and certain other countries). We currently sell ClearUP directly to consumers online through our own website, Amazon, and Walmart in addition to wholesale via major and specialty retailers, such as BestBuy, FSAStore, and others.
Recent Events
In the first quarter of 2024:
| • | We launched ClearUP 2.0 with improved charging circuitry, which also incorporated cost and usability improvements previously undertaken in 2022 and 2023. |
| • | We completed enrollment in the vagus nerve study at The Feinstein Institutes for Medical Research and anticipate final data read-outs in early Q2 of 2024. |
Business Activities
Reverse Stock Split - 2023
Effective August 23, 2023, the Company implemented a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-100. As a result of the reverse stock split, the total number of shares of Common Stock held by each stockholder of the Company were converted automatically into the number of shares of Common Stock equal to the number of issued and outstanding shares of Common Stock held by each such stockholder immediately prior to completion of the reverse stock split divided by 100. The Company issued one whole share of the post reverse stock split common stock to any stockholder who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split. As a result, no fractional shares were issued in connection with the reverse stock split and no cash or other consideration was
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paid in connection with any fractional shares that would otherwise have resulted from the reverse stock split. Also, all options, warrants and other convertible securities of the Company outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which such options, warrants and other convertible securities were exercisable or convertible by 100 and multiplied the exercise or conversion price thereof by 100, all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding pursuant to such terms. There was no change to the par value, or authorized shares, of either the common stock or preferred stock, as a result of the reverse stock split. All share and per share amounts for the Company’s common stock, as well as the options and warrants outstanding and exercise prices thereof, from dates prior to completion of the reverse stock split that are included in this prospectus, including the financial statements and footnotes thereto included herein, have been retroactively restated to give effect to the reverse stock split.
2023 Capital Raises
On February 13, 2023, we sold an aggregate of 200,000 shares of our common stock to certain investors at a public offering price of $25.00 per share (less underwriting discounts and commissions) in a firm commitment underwritten public offering. This offering resulted in aggregate gross proceeds to the Company of $5.0 million. Aggregate net proceeds to the Company, after deducting the underwriting discount and commissions and offering expenses paid by the Company, was approximately $3.6 million. ThinkEquity LLC served as underwriter for the offering. The securities issued in connection with the offering were registered pursuant to the registration statement on Form S-1 (File No. 333-268010), which was initially filed with the Commission on October 26, 2022, and amended on December 09, 2022, December 20, 2022, January 6, 2023, February 1, 2023, and February 9, 2023, which the Commission declared effective on February 8, 2023.
From July 11, 2023 to August 9, 2023, we sold an aggregate of 1,169,230 shares of common stock to certain investors at prices ranging from $4.00 to $5.50 per share in a series of registered public offerings, resulting in aggregate gross proceeds to the Company of approximately $5.2 million. Aggregate net proceeds to the Company, after deducting placement agent fees and offering expenses paid by the Company, was approximately $4.3 million. Maxim served as the placement agent, on a “reasonable best efforts basis,” in connection with each of the offerings. The shares of common stock sold in the offerings were offered pursuant to final prospectus supplements, filed with the Commission, to the Company’s effective shelf registration statement on Form S-3 (File No. 333-269494), which was initially filed with the Commission on February 1, 2023 and was declared effective on February 8, 2023. See footnote No, 9 “Common Stock” and No. 10 “Common Stock Warrants” in the financial statements included elsewhere in the registration statement of which this prospectus is a part for additional information regarding each of the offerings.
Operational Updates
Fiscal 2023
In 2023, we invested in our marketing, product design, distribution relationships, and quality systems as follows:
| • | In February, Tivic received successful recertification to ISO 13485, the international standard for medical device quality systems. This allowed Tivic, in early 2023, to recertify under the European Union Medical Device Certificate (CE-Mark). |
| • | In March, we completed supplier qualification and first article inspections at ALOM Technologies Corporation (“ALOM”) and Microart Services Inc. (“Microart”), allowing Tivic to reduce assembly production costs by 40% and improve gross margins substantively by end of year. |
| • | In April, we completed a 2000-person marketing segmentation study to inform our advertising and pricing structure. We subsequently implemented a price increase for ClearUP that negatively impacted direct sales and retail order volumes in Q2, but substantively improved gross profit throughout the course of the year. |
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| • | In May, we launched a B2B portal to support our strategy to increase physician and healthcare provider engagement, including physician resale and recommendation programs for ClearUP. |
| • | In late June, we entered into a non-exclusive distribution agreement with Cardinal Health for our products. |
| • | In late August, we entered into a non-exclusive agreement with AmerisourceBergen, soon to be Cencora, to make our products available on AmerisourceBergen’s third-party marketplace. |
| • | In late September, we entered into an agreement with InStep Health® to introduce ClearUP to over 2,500 healthcare providers and their patients. |
| • | In Q3, we initiated and subsequently launched a printed circuit board redesign to address charging issues associated with a purchased component used in ClearUP. The redesigned circuitry began shipping in late December 2023 and launched formally as ClearUP 2.0 in January 2024. |
In 2023, we also invested in our product innovation and development programs as follows:
| • | In early April, we filed our first patent in Vagus Nerve Stimulation with the USPTO, expanding our IP portfolio into new clinical targets. |
| • | In mid-April, we announced a research collaboration with The Feinstein Institutes for Medical Research to conduct a pilot clinical study that will test a novel non-invasive bioelectronic device approach for vagus nerve stimulation. |
| • | In July, we announced that the USPTO had issued us a sixth patent for our bioelectronic platform, expanding our IP portfolio to include the proprietary contacts, conductive circuitry design, and algorithms to optimize therapy delivery in our handheld monopolar design. |
| • | In August, we received study approval from the Institutional Review Board (“IRB”) of The Feinstein Institutes for Medical Research and initiated study recruitment and enrollment for our vagus nerve program. |
| • | We expanded our post-operative pain clinical study to include Otolaryngology and Facial Plastic Surgery patients. This study aims to investigate the potential benefits of a drug-free alternative to traditional post-operative pain management methods. |
As a result of these programs, the Company was named to Fast Company’s prestigious annual list of the World’s Most Innovative Companies for 2023 in the Medical Device category. Additionally, in 2022, Global Health & Pharma named Tivic Health the Most Pioneering Bioelectronic Medicine Company of 2022.
We have continued to intentionally maintain a small core team at this stage of the Company, including decreasing our headcount to reduce operating expenses. We have relied, and continue to rely, heavily on third-party service providers, including marketing agencies, contract manufacturing organizations, software-as-a-service platforms, clinical research organizations, academic research partnerships, finance and accounting support, and legal support to carry out our operations.
Components of Results of Operations
Revenue
Revenue is generated by the sale of our ClearUP and ancillary products, including accessories and accelerated shipping charges, and is net of return reserves. We currently sell directly to consumers through our own website, Amazon and Walmart. We also sell to major and specialty distributors and online retailers, such as FSAStore and Best Buy. Noninvasive bioelectronic medicine is an emerging market space that provides consumers with non-drug treatments for various diseases and ClearUP is the first FDA-approved bioelectronic treatment for sinus pain and congestion.
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Cost of Sales
Cost of sales consists primarily of the materials and services to manufacture our products, the internal personnel costs to oversee manufacturing and supply chain functions, and the shipment of goods to customers. A significant portion of our cost of sales is currently in fixed and semi-fixed expenses associated with the management of manufacturing and supply chain. Cost of sales is expected to increase on an absolute basis as sales volume increases. Cost of sales is expected to decrease as a proportion of revenue with (i) the continued optimization of our supply chain, and (ii) the allocation of fixed and semi-fixed expenses over increasing unit sales volume over time.
Gross Margin
Gross margin has been and will continue to be affected by, and is likely to fluctuate on a quarterly basis due to, a variety of factors, including sales volumes, product and channel mix, pricing strategies, costs of finished goods, and product return rates, new product launches and potential new manufacturing partners and suppliers. We expect our gross margin to improve with optimization of our product design and supply-chain, and increasing sales volume over which fixed and semi-fixed costs are allocated.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred to conduct research, including the discovery, development and validation of product candidates. Research and development expenses include personnel costs, including stock-based compensation expense, third-party contractor services, including development and testing of prototype devices, and maintenance of limited in-house research facilities. We expense research and development costs as they are incurred. We expect research and development expenses to increase with the discovery and validation of new product candidates.
Sales and Marketing Expenses
Sales and marketing expenses include personnel costs and expenses for advertising and other marketing services. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation expense. We expect sales and marketing expenses to increase modestly as we continue to expand our markets and distribution channels.
General and Administrative Expenses
General and administrative expenses include D&O insurance, personnel costs, expenses for outside professional services and other expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation expense. Outside professional services consist of legal, finance, accounting and audit services, and other consulting fees. We expect general and administrative expenses to remain relatively flat.
Other Income / Expense, Net
Other income and expense include interest expense, change in fair value of derivative liabilities, loss on extinguishment of debt, and other income.
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Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
The following table summarizes our results of operations (in thousands):
| Year Ended December 31, | ||||||||||||
| Statement of operations data: |
2023 | 2022 | Change | |||||||||
| Revenue |
$ | 1,176 | $ | 1,840 | $ | (664 | ) | |||||
| Cost of sales |
889 | 1,541 | (652 | ) | ||||||||
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| Gross profit |
287 | 299 | (12 | ) | ||||||||
| Operating expenses: |
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| Research and development |
1,655 | 1,730 | (75 | ) | ||||||||
| Sales and marketing |
2,125 | 2,792 | (667 | ) | ||||||||
| General and administrative |
4,752 | 5,875 | (1,123 | ) | ||||||||
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| Total operating expenses |
8,532 | 10,397 | (1,865 | ) | ||||||||
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| Loss from operations |
(8,245 | ) | (10,098 | ) | 1,853 | |||||||
| Other income: |
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| Interest income |
1 | 2 | (1 | ) | ||||||||
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| Total other income |
1 | 2 | (1 | ) | ||||||||
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| Net loss before income taxes |
$ | (8,244 | ) | $ | (10,096 | ) | $ | 1,852 | ||||
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Revenue
Revenue (net of returns) decreased $664 thousand, or -36%, to $1.2 million for the year ended December 31, 2023 from $1.8 million for the year ended December 31, 2022, which decrease was primarily attributable to decreased unit sales of 52%. Unit sales were approximately 7,400 for the year ended December 31, 2023 and were approximately 15,400 for the year ended December 31, 2022. Ancillary revenues were less than 1.5% of total revenue for both of the years ended December 31, 2023 and 2022.
| Year Ended December 31, | ||||||||||||
| Statement of operations data (in thousands): |
2023 | 2022 | Change | |||||||||
| Product Revenue |
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| Direct-to-consumer |
$ | 1,079 | $ | 1,635 | $ | (556 | ) | |||||
| Reseller |
261 | 416 | (155 | ) | ||||||||
| Returns |
(164 | ) | (211 | ) | 47 | |||||||
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| Revenue |
$ | 1,176 | $ | 1,840 | $ | (664 | ) | |||||
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Direct-to-consumer product revenue decreased $556 thousand ,or -34%, to $1.1 million for the year ended December 31, 2023 from $1.6 million for the year ended December 31, 2022, which was due to decreased unit sales of -53%, offset by an average direct-to-consumer price increase of 46% over the prior year. Direct-to-consumer unit sales were approximately 5,400 for the year ended December 31, 2023 compared to approximately 11,400 for the year ended December 31, 2022. The decrease in unit sales was due to the price increases in 2023 as well as the reduction of unprofitable marketing spend.
Reseller channel product revenue decreased $155 thousand, or -37%, to $261 thousand for the year ended December 31, 2023 from $416 thousand for the year ended December 31, 2022, attributable to decreased unit sales of 50%. Reseller channel unit sales were approximately 2,000 for the year ended December 31, 2023 and were approximately 4,000 for the year ended December 31, 2022. Average reseller channel selling prices increased 21% in 2023 compared to 2022. The decrease in unit sales and the increase in average selling price were primarily due to the termination of less profitable reseller channels in 2023.
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Returns as a percentage of product revenue was approximately 12% for the year ended December 31, 2023 and 10% for the year ended December 31, 2022.
Cost of Sales
Cost of sales for the year ended December 31, 2023 was $889 thousand compared to $1.5 million for the year ended December 31, 2022, a decrease of $652 thousand, or -42%. The decrease was primarily attributable to the -52% decrease in overall unit sales, offset by an increases of $140 thousand of costs related to scrapped inventory and $32 thousand for a reserve against inventory. The costs for scrap and inventory reserves were primarily related to inventory components included in our ClearUP 1.0 unit. With the launch of ClearUP 2.0 in the fourth quarter of 2023, we do not expect to incur similar costs in 2024.
Variable cost of goods sold includes product costs, fulfillment, shipping and purchase price variances and other inventory adjustments. Variable cost of goods sold was $641 thousand, or $86.61 per unit, for the year ended December 31, 2023, as compared to $1.3 million, or $87.04 per unit, for the year ended December 31, 2022. The decrease in variable costs of goods sold was primarily due to reduction in variable costs associated with new supply chain partners, offset by inventory obsolescence associated with the transition in sales to ClearUP 2.0 at year-end.
Fixed cost of goods sold includes third-party product support and logistic fees and allocated overhead costs. Fixed cost of goods sold increased to $248 thousand for the year ended December 31, 2023, as compared to $203 thousand for the year ended December 31, 2022, primarily due to increased product support costs in 2023, which in turn was primarily associated with certain hourly service charges and periodic minimum spend obligations included Tivic’s contracts with its supply chain partners.
Gross profit for the year ended December 31, 2023 was $287 thousand compared to a gross profit of $299 thousand for the year ended December 31, 2022.
Research and Development Expenses
Research and development expenses decreased by $75 thousand to $1.7 million for the year ended December 31, 2023 from $1.7 million for the year ended December 31, 2022. The decrease was primarily due to reduced compensation costs related to decreased headcount. The emphasis of research and development activities in 2023 was primarily related to our work with The Feinstein Institutes. Activities in 2022 were primarily focused on product research and design in the migraine therapeutic area, initiation of a double-blind randomized controlled trial for post-operative pain relief following sinus surgery, and enhancement of our intellectual property protection.
We expect to incur additional research and development expenses related to extending the indications for our product(s) in the near term.
Sales and Marketing Expenses
Sales and marketing expenses decreased to $2.1 million for the year ended December 31, 2023, compared to $2.8 million for the year ended December 31, 2022. The decrease was primarily due to a decrease of $925 thousand in advertising and agency costs, offset by increases of $327 thousand related to the expansion of our internal marketing team and $76 thousand in public relations costs.
General and Administrative Expenses
General and administrative expenses decreased to $4.8 million for the year ended December 31, 2023, compared to $5.9 million for the year ended December 31, 2022, primarily due to decreased legal and professional fees of $919 thousand and a net decrease in other corporate expenses of $221 thousand as a result of the Company’s efforts to reduce costs.
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Other Income
Other income was immaterial for the years ended December 31, 2023 and 2022, and consists of interest income from money market accounts.
Liquidity and Capital Resources
Sources of Liquidity
Since our formation in September 2016, we have devoted substantially all of our efforts to research and development, to regulatory clearance and to early market development and testing for our first product, released September 2019 in the United States. We are not profitable and have incurred net losses and negative cash flows from our operations in each year since our inception. During the years ended December 31, 2023 and 2022, we generated revenue of $1.2 million and $1.8 million, respectively. Additionally, during the years ended December 31, 2023 and 2022, we incurred net losses of $8.2 million and $10.1 million, respectively, and used $8.5 million and $8.9 million of cash for operations, respectively. As of December 31, 2023, we had cash and cash equivalents of $3.4 million, working capital of $3.3 million and an accumulated deficit of $37.9 million.
We have financed our operations to date primarily through issuances of SAFE instruments, convertible notes and convertible preferred stock and the proceeds from registered offerings of our securities. In 2021, we completed our IPO, generating net proceeds to the Company of approximately $14.9 million, and we borrowed $2.6 million by issuing convertible notes payable, the outstanding balance of all of which converted into shares of our common stock in connection with our IPO. On February 13, 2023, we completed the sale of 200,000 shares of our common stock in a firm commitment, fully underwritten registered public offering, resulting in net proceeds to the Company of approximately $3.6 million. From July 11, 2023 to August 9, 2023, we sold an aggregate of 1,169,230 shares of our common stock to certain investors in a series of registered public offerings, resulting in aggregate net proceeds to the Company of approximately $4.3 million.
Although we have taken measures to decrease our operating expenses, we expect that our operating expenses may increase significantly as we discover, acquire, validate and develop additional product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Furthermore, we have incurred and will continue to incur additional costs associated with operating as a public company that we did not experience as a private company. Management expects to incur substantial additional operating losses for the foreseeable future to expand our markets, complete development or acquisition of new product lines, obtain regulatory approvals, launch and commercialize our products and continue research and development programs. Based on the Company’s current cash levels and burn rate, amongst other things, the Company believes its cash and financial resources may be insufficient to meet the Company’s anticipated needs for the twelve months following the date of issuance of the financial statements for the year ended December 31, 2023, included elsewhere in the registration statement of which this prospectus is a part, which raises substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the financial statements.
Plan of Operation and Future Funding Requirements
We have used our capital resources primarily, to date, to fund marketing and advertising for ClearUP, development of both our trigeminal and our vagus nerve platforms and product candidates, evaluating and diligencing potential licensing and acquisition candidates, and the establishment of public company operating infrastructure and general operations. Although we have taken measures to decrease our operating expenses, we expect that our operating expenses may increase as we advance our vagus nerve platform, as well as discover, acquire, validate or develop additional product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products; obtain, maintain, protect and enforce our intellectual property portfolio; hire additional personnel; and maintain compliance with material government (in addition to environmental) regulations. We plan to increase our research and development investments in our vagus nerve platform and
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clinical applications thereof in 2024. Furthermore, we have incurred, and will continue to incur, costs associated with operating as a public company that we did not experience as a private company. We expect to continue to incur losses for the foreseeable future. At this time, due to the inherently unpredictable nature of research and new product adoption as well as other macroeconomic factors, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize future product candidates, if at all. For the same reasons, we are also unable to predict how quickly we will generate significant revenue from ClearUP product sales or whether, or when, if ever, we may achieve profitability from the sales of one or more products. Clinical and preclinical development timelines, the probability of success, and costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be best developed and/or monetized through future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
As previously disclosed, we encountered disruptions in our supply of various materials and components in 2022 due to the well-documented shortages and constraints in the global supply chain. Although we currently do not anticipate a supply shortage, unforeseen shortages may continue to pose a material risk for the Company in the near term or future. We regularly evaluate alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. Global supply chain shortages (especially when coupled with the increase in inflation and other economic factors) could result in an increase in the cost of the components used in our products, which could result in a decrease of our gross margins or in us having to increase the price at which we sell our products until supply chain constraints are resolved. Additionally, in the event that we are unable to source sufficient components and materials from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production and our business operations and financial condition may be materially harmed and we may need to alter our plan of operation.
In addition to the foregoing, we may, from time to time, consider opportunities for strategic acquisitions that we believe will align with our growth plan, complement our product offerings and be in the best interest of the Company and our shareholders. If an acquisition is identified and pursued, a substantial portion of our cash reserves may be required to complete such acquisition. If we identify an attractive acquisition that would require more cash to complete than we are willing or able to use from our cash reserves, we will consider financing options to complete the acquisition, including through equity and/or debt financings.
We have generated operating losses in each period since inception. We have incurred an accumulated deficit of $37.9 million through December 31, 2023. We expect to incur additional losses in the future as we expand both our research and development activities. Based on our current cash levels and burn rate, amongst other things, we believe our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months. As a result, we expect that we will need to raise additional capital to continue operating our business and fund our planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of future product candidates.
We currently generate sales revenue direct-to-consumer though our own websites, Amazon.com and Walmart.com. We also sell to major and specialty U.S. online retailers such as BestBuy and FSAStore and through distributors including McKesson’s affiliate Simply Medical, Cardinal Health and Amerisource Bergen. Our ability to grow sales revenue will depend on successfully executing a comprehensive marketing campaign to drive additional sales through existing and new channels. Long-term growth will be commensurate with our ability to successfully identify, develop, and secure regulatory approval of one or more additional product candidates beyond ClearUP. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate, foundation or government funding sources, or through other sources of financing. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to
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fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial conditions or results of operations, and we may have to significantly delay, scale back or discontinue the development and commercialization of our products and/or future product candidates.
The timing and amount of our operating expenditures will depend largely on:
| • | our ability to raise additional capital if and when necessary and on terms favorable to the Company; |
| • | the timing and progress of sales initiatives driving top-line revenue; |
| • | the availability of electronic parts and other components for our products, as well as our ability to source such parts and components at favorable prices; |
| • | the timing and adoption rate of ClearUP line extensions at lower cost of goods; |
| • | the payment terms and timing of commercial contracts entered into for manufacturing and sales of our products to and through online third-party retailers; |
| • | the timing and progress of preclinical and clinical development activities; |
| • | the number and scope of preclinical and clinical programs we decide to pursue; |
| • | the timing and amount of milestone payments we may receive under any future collaboration agreements; |
| • | whether we close potential future strategic acquisition opportunities, and if we do, our ability to successfully integrate acquired assets and/or businesses with our own; |
| • | our ability to source new business opportunities through licenses and research and development programs and to establish new collaboration arrangements; |
| • | the costs involved in prosecuting and enforcing patent and other intellectual property claims; |
| • | the cost and timing of additional regulatory approvals beyond those currently held by us; |
| • | our efforts to enhance operational systems and hire additional personnel, including personnel to support finance, sales, marketing, operations and development of our product candidates and satisfy our obligations as a public company; and |
| • | our efforts to maintain compliance with material government (including environmental) regulations. |
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also consider entering into collaboration arrangements or selectively partnering with third parties for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations and prospects.
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Cash Flows
The following table summarizes our cash flows for the period indicated (in thousands):
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash used in operating activities |
$ | (8,511 | ) | $ | (8,919 | ) | ||
| Cash used in investing activities |
$ | (118 | ) | $ | (11 | ) | ||
| Cash provided by (used in) financing activities |
8,507 | (528 | ) | |||||
|
|
|
|
|
|||||
| Net decrease in cash and cash equivalents |
$ | (122 | ) | $ | (9,458 | ) | ||
|
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|
|
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Operating Activities
Net cash used in operating activities for the year ended December 31, 2023 was $8.5 million, which consisted primarily of net loss of $8.2 million decreased by non-cash charges of $485 thousand and increased by a net change of $752 thousand in our net operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation of $271 thousand and amortization of right-of-use assets of $174 thousand. The change in our net operating assets and liabilities was primarily due to a decrease in accounts payable of $610 thousand, an increase in prepaid and other current assets of $92 thousand, a decrease in lease liabilities of $161 thousand and an increase in accrued expenses of $103 thousand.
Net cash used in operating activities for the year ended December 31, 2022 was $8.9 million, which consisted primarily of net loss of $10.1 million decreased by non-cash charges of $572 thousand and further decreased by a net change of $605 thousand in our net operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation of $398 thousand and amortization of right-of-use assets of $164 thousand. The change in our net operating assets and liabilities was primarily due to an increase in accounts payable of $534 thousand and a decrease in prepaid and other current assets of $558 thousand, offset by an increase in inventory of $434 thousand and a decrease in lease liabilities of $178 thousand.
Investing Activities
Net cash used in investing activities during the years ended December 31, 2023 and 2022 was related to the purchases of equipment and product development.
Financing Activities
Our financing activities provided $8.5 million of cash during the year ended December 31, 2023, which consisted primarily of proceeds from the sale of an aggregate of 1,369,230 shares of our common stock, net of offering discounts and other costs.
Our financing activities used $528 thousand of cash during the year ended December 31, 2022, which consisted of $584 thousand of deferred offering costs in connection with the sale of our common stock which closed subsequent to December 31, 2022, offset by $56 thousand of proceeds from the exercise of stock options.
Known Trends or Uncertainties
As discussed elsewhere in this prospectus, the world has continued to be been affected by the lingering effects of the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine and the more recent conflict between Israel and Hamas, economic uncertainty in human capital management (“HCM”) and certain other macroeconomic factors. Inflation has risen, Federal Reserve interest rates have increased over the last year, and the general consensus among economists continues to suggest that we should expect a higher recession risk to
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continue for the near term. Climate change continues to be an intense topic of public discussion and is adding additional challenges and financial burden due to impending preparations and changes in the customer mindset. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Effects of the pandemic and recent economic volatility have negatively impacted our business in various ways over the last three years, including as a result of global supply chain constraints at least partially attributable to the pandemic. We will continue to monitor material impacts on our HCM strategies, including potential of employee attrition, amongst other things.
We encountered disruptions in our supply of various materials and components in 2022 due to the well-documented shortages and constraints in the global supply chain. We experienced increased pricing, longer lead-times, unavailability of product and limited supplies, protracted delivery dates, and shortages of certain parts and supplies that were necessary components for our products. As a result, we carried increased inventory balances in 2023 to ensure availability of necessary products and to secure pricing. Although we currently do not anticipate a supply shortage will continue to pose a material risk for the Company in the near term, we are continuing to evaluate alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. Global supply chain shortages (especially when coupled with the increase in inflation and other economic factors) could result in an increase in the cost of the components used in our products, which could result in a decrease of our gross margins or in us having to increase the price at which we sell our products until supply chain constraints are resolved. Additionally, in the event that the price of our components increases significantly or we are unable to source sufficient components and materials from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production and our business operations and financial condition may be materially harmed and we may need to alter our plan of operation.
The United States has recently implemented tariffs on certain imported goods, including on certain items imported from China. In addition, China has imposed tariffs on a wide range of American products and placed restrictions on the export of certain items, including gallium and germanium, in retaliation for these American tariffs. As a result, there is a concern that the imposition of additional tariffs by the United States could result in the adoption of additional tariffs or export restrictions by China and/or other countries. Any resulting trade war could negatively impact our business. The imposition of tariffs on items imported by us from China or other countries could increase our costs and could result in lowering our gross margin on products sold.
Additionally, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the ongoing military conflict between Russia and Ukraine and more recent conflict between Israel and Hamas. Although the length and impact of the ongoing military conflicts is highly unpredictable, the conflicts in Ukraine and Israel/Palestine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as further supply chain interruptions. Additionally, the recent military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine or the conflict between to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.
As a result of these global issues and other macroeconomic factors, it has been difficult to accurately forecast our revenues or financial results, especially given the near and long term impact of the pandemic, and geopolitical
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issues, inflation, the Federal Reserve interest rate increases and the potential for a recession. In addition, while the potential impact and duration of these issues on the economy and our business may be difficult to assess or predict, these world events have resulted in, and may continue to result in, significant disruption of global financial markets, and may reduce our ability to access additional capital, which could negatively affect our liquidity in the future. Our results of operations could be materially below our forecasts as well, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline. Furthermore, a decrease in orders in a given period could negatively affect our revenues in future periods.
These global issues and events may also have the effect of heightening many risks associated with our customers and supply chain. We may take further actions that alter our operations as may be required by federal, state, or local authorities from time to time, or which we determine are in our best interests. In addition, we may decide to postpone or abandon planned investments in our business in response to changes in our business, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business.
Inflation
Inflation has increased recently and future rates are unknown. Inflationary factors, such as increases in the cost of our products (and components thereof), interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with the ongoing conflicts between Russia and Ukraine, employee availability and wage increases, trade tariffs imposed on certain products from China and increased component and services pricing.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations and Commitments
Office Lease
The Company executed a noncancelable operating lease for approximately 9,091 square feet of office space in Hayward, California in November 2021 as its headquarters. There lease expires in October 2025 and there is no option to renew for an additional term. The Company is obligated to pay, on a pro-rata basis, real estate taxes and operating costs related to the premises.
Lease costs recorded during the years ended December 31, 2023 and 2022 were $222 thousand and $223 thousand, respectively.
We enter into contracts in the normal course of business with our contract manufacturer and other vendors to assist in the manufacturing of our products and performance of our research and development activities and other services for operating purposes. These contracts generally provide for termination for convenience after expiration of an advance notice period ranging from 0 to 60 days, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.
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We believe that the accounting policies described below involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of our operations.
Revenue Recognition
The Company recognizes revenue from product sales in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). The standard applies to all contracts with customers, except contracts that are within scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are in within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inceptions, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company sells its products direct-to-consumer and third-party online resellers. Revenue is recognized when control of the promised goods is transferred to the customers or retailer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction.
The Company may receive payments at the onset of the contract and before goods have been delivered. In such instances, the Company records a deferred revenue liability. The Company recognizes these contract liabilities as sales after the revenue criteria are met.
The Company relies on third parties to have procedures in place to detect and prevent credit card fraud, as the Company has exposure to losses from fraudulent charges. The Company records the losses related to chargebacks as incurred.
The Company has also elected to exclude from the measurement of the transaction price sales taxes remitted to governmental authorities.
Stock-Based Compensation
We measure all stock options and other stock-based awards granted to our employees, directors, consultants and other non-employee service providers based on the fair value on the date of the grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is typically the vesting term. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. Non-employee option awards are measured at the earlier of the commitment date for performance by the counterparty or the date when the performance is complete, and compensation expense is recognized in the same manner as if we had paid cash for goods or services.
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We classify stock-based compensation expense in our statement of operations in the same way the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.
We use the Black-Scholes option pricing model to estimate the fair value of stock options on the date of grant. Using the Black-Scholes option pricing model requires management to make significant assumptions and judgments. We determined these assumptions for the Black-Scholes option-pricing model as discussed below.
| • | Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we based our expected term for awards issued to employees and non-employees using the simplified method which is presumed to be the midpoint between the vesting date and the end of the contracted term. |
| • | Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term. |
| • | Expected Volatility—Since we do not have a trading history of common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that we consider to be comparable to our business over a period equivalent to the expected term of the stock-based awards. |
| • | Dividend Rate—The expected dividend rate is zero as we have not paid and do not anticipate paying any dividends in the foreseeable future. |
| • | Fair Value of Common Stock—Prior to our initial public offering (“IPO”), the fair value of the shares of common stock underlying the stock-based awards was determined by our board of directors with input from management. Because there was no public market for our common stock, our board of directors determined the fair value of our common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having valuations of the common stock performed by a third-party valuation specialist, as further described below. |
As of December 31, 2023, the total compensation cost related to nonvested service-based awards not yet recognized is $440 thousand. The weighted-average period over which the nonvested awards is expected to be recognized is 2.04 years. The aggregate intrinsic value of stock options outstanding as of December 31, 2023 was zero for both vested and unvested options.
Common Stock Valuations
The fair value of the shares of common stock underlying our stock-based awards prior to our IPO was determined by our board of directors with input from management and contemporaneous third-party valuations. We believe that our board of directors had the relevant experience and expertise to determine the fair value of our common stock prior to our IPO. Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors included:
| • | contemporaneous valuations of our common stock performed by independent third-party specialists; |
| • | the prices, rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; |
| • | the prices of common or convertible preferred stock sold to third-party investors by us; |
| • | lack of marketability of our common stock; |
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| • | our actual operating and financial performance; |
| • | current business conditions and projections; |
| • | hiring of key personnel and the experience of our management; |
| • | the history of the company and notable milestones; |
| • | our stage of development; |
| • | likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company given prevailing market conditions; |
| • | the market performance of comparable publicly traded companies; and |
| • | the U.S. and global capital market conditions. |
In valuing our common stock, our board of directors determined the equity value of our business using the hybrid method with input from management and contemporaneous third-party valuations. The hybrid method is based upon the probability-weighted value across two scenarios, being (i) successfully consummating an initial public offering and (ii) alternative scenarios in which an initial public offering is not consummated. The hybrid method can be a useful alternative to explicitly modeling all probability-weighted expected return scenarios in situations when the company has transparency into one or more near term exits but is unsure about what will occur if current plans do not materialize. In the first scenario, the potential exit date, the probability exit value and the likelihood of interim financings were considered. In the second scenario, which was assigned the residual probability, the potential exit date, the equity volatility, the assumed interest rate, the dividend yield and equity inflection points at which the allocation of proceeds changes were considered. The valuation method considers the total number of shares authorized and outstanding, as well as recent issuances of both preferred and common stock.
Application of these approaches involves the use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding the time to the liquidation event and volatility. Changes in these estimates and assumptions or the relationships between these assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of common stock.
Since completion of our IPO in 2021, the fair value of each share of underlying common stock has been based on the closing price of our common stock as reported by the Nasdaq Capital Market on the date of grant, or as otherwise provided in 2021 Equity Incentive Plan. Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until December 31, 2026. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
| • | reduced disclosure about our executive compensation arrangements; |
| • | no non-binding stockholder advisory votes on executive compensation or golden parachute arrangements; and |
| • | exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
We have taken advantage of reduced reporting requirements in this prospectus and may continue to do so until such time that we are no longer an emerging growth company. We will remain an “emerging growth company”
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until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of 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 other public companies.
In addition, we are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 of the notes to our audited financial statements for the year ended December 31, 2023, included elsewhere in the registration statement of which this prospectus is a part.
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MANAGEMENT
The following table sets forth the names, ages, and positions of our executive officers and directors:
| Name |
Age |
Position | ||
| Jennifer Ernst |
55 | Chief Executive Officer and Director | ||
| Kimberly Bambach |
52 | Interim Chief Financial Officer | ||
| Blake Gurfein, PhD |
40 | Chief Scientific Officer | ||
| Sheryle Bolton |
77 | Chair of the Board | ||
| Karen Drexler |
64 | Director | ||
| Dean Zikria |
56 | Director |
Executive Officers
Jennifer Ernst is a co-founder and has served as our Chief Executive Officer and as a director since September 2016; she also served as our Chief Financial Officer from September 2016 to July 2021. Previously, Ms. Ernst served as the Chief Executive Officer of the U.S. subsidiary of Thin Film Electronics ASA from April 2011 to December 2015. Ms. Ernst also served as the Chief Strategy Officer of Thin Film Electronics ASA from January 2014 to December 2015, where she established and guided the strategic planning process across all business functions and four separate product lines. Ms. Ernst also worked for Xerox PARC for over 20 years, where she held multiple go-to-market roles, including as the Director of Business Development. Ms. Ernst previously served as a director of FlexTech Alliance, the U.S. national consortium for flexible and printed electronics, for four years, including one year as the Chair. Ms. Ernst earned her Master of Business Administration degree from Santa Clara University.
Kimberly Bambach currently serves as Tivic’s Interim Chief Financial Officer since May 2023, with 30+ years of financial leadership experience in both public and private companies. Her background includes financial leadership in medical and retail markets, manufacturing, wholesale distribution, licensing, digital media, and broadcasting. Ms. Bambach specializes in scaling finance organizations in early development stage to post commercial, large international corporations and IPOs assisting with the navigation through transitions between the different phases of business and fundraising efforts. Prior to joining the Company, Ms. Bambach served as the Chief Financial Officer at Jushi Holdings, Inc., where she played a pivotal role in the company’s rapid growth, reverse merger, multi-state acquisitions, equity/debt raises as well as the associated regulatory filings in both IFRS & US GAAP. She received Bachelors of Science Degrees in Finance from SUNY Brockport, and an MBA in Strategic Planning from the Lubin School of Business at Pace University in New York City.
Blake Gurfein, PhD serves as our Chief Scientific Officer, a role that he has held since March 2019, prior to which he served as our Vice President of Research commencing in January 2018. Dr. Gurfein leads our clinical and scientific research. In addition to his full-time role with the Company, he has also served as an Adjunct Assistant Professor of Medicine at the University of California San Francisco since 2012. Dr. Gurfein is an expert in neuromodulation device development and has served as a research executive and consultant for several medical device and pharma companies, including as Chief Scientific Officer of Rio Grande Neurosciences from 2014 to 2017 and as a Medical Writer for EMD Serono/Pfizer in 2012. Dr. Gurfein’s prior research in neuroscience and immunology was funded by the National Institutes of Health and philanthropic donors, yielding high-impact journal publications. Dr. Gurfein has a Ph.D. in Neuroscience from the Icahn School of Medicine at Mount Sinai and an Sc.B. in Neuroscience from Brown University.
Non-Employee Directors
Sheryle Bolton has served as a director on our board since July 16, 2019, and as Chair of the board since August 18, 2021. She is an experienced serial technology entrepreneur, public company chief executive officer, corporate executive, speaker, board member, and investor. Ms. Bolton has been a corporate executive in financial
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services, media, and health care and has served on the boards of private and public corporations, ranging from large groups of mutual funds to technology and finance companies, as well as non-profits, including an NGO, where she served as Chair of the audit committee, focused on financing small businesses in Asia and Sub-Saharan Africa and Berry College, a private college with an internationally known work-study program. Ms. Bolton worked in private equity investing as an investment banker at Merrill Lynch Capital Markets, as Director of Strategy at Home Box Office and in asset management at Rockefeller & Co. In her roles as Chief Executive Officer, she raised significant funding for several start-ups from angels, venture capital, and the public and institutional markets. She previously served as Chief Executive Officer of Scientific Learning Corporation, a health care and educational technology company, where she led the company from pre-product to IPO with venture funding from Warburg Pincus. She also served as Chief Executive Officer and Chair of the public company after completion of their IPO. She has served as a board member for more than forty Scudder-Kemper mutual funds. From 2015 to 2021, Ms. Bolton was an adjunct Professor of Practice at Hult International Business School, where she taught entrepreneurship and finance courses in graduate and undergraduate programs. She has also been an invited speaker on business and entrepreneurship in the U.S., Asia, the Pacific Rim, Latin America, and Europe. Harvard Business School recognized Ms. Bolton as one of its most influential female graduates in Silicon Valley and the San Francisco Bay Area. She was a recipient of the first Springboard All-Women’s IPO Class award, formerly served as Chair of Watermark, the largest organization in Silicon Valley for female executives and entrepreneurs, and is a recipient of the “A Woman Who Made Her Mark” award, among many other honors and recognition. Ms. Bolton started her career as a Peace Corps Volunteer in Africa. She holds a Bachelor of Arts. and a Master of Arts in Linguistics from the University of Georgia and a Master of Business Administration from Harvard Business School.
Karen Drexler has served as a director on our board since July 16, 2019. Ms. Drexler is a serial entrepreneur with expertise in the fields of digital health, medical devices and diagnostics. From September 2014 to June 2020 she served as board member of, and from June 2016 until June 2020, she was the Chief Executive Officer of, Sandstone Diagnostics, Inc., a private company developing instruments and consumables for point-of-care medical testing. Ms. Drexler also serves on the boards of ResMed (NYSE: RSMD), OutSet Medical (NASDAQ: OM), EBR Systems (ASX: EBR), VIDA Health, a leading company in Al-powered lung intelligence solutions and analytics, and Huma.ai, a medical intelligence company. From 2011 to 2017, she served as Chair of the board of Hygieia, Inc., a digital insulin therapy company, where she remains involved as an advisor to the chief executive officer. She also acts as a senior strategic advisor for other early-stage companies and spent 11 years on the board of the Keller Center for Innovation in Engineering Education at Princeton University. Ms. Drexler has served on numerous private company boards in the fields of diagnostics, medical devices, and digital health. She is an active mentor and advisor with Astia, a global nonprofit that supports high-potential female founders. She is a founding member of Astia Angels, a network of individual investors who fund such founders, and a lead mentor with StartX, the Stanford University incubator. She is also on the Life Science and Women’s Health Councils for Springboard, an accelerator for women-led technology-oriented companies. Through her work with Astia, Springboard, and StartX, she interacts with many promising young medtech companies. Ms. Drexler was a founder, president, and Chief Executive Officer of Amira Medical Inc., a private company focused on minimally invasive glucose monitoring technology, from 1996 until it was sold to Roche Holding AG in 2001. Before joining Amira Medical, she held management roles at LifeScan and played a key role in its sale to Johnson & Johnson (NYSE: JNJ). Ms. Drexler graduated magna cum laude with a Bachelor of Science in Chemical Engineering from Princeton University and earned a Master of Business Administration with honors from the Stanford University Graduate School of Business.
Dean Zikria has served as a director on our board since July 10, 2019. Mr. Zikria brings deep industry experience in allergy and asthma as well as other chronic diseases to the board. Since August 2019, Dean has been the Founder, CEO and Chairman of Mind Machine LLC, a Silicon Valley based marketing/advertising agency—focused on the MedTech industry. From June 1, 2021 until January 2023, he served as the Chief Commercial Officer at Intuity Medical Inc., a Silicon Valley MedTech company launching a highly disruptive glucose meter in the diabetes industry. In addition, he has served as Chairman of DZ Advisors, LLC, a company founded by Mr. Zikria in 2017 that provides consulting and advisory services to the medtech, biotech, digital
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health and pharmaceutical industries; since inception, where he also served as President from December 2017 until May 31, 2021. Mr. Zikria also sits on the boards of the following privately held companies: AsthmaTek, Inc., a startup digital health company in the asthma space; Brev.Dev, Inc., a technology company developing a disruptive platform to aid developers. Dean previously served as Chief Executive Officer of Spirosure Inc., a FeNO detection company for asthma diagnostics, from 2014 to 2017. Additionally, he previously served as head of global marketing for Johnson & Johnson’s Animas Corporation within their medical device & diagnostics division. He was head of strategy for Pfizer Pharmaceuticals U.S. Cardiovascular Unit, a division with approximately $7 billion in annual revenues. Mr. Zikria brings experience in strategic planning, scenario planning and analysis, and mergers and acquisitions, including sourcing, transactions and integration.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Corporate Governance
Composition of our Board of Directors
Our business and affairs are managed under the direction of our board of directors (“Board”). The number of directors will be fixed by our Board, subject to the terms of our Charter and Bylaws, which include a requirement that the number of directors be fixed exclusively by a resolution adopted by directors constituting a majority of the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. The size of our Board is currently fixed at five directors, with one vacancy.
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Corporate Governance Profile
As set forth in our Charter and Bylaws, our corporate governance is structured in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:
| • | a majority of our directors satisfy the Nasdaq listing standards for independence; |
| • | generally, all matters to be voted on by stockholders will be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all stockholders present in person or represented by proxy, voting together as a single class; |
| • | we comply with the requirements of Nasdaq rules, including having committees comprised solely of independent directors; and |
| • | we do not have a stockholder rights plan. |
Our directors stay informed about our business by attending meetings of our Board and its committees and through supplemental reports and communications. Our independent directors meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.
Classified Board
In accordance with the terms of our Charter, our Board is divided into three staggered classes, and each of our directors is assigned to one of the three classes, Class I, Class II and Class III. Each class of directors is elected
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for a three-year term, provided that the first term for each class of directors will expire as set forth below. Currently, our directors are divided among the three classes as follows:
| • | the Class I director is Karen Drexler, and her current term will expire at our 2025 annual meeting of stockholders; |
| • | the Class II director is Dean Zikria, and his current term will expire at our 2026 annual meeting; and |
| • | the Class III directors are Sheryle Bolton and Jennifer Ernst, and their initial terms will expire at our 2024 annual meeting of stockholders. |
The division of our Board into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company.
Leadership Structure and Risk Oversight
Currently, Ms. Ernst serves as our Chief Executive Officer and Ms. Bolton serves as Chair of our Board. The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chair of the Board, as our Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board.
The Board actively manages the Company’s risk oversight process and receives periodic reports from management on areas of material risk to the Company, including operational, financial, legal, and regulatory risks. The Board committees will assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit and Risk Committee assists the Board with its oversight of the Company’s major financial risk exposures. The Compensation Committee assists the Board with its oversight of risks arising from the Company’s compensation policies and programs. The Nominations and Corporate Governance Committee assists the Board with its oversight of risks associated with board organization, board independence, and corporate governance. While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board will continue to be regularly informed about the risks.
Director Independence
The Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominations committees be independent, or, if a listed company has no nominations committee, that director nominees be selected or recommended for the board’s selection by independent directors constituting a majority of the board’s independent directors. The Nasdaq rules further require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act and that compensation committee members satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act.
Our Board has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities. Our Board has affirmatively determined that each of Dean Zikria, Sheryle Bolton and Karen Drexler qualify as an independent director, as defined under the applicable corporate governance standards of Nasdaq. These rules require that our Audit and Risk Committee be composed of at least three directors, all of whom must be independent members.
Board Committees
The Board has three standing committees, the Audit and Risk Committee, the Compensation Committee, and the Nominations and Corporate Governance Committee, to assist it with the performance of its responsibilities. The Board designates the members of these committees and the committee chairs based on the recommendation of the Nominations and Corporate Governance Committee. The Board has adopted written charters for each of these
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committees, all of which can be found on our corporate website at https://tivichealth.com/investor/. The chair of each committee develops the agenda for that committee and determines the frequency and length of committee meetings.
Audit and Risk Committee
Our Board has established an Audit and Risk Committee which consists of three independent directors, Dean Zikria, Sheryle Bolton and Karen Drexler, with Sheryle Bolton serving as the Chairperson. The Board has determined that each member of the Audit and Risk Committee meets the independence requirements of Rule 10A-3 of the Exchange Act, and the applicable rules of Nasdaq, and has sufficient knowledge in financial and auditing matters to serve on the Audit and Risk Committee. The committee’s primary duties include:
| • | selecting a firm to serve as the independent registered public accounting firm to audit our financial statements; |
| • | reviewing and discussing with management and our independent auditor our annual and quarterly financial statements and related disclosures, including disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the results of the independent auditor’s audit or review, as the case may be; |
| • | reviewing our financial reporting processes and internal control over financial reporting systems and the performance, generally, of our internal audit function; |
| • | overseeing the audit and other services of our independent registered public accounting firm and being directly responsible for the appointment, independence, qualifications, compensation and oversight of the independent registered public accounting firm, which reports directly to the Audit and Risk Committee; |
| • | providing an open means of communication among our independent registered public accounting firm, management, our internal auditing function and our Board; |
| • | reviewing any disagreements between our management and the independent registered public accounting firm regarding our financial reporting; |
| • | preparing the Audit and Risk Committee report for inclusion in our proxy statement for our annual stockholder meetings; |
| • | establishing procedures for complaints received regarding our accounting, internal accounting control and auditing matters; |
| • | overseeing the Company’s enterprise risk management process; and |
| • | approving all audit and permissible non-audit services conducted by our independent registered public accounting firm. |
The Board has determined that Sheryle Bolton is an “audit committee financial expert,” as that term is defined in the rules promulgated by the Commission pursuant to the Sarbanes-Oxley Act. The Board has further determined that each of the members of the Audit and Risk Committee is financially literate and that at least one member of the committee has accounting or related financial management expertise, as such terms are interpreted by the Board in its business judgment.
Compensation Committee
Our Board has established a Compensation Committee which consists of three independent directors (as defined under the general independence standards of Nasdaq and our Corporate Governance Guidelines): Dean Zikria, Sheryle Bolton and Karen Drexler are each a “non-employee director” (within the meaning of Rule 16b-3 of the
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Exchange Act). Karen Drexler serves as Chairperson of the Compensation Committee. The committee’s primary duties include:
| • | reviewing all overall compensation policies and practices; |
| • | administering the Company’s compensation recovery policy; |
| • | approving corporate goals and objectives relevant to executive officer compensation and evaluate executive officer performance in light of those goals and objectives; |
| • | determining and approving executive officer compensation, including base salary and incentive awards; |
| • | reviewing and approving, or making recommendations to the Board regarding, compensation plans; |
| • | administering our equity incentive plan, subject to Board approval; and |
| • | reviewing succession planning for key executives. |
Our Compensation Committee determines and approves elements of executive officer compensation, except that compensation of our chief executive officer and chief financial officer will be subject to review and approval by the Board. It also provides recommendations to the Board with respect to non-employee director compensation. The Compensation Committee may not delegate its authority to any other person, other than to a subcommittee.
Nominations and Corporate Governance Committee
Our Board has also established a Nominations and Corporate Governance Committee which consists of Dean Zikria, Sheryle Bolton and Karen Drexler, with Karen Drexler serving as Chairperson. The committee’s primary duties include:
| • | recruiting new directors, consider director nominees recommended by stockholders and others and recommend nominees for election as directors; |
| • | reviewing the size and composition of our Board and committees; |
| • | overseeing the evaluation of the Board; |
| • | recommending actions to increase the Board’s effectiveness; and |
| • | developing, recommending and overseeing our corporate governance principles, including our Code of Business Conduct and Ethics and our Corporate Governance Guidelines. |
Legal Proceedings
To our knowledge, (i) no director or executive officer has been a director or executive officer of any business that has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years; (ii) no director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years; (iii) no director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years; and (iv) no director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Our Code of Business Conduct and Ethics is available on our corporate website at https://tivichealth.com/investor/. We intend to disclose any amendments to the code, or any waivers of its requirements, on our corporate website or in a Current Report on Form 8-K.
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EXECUTIVE AND DIRECTOR COMPENSATION
Summary Compensation Table
The following table sets forth, for the fiscal years ended December 31, 2023 and December 31, 2022, the dollar value of all cash and noncash compensation earned by our named executive officers, as set forth above.
| Name and Principal Position |
Year | Salary ($) |
Bonus ($) |
Option Awards ($)(1) |
All Other Compensation ($)(2) |
Totals ($) |
||||||||||||||||||
| Jennifer Ernst, |
2023 | 275,000 | — | 15,393 | 38,947 | 329,340 | ||||||||||||||||||
| CEO and Director |
2022 | 275,000 | — | 123,320 | 20,901 | 419,221 | ||||||||||||||||||
| Blake Gurfein, PhD |
2023 | 303,409 | 40,625 | 12,315 | 48,672 | 405,021 | ||||||||||||||||||
| Chief Scientific Officer |
2022 | 275,000 | 50,938 | 29,038 | 29,926 | 384,902 | ||||||||||||||||||
| Ryan Sabia (3) |
2023 | 229,167 | 10,000 | 12,315 | 33,759 | 285,241 | ||||||||||||||||||
| Chief Operating Officer |
2022 | 254,205 | 24,750 | 41,484 | 16,994 | 337,433 | ||||||||||||||||||
| (1) | Amounts shown in the “Option Awards” column represent the aggregate grant date fair value of stock options. These amounts represent the grant date fair value of stock options granted in fiscal 2023 and 2022 computed in accordance with FASB ASC Topic 718. We do not include any impact of estimated forfeitures related to service-based vesting terms in these calculations. |
| (2) | Includes the cost of health insurance coverage and benefits paid by the Company for each named executive officer that is not reimbursed. |
| (3) | On January 22, 2024, Ryan Sabia was terminated as an employee and Chief Operating Officer of the Company. |
Narrative to the summary compensation table
Employment Agreements/Arrangements
As of the year ended December 31, 2023, we had executive offer letters in place with Jennifer Ernst, our Chief Executive Officer; Blake Gurfein, our Chief Science Officer; and Ryan Sabia, our Chief Operating Officer, as well as a consulting agreement with Kimberly Bambach, our Interim Chief Financial Officer. A summary of the terms is set forth below.
Currently, the annual compensation of each of our executive officers is determined by the Board. The named executive officers are also entitled to participate in the Company’s benefit plans, which benefits are generally available to all full-time employees.
Executive Offer Letter with Jennifer Ernst
On July 31, 2021, we entered into an executive offer letter with Jennifer Ernst. Pursuant to her executive offer letter, effective July 31, 2021, Ms. Ernst is entitled to a base salary of $275 thousand and, commencing with the 2022 calendar year (payable in the first quarter of 2023), will be eligible to receive, at the sole discretion of the Board, an annual end-of-year incentive bonus in an amount up to 40% of her base salary. The annual end-of-year incentive bonus, if earned, will be determined by the Board, in its sole discretion, and will be dependent upon the achievement of certain Company milestones and profitability, and such other milestones as the Board deems appropriate.
Ms. Ernst’s employment is “at will,” meaning that either she or the Company are entitled to terminate Ms. Ernst’s employment at any time and for any reason, with or without cause. In the event that her employment with the Company is terminated for any reason before December 31 of any given year, she will not be entitled to receive an annual end-of-year bonus. In the event that (i) Ms. Ernst elects to terminate her employment with the Company other than for good reason, (ii) the Company terminates her employment for cause, or (iii) her
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employment is terminated as a result of her death of complete disability, then Ms. Ernst will not be entitled to receive any separation benefits. In the event that Ms. Ernst terminates her employment for good reason or the Company terminates her employment without cause, Ms. Ernst shall be entitled to receive 1/12 of her base salary for a period of six months after termination.
Executive Offer Letter with Blake Gurfein
In January 2018, we entered into a standard at will offer with Blake Gurfein, which was amended in part in February 2019. Pursuant to his offer letter, Mr. Gurfein is entitled to a base salary of $350 thousand per annum and, will be eligible to receive, at the sole discretion of the Board, an annual end-of-year incentive bonus in an amount up to 25% of his base salary. The annual end-of-year incentive bonus, if earned, will be determined by the Board, in its sole discretion, and will be based on subjective or objective criteria, as approved by the Board.
Mr. Gurfein’s employment is “at will,” meaning that either he or the Company are entitled to terminate Mr. Gurfein’s employment at any time and for any reason, with or without cause. In the event that his employment with the Company is terminated for any reason before December 31 of any given year, he will not be entitled to receive an annual end-of-year bonus. In the event that Mr. Gurfein’s employment terminates as a result of an involuntary Separation of Service (as defined in the regulations interpreting Section 409A of the Internal Revenue Code), other than for cause, Mr. Gurfein will be eligible to receive his full base salary for a period of six months after termination, as well as reimbursement for COBRA premiums him and his covered dependents for six months after termination. Notwithstanding the foregoing, such severance benefits shall be waived in the event that a Separation of Services occurs within 12 months of a change of control that results in proceeds to Mr. Gurfein of $2,000,000 or more.
Executive Offer Letter with Ryan Sabia
On April 1, 2022, we entered into an executive offer letter with Ryan Sabia. Pursuant to his executive offer letter, and prior to his termination in January 2024, Mr. Sabia was entitled to a base salary of $250 thousand per annum (subject to review and adjustment in accordance with the Company’s normal performance review practices) and, commencing with the 2022 calendar year (payable in the first quarter of 2023), was eligible to receive, at the sole discretion of the Board, an annual end-of-year incentive bonus in an amount up to 25% of base salary. The annual end-of-year incentive bonus, if earned, was to be determined by the Board, in its sole discretion, and was to be dependent upon the achievement of certain Company milestones and profitability, and such other milestones as the Board deems appropriate.
Mr. Sabia was terminated as an employee and Chief Operating Officer of the Company. Mr. Sabia received salary and benefits earned by him through his termination date, and was not entitled to, and did not receive, any separation benefits in connection with his termination. Additionally, all outstanding options to purchase Company common stock held by Mr. Sabia as of his termination date terminated.
Agreement with Kimberly Bambach
Kimberly Bambach was appointed as the Company’s Interim Chief Executive Officer, effective April 28, 2023, and was retained to provide such services as a non-employee consultant pursuant to a consulting agreement. Pursuant to such agreement, Ms. Bambach is entitled to receive $200 per hour for services provided in her capacity as Interim Chief Financial Officer. The agreement shall remain effective until such time as it is terminated by either party.
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Outstanding Equity Awards at Fiscal Year-End 2023
The following table provides information regarding the outstanding equity awards held by our named executive officers as of December 31, 2023. See “Equity Incentive Plan Information,” below, for additional information regarding our equity incentive plans.
| Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares of Stock That Have Not Vested (#) |
Market Value of Shares of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|||||||||||||||||||||||||||
| Jennifer Ernst |
575 | — | — | $ | 13.20 | 4/1/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 917 | 1,083 | (1) | — | $ | 183.00 | 2/4/2027 | — | — | — | — | ||||||||||||||||||||||||||
| — | 1,250 | (2) | — | $ | 13.00 | 5/8/2033 | — | — | — | — | ||||||||||||||||||||||||||
| Blake Gurfein |
413 | 412 | (3) | — | $ | 459.00 | 12/14/2031 | — | — | — | — | |||||||||||||||||||||||||
| 79 | — | — | $ | 12.00 | 4/3/2028 | — | — | — | — | |||||||||||||||||||||||||||
| 53 | — | — | $ | 12.00 | 6/27/2028 | — | — | — | — | |||||||||||||||||||||||||||
| 162 | 188 | (4) | — | $ | 167.00 | 2/4/2032 | — | — | — | — | ||||||||||||||||||||||||||
| — | 1,000 | (2) | — | $ | 13.00 | 5/8/2033 | — | — | — | — | ||||||||||||||||||||||||||
| Ryan Sabia(6) |
345 | 155 | (5) | — | $ | 160.00 | 6/17/2031 | — | — | — | — | |||||||||||||||||||||||||
| 126 | 124 | (3) | — | $ | 459.00 | 12/14/2031 | — | — | — | — | ||||||||||||||||||||||||||
| 230 | 270 | (1) | — | $ | 167.00 | 2/4/2032 | — | — | — | — | ||||||||||||||||||||||||||
| — | 1,000 | (2) | — | $ | 13.00 | 5/8/2033 | — | — | — | — | ||||||||||||||||||||||||||
| (1) | The options vest as follows: (i) 25% on February 4, 2023, and (ii) the remaining 75% in equal installments over the next 36 months. |
| (2) | The options vest as follows: (i) 25% on May 8, 2024, and (ii) the remaining 75% in equal installments over the next 36 months. |
| (3) | The options vest as follows: (i) 25% on December 14, 2022, and (ii) the remaining 75% in equal monthly installments over the next 36 months. |
| (4) | The options vest as follows: (i) 25% on February 4, 2022, and (ii) the remaining 75% in equal monthly installments over the next 36 months. |
| (5) | The options vest as follows: (i) 25% on March 1, 2022, and (ii) the remaining 75% in equal monthly installments over the next 36 months. |
| (6) | As noted above, Mr. Sabia was terminated as an employee of the Company on January 22, 2024. In connection with his termination, all of the outstanding stock options held by Mr. Sabia as of that date terminated. |
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Equity Incentive Plan Information
The following table provides information as of December 31, 2023, regarding our equity compensation plans:
| Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans |
|||||||||
| Equity compensation plans approved by security holders (1) |
14,661 | $ | 144.41 | 7,190 | ||||||||
| Equity compensation plans not approved by security holders |
— | — | — | |||||||||
| Total |
14,661 | $ | 144.41 | 7,190 | ||||||||
| (1) | Represents outstanding stock options granted to our current or former employees, directors and consultants pursuant to the 2017 Equity Incentive Plan (the “2017 Plan”) and 2021 Equity Incentive Plan (the “2021 Plan”). |
2017 Equity Incentive Plan
The Board adopted the 2017 Plan on April 13, 2017. The principal purpose of the 2017 Plan was to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the 2017 Plan are summarized below. In August 2021, the Board adopted and our stockholders approved the 2021 Plan, which became effective upon the completion of our IPO. Upon the effectiveness of the 2021 Plan, it replaced the 2017 Plan, except with respect to awards outstanding under the 2017 Plan, and no further awards are available for grant under the 2017 Plan.
Share reserve. Under the 2017 Plan, 9,813 shares of our common stock were reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, restricted stock awards, and other stock-based awards. With respect to the share reserve under the 2017 Plan:
| • | to the extent that an award terminated, expired or lapsed for any reason or an award was settled in cash without the delivery of shares prior to the effectiveness of the 2021 Plan, any shares subject to the award at such time would have been available for future grants under the 2017 Plan; and |
| • | prior to the effectiveness of the 2021 Plan, to the extent that shares of our common stock were repurchased by us prior to vesting so that shares were returned to us, such shares would have been available for future grants under the 2017 Plan. |
As noted above, upon the effectiveness of the 2021 Plan, it replaced the 2017 Plan, except with respect to awards outstanding under the 2017 Plan, and no further awards are available for grant under the 2017 Plan.
Administration. Following completion of our IPO, the Compensation Committee of the Board began administering the 2017 Plan. Prior to that, the 2017 Plan was administered by the Board.
Subject to the terms and conditions of the 2017 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2017 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2017 Plan. The Board may at any time remove the Compensation Committee as the administrator and revest in itself the authority to administer the 2017 Plan.
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Eligibility. Options, restricted stock and all other stock-based and cash-based awards under the 2017 Plan may be granted to individuals who are then our officers, employees or consultants or are the officers, employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. Only employees of our company may be granted incentive stock options (“ISOs”).
Awards. The 2017 Plan provides that the administrator may grant or issue stock options, restricted stock, other stock- or cash-based awards and dividend equivalents, or any combination thereof; provided, however, that as noted above, no additional awards may be issued under the 2017 Plan. Each award will be set forth in a separate agreement with the person receiving the award, which will indicate the type, terms and conditions of the award.
| • | Incentive stock options. ISOs will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2017 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant. |
| • | Nonstatutory stock options. Nonstatutory Stock Options, or NSOs, will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/ or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years. |
| • | Restricted stock. Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for No consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse, however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire. |
| • | Other stock-based awards. Other stock-based awards are awards of fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. |
Other stock-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The plan administrator will determine the terms and conditions of other stock-based awards, which may include vesting conditions based on continued service, performance and/or other conditions.
Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.
Change in control. In the event of a change in control, to the extent that an award (i) is vested, (ii) the terms of an award provide for acceleration of vesting upon a change in control, or (iii) the administrator elects to accelerate the vesting of the award in connection with the change in control, the plan administrator may elect to provide for the purchase or exchange of an award for cash or other property in an amount equal to the difference between
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(x) the value of cash or other property the optionee would receive in connection with such change in control if the optionee exercised the award, and (y) the aggregate exercise price of the vested portion of the award. If the award is not purchased or exchanged as provided above, then the award will be terminated and cease to be exercisable unless the award is expressly assumed or substituted by the acquirer.
Adjustments of awards. In the event of any stock dividend or other distribution, stock split, reverse stock split, reorganization, combinations or exchange of share, merger, consolidation, split-up, spin off, recapitalization, repurchase or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2017 Plan or any awards under the 2017 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to: (i) the aggregate number and type of shares subject to the 2017 Plan; (ii) the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and (iii) the grant or exercise price per share of any outstanding awards under the 2017 Plan. In connection with the 1-for-4 reverse stock split of our issued and outstanding shares of common stock that was effected on August 31, 2021, the terms of certain awards granted under our 2017 Plan were equitably adjusted in accordance with the provisions thereof.
Amendment and termination. The administrator may terminate, amend or modify the 2017 Plan at any time and from time to time. However, we must generally obtain stockholder approval to amend or modify the 2017 Plan to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.
No ISOs may be granted pursuant to the 2017 Plan after the tenth anniversary of the effective date of the 2017 Plan. Any award that is outstanding on the termination date of the 2017 Plan will remain in force according to the terms of the 2017 Plan and the applicable award agreement.
2021 Equity Incentive Plan
In August 2021, the Board adopted and our stockholders approved the 2021 Plan, which became effective upon the completion of our IPO. Upon the effectiveness of the 2021 Plan, it replaced the 2017 Plan, except with respect to awards outstanding under the 2017 Plan, and no further awards may be made under the 2017 Plan. Additionally, any awards that are canceled or expire under the 2017 Plan will not be reissued. The principal purpose of the 2021 Plan is to attract, retain and incentivize the Company’s employees and other service providers through the granting of certain stock-based awards, including performance-based awards. The material terms of the 2021 Plan, as it is currently contemplated, are summarized below.
Share reserve. Under the 2021 Plan, 9,375 shares of our common stock were initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, restricted stock awards, restricted stock units, stock bonus awards and performance-based awards as of the date of its adoption by the Company. With respect to the share reserve under the 2021 Plan:
| • | to the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2021 Plan; and |
| • | to the extent that shares of our common stock are repurchased by us at the original purchase price, such shares will be available for future grants under the 2021 Plan. |
In addition, the 2021 Plan provides that additional shares will automatically be added to the shares authorized for issuance under the 2021 Plan on January 1 of each year. The number of shares added each year will be equal to
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the lesser of: (i) 5.0% of the outstanding on December 31st of the preceding calendar year or (ii) such number of shares determined by the Board, in its discretion. In accordance with this provision, on January 1, 2022, the number of shares of our common stock authorized for issuance under the 2021 Plan automatically increased from 9,375 shares to 14,233 shares (an increase equal to 5% of the number of our outstanding shares of common stock as of December 31, 2021). Additionally, on January 1, 2023, the number of shares of our common stock authorized for issuance under the 2021 Plan automatically increased from 14,233 shares to 19,072 shares (an increase equal to 5% of the number of our outstanding shares of common stock as of December 31, 2022). Additionally, on January 1, 2024, the number of shares of our common stock authorized for issuance under the 2021 Plan automatically increased from 19,072 shares to 92,376 shares (an increase equal to 5% of the number of our outstanding shares of common stock as of December 31, 2023).
Share Counting. For purposes of counting the number of shares available for the grant of stock awards under the 2021 Plan, all shares covered by any stock award shall be counted against shares available under the 2021 Plan on a “one for one” basis. Notwithstanding the foregoing, (i) awards that may be settled only in cash shall not be so counted, and (ii) while any performance-based award is outstanding, the maximum number of shares issuable under such award shall be counted against available shares under the 2021 Plan, and upon final settlement of such performance-based award, any shares not issued to the holder due to failure to achieve any related performance goal(s) shall again be available for grant and issuance under the 2021 Plan.
Administration. The Compensation Committee of the Board is authorized to administer the 2021 Plan unless the Board subsequently assumes authority for administration. The Compensation Committee must consist of at least two members of the Board, each of whom is intended to qualify as a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act and an “independent director” within the meaning of the rules of the applicable stock exchange, or other principal securities market on which shares of our common stock are traded. The term Administrator refers to either the Board or the Compensation Committee, as applicable.
Additionally, the Board or Compensation Committee may delegate certain functions under the 2021 Plan to designate employees who are not Officers to be recipients of awards under the 2021 Plan, and to determine the number of shares subject to awards granted to such employees.
Subject to the terms and conditions of the 2021 Plan, the Administrator has the authority to construe and interpret the 2021 Plan and awards granted under it and to determine the persons to whom and the dates on which awards will be granted, the number of shares of common stock to be subject to each award, the time or times during the term of each award within which all or a portion of such award may be exercised, the exercise price, the type of consideration and other terms of the award. All decisions, determinations and interpretations by the Administrator regarding the 2021 Plan shall be final and binding on all participants or other persons claiming rights under the 2021 Plan or any award.
Awards. The 2021 Plan provides that the Administrator may grant or issue stock options, restricted stock, restricted stock units, other stock-based awards and dividend equivalents, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
Eligibility. Options, restricted stock, restricted stock units and all other stock-based awards under the 2021 Plan may be granted to individuals who are then our officers, employees, directors or consultants or are the officers, employees or consultants of certain of our subsidiaries. Only employees of our company or certain of our subsidiaries may be granted incentive stock options, or ISOs. No ISO may be granted under the 2021 Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of the Company or any affiliate of the Company, unless the exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and the term of the option does not exceed five years from the date of grant. In addition, the aggregate fair market value, determined at the time of grant, of the shares of common stock with respect to which ISOs are exercisable for the first time by a
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participant during any calendar year (under the 2021 Plan and all other such plans of the Company and its affiliates) may not exceed $100,000. ISOs are not transferable except by will or by the laws of descent and distribution, provided that a participant may designate a beneficiary who may exercise an option following the participant’s death.
| • | Stock Options. Options granted under the 2021 Plan may become exercisable in cumulative increments (“vest”) as determined by the Administrator. Such increments may be based on continued service to the Company over a certain period of time, the occurrence of certain performance milestones, or other criteria. Options granted under the 2021 Plan may be subject to different vesting terms. Except as to a maximum of five percent (5%) of the number of shares reserved and available for grant and issuance under the 2021 Plan, any options that vest on the basis of the participant’s continued service will have a minimum vesting period of one year. In addition, the Administrator may not use discretion to accelerate the vesting of options (subject to a maximum five percent (5%) of shares under the 2021 Plan that may be accelerated) other than in connection with a death, disability or a change in control (where a participant terminates employment in certain situations or equity awards are not assumed or substituted for in the transaction). |
To the extent provided by the terms of an option, a participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of such option by a cash payment upon exercise, by authorizing the Company to withhold a portion of the stock otherwise issuable to the participant, or by such other method as may be set forth in the option agreement. The maximum term of options under the 2021 Plan is 10 years, except that in certain cases (see Eligibility) the maximum term of certain incentive stock options is five years. Options under the 2021 Plan generally terminate sixty (60) days after termination of the participant’s service unless (i) such termination is due to the participant’s disability, in which case the option may, but need not, provide that it may be exercised at any time within 6 months of such termination; (ii) the participant dies before the participant’s service has terminated, or within three months after termination of such service, in which case the option may, but need not, provide that it may be exercised within 12 months of the participant’s death by the person or persons to whom the rights to such option pass by will or by the laws of descent and distribution; or (iii) the option by its terms specifically provides otherwise. If an optionee’s service with the Company, or any affiliate of the Company, ceases with cause, the option will terminate at the time the optionee’s service ceases. In no event may an option be exercised after its expiration date.
| • | Stock Bonuses and Restricted Stock Awards. Stock bonus awards and restricted stock awards are granted through a stock bonus award agreement or restricted stock award agreement. The purchase price for a stock purchase award (if any) may be payable in cash, or any other form of legal consideration approved by the Administrator. Stock bonus awards may be granted in consideration for the recipient’s past services for the Company. Common stock issued under a restricted stock or stock bonus award agreement may be subject to a share repurchase option or forfeiture right in our favor, each in accordance with a vesting schedule and subject to the minimum vesting requirement. If a recipient’s service relationship with us terminates, we may reacquire or receive via forfeiture all of the shares of our common stock issued to the recipient pursuant to a restricted stock or stock bonus award that have not vested as of the date of termination. Rights under a stock bonus or restricted stock bonus agreement may be transferred only as expressly authorized by the terms of the applicable stock bonus or restricted stock purchase agreement. |
| • | Restricted Stock Units. Restricted stock unit awards are issued pursuant to a restricted stock unit award agreement. The consideration for a stock unit award shall be determined by the Administrator and may be payable in any form acceptable to the Administrator and permitted under applicable law. The Administrator may impose any restrictions or conditions upon the vesting of restricted stock unit awards, or that delay the delivery of the consideration after the vesting of stock unit awards, that it deems appropriate consistent with the minimum vesting requirement. Restricted stock unit awards may be settled in cash or shares of the Company’s common stock, as determined by the Administrator. No dividends payments will be made on unvested restricted stock unit awards, but instead any dividends |
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| will be deferred until awards become vested. If a restricted stock unit award recipient’s service relationship with the Company terminates, any unvested portion of the restricted stock unit award is forfeited upon the recipient’s termination of service. |
| • | Performance-Based Award. Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals. Generally, such pre-established performance goals consist of one or more business criteria and a targeted performance level with respect to such criteria as a condition of awards being granted or becoming exercisable, or as a condition to accelerating the timing of such events. Performance may be measured over a period of any length specified by the Administrator. |
Certain Corporate Transactions. In the event of a merger, sale of all or substantially all of the assets of the Company or other change of control transaction, unless otherwise determined by the Board, all outstanding awards will be subject to the agreement governing such merger, asset sale or other change of control transaction. Such agreement need not treat all such awards in an identical manner, and it will provide for one or more of the following with respect to each award: (i) the continuation of the award, (ii) the assumption of the award, (iii) the substitution of the award, or (iv) the payment of the excess of the fair market value of the shares subject to the award over the exercise price or purchase price of such shares. In the event the successor corporation refuses to either continue, assume or substitute the shares subject to the award pursuant to the terms of the 2021 Plan, or pay the excess of the fair market value of the shares subject to the award over the exercise price or purchase price of such shares, then outstanding awards shall vest and become exercisable as to 100% of the shares subject thereto contingent upon the consummation of such change of control transaction.
Adjustments Provisions. Transactions not involving receipt of consideration by the Company, such as a merger, consolidation, reorganization, recapitalization, reincorporation, reclassification, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, or a change in corporate structure may change the type(s), class(es) and number of shares of common stock subject to the 2021 Plan and outstanding awards. In that event, the 2021 Plan will be appropriately adjusted as to the type(s), class(es) and the maximum number of shares of common stock subject to the 2021 Plan, and outstanding awards will be adjusted as to the type(s), class(es), number of shares and price per share of common stock subject to such awards.
Amendment and termination. The administrator may terminate, amend or modify the 2021 Plan at any time and from time to time. However, we must generally obtain stockholder approval to amend or modify the 2021 Plan to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.
Director Compensation
The following table sets forth information regarding the compensation awarded to, earned by, or paid to our non-employee directors who served on our Board for the year ended December 31, 2023.
| Name |
Fees earned or paid in cash ($)(1) |
Stock awards ($) |
Option awards ($)(2)(3) |
Non-equity incentive plan compensation ($) |
Nonqualified deferred compensation earnings ($) |
All other compensation ($) |
Total ($) |
|||||||||||||||||||||
| Sheryle Bolton |
63,000 | — | 2,121 | — | — | — | 65,121 | |||||||||||||||||||||
| Karen Drexler |
50,000 | — | 2,121 | — | — | — | 52,121 | |||||||||||||||||||||
| Dean Zikria |
35,000 | — | 2,121 | — | — | — | 37,121 | |||||||||||||||||||||
| (1) | These amounts reflect the cash payments that we made as compensation for Board services during fiscal year 2023. |
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| (2) | These amounts represent the grant date fair value of stock options granted in fiscal 2023 computed in accordance with FASB ASC Topic 718. We do not include any impact of estimated forfeitures related to service-based vesting terms in these calculations. |
| (3) | As of December 31, 2023, the number of shares subject to all outstanding option awards and stock awards held by our non-employee directors were as follows: |
| Director |
Number of Shares Subject to Option Awards |
Number of Shares Subject to Stock Awards |
||||||
| Sheryle Bolton |
893 | — | ||||||
| Karen Drexler |
956 | — | ||||||
| Dean Zikria |
893 | — | ||||||
On December 16, 2021, our Board, upon recommendation of the Compensation Committee, approved an annual compensation plan for our Board (the “Board Compensation Plan”), which Board Compensation Plan is still in effect. In accordance with the Board Compensation Plan, directors of the Company will be entitled to receive the following annual compensation, which amounts will be paid in equal quarterly installments in accordance with our policies:
| • | Annual Retainer for all Directors: $35,000 |
| • | Chairperson of the Board: $15,000 |
| • | Chairperson of the Audit and Risk Committee: $13,000 |
| • | Chairperson of the Compensation Committee: $9,000 |
| • | Chairperson of the Nominating and Governance Committee: $6,000 |
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
There have not been any transactions or any series of similar transactions, since January 1, 2022, nor are we aware of any such pending transactions, to which we were a party or will be a party, in which:
| • | the amounts involved exceeded or will exceed the lesser of $120 thousand or one percent of the average of our total assets for the last two fiscal years; and |
| • | any of our directors, executive officers, holders of more than 5% of our capital stock or any member of their immediate family had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements with directors and executive officers, which are described where required under the sections above entitled “Executive Compensation” and “Director Compensation.” |
Policies and Procedures Regarding Related Party Transactions
Our Board has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120 thousand and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our Audit and Risk Committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. The related person transactions disclosed in this Proxy Statement were each approved by the full Board or Audit and Risk Committee, as applicable.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our outstanding common stock as of March 22, 2024 by: (i) each of our directors, (ii) each of our named executive officers (as defined by Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act), and (iii) all of our directors and named executive officers as a group. As of March 22, 2024, there are no persons known to us to beneficially own more than 5% of each class of our outstanding common stock. As of March 22, 2024, there were 1,473,592 shares of our common stock issued and outstanding.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse. The Company does not know of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.
| Beneficial owner (1) |
Amount and Nature of Beneficial Ownership |
Percent of Class |
||||||
| Directors and Named Executive Officers |
||||||||
| Jennifer Ernst(2) |
14,012 | * | ||||||
| Kimberly Bambach |
7,500 | * | ||||||
| Blake Gurfein, PhD(3) |
2,199 | * | ||||||
| Dean Zikria(4) |
443 | * | ||||||
| Sheryle Bolton(5) |
443 | * | ||||||
| Karen Drexler(6) |
687 | * | ||||||
| All directors and executive officers as a group (6 persons) |
25,284 | 1.7 | % | |||||
| * | Less than 1% |
| (1) | Unless otherwise indicated in the footnotes to the table, the address for each beneficial owner listed is c/o Tivic Health Systems, Inc., 25821 Industrial Blvd., Suite 100, Hayward, CA 94545. |
| (2) | Includes 11,999 shares of common stock held by Ms. Ernst, and options to purchase 2,013 of common stock that are vested and exercisable (or will be vested and exercisable within 60 days of March 22, 2024). |
| (3) | Includes 1,120 shares of common stock held by Dr. Gurfein, as well as options to purchase 1,079 shares of common stock that are vested and exercisable (or will be vested and exercisable within 60 days of March 22, 2024). |
| (4) | Includes options to purchase 443 shares of common stock that are vested and exercisable (or will be vested and exercisable within 60 days of March 22, 2024). |
| (5) | Includes options to purchase 443 shares of common stock that are vested and exercisable (or will be vested and exercisable within 60 days of March 22, 2024). |
| (6) | Includes 181 shares of common stock held by Ms. Drexler, and options to purchase 506 shares of common stock that are vested and exercisable (or will be vested and exercisable within 60 days of March 22, 2024). |
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 200,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share.
As of March 22, 2024, there are 1,473,592 shares of common stock outstanding, and zero shares of preferred stock outstanding.
In addition, as of March 22, 2024, there were outstanding options to purchase 54,369 shares of our common stock and outstanding warrants to purchase 59,497 shares of our common stock outstanding.
This description is intended to be a summary and is qualified in its entirety by reference to our Charter and Bylaws, which are filed, or incorporated by reference, as exhibits to the registration statement of which this prospectus forms a part.
Common Stock
Voting Rights
Holders of our common stock are entitled to one vote for each share of common stock held of record for the election of our directors and all other matters requiring stockholder action, except with respect to amendments to our Charter to alter or change the powers, preferences, rights or other terms of any outstanding preferred stock if the holders of such affected series of preferred stock are entitled to vote on such an amendment. Holders of our common stock do not have cumulative voting rights. In the case of election of directors, all matters to be voted on by our stockholders must be approved by a plurality of the votes entitled to be cast by all shares of common stock. Accordingly, the holders of a majority of the outstanding shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they so choose, other than any directors that holders of any preferred stock we may issue may be entitled to elect. Except as otherwise provided by our Charter, Bylaws, the rules or regulations of any stock exchange applicable to the Company, or applicable law or pursuant to any regulation applicable to the Company or its securities, all other matters presented to our stockholders at a duly called or convened meeting, at which a quorum is present, shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter.
Dividends
Dividends may be declared and paid on shares of our common stock as and when determined by our board of directors, subject to any preferential dividend or other rights of any then outstanding preferred stock and to the requirements of applicable law. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock will be entitled to share equally, identically and ratably in any dividends that our board of directors may determine to issue from time to time.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of our debts and other liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.
Other Rights
Our stockholders have no preemptive, conversion or other rights to subscribe for additional shares, and there are no redemption or sinking funds provisions applicable to the common stock. The rights, preferences and
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privileges of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Preferred Stock
No series of preferred stock are currently designated, and there are no shares of preferred stock currently outstanding. Under the terms of our Charter, our board of directors has the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the dividend, voting and other rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.
Anti-Takeover Effects of Delaware Law and Our Charter and Bylaws
Certain provisions of Delaware law, as well as our Charter and Bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our Board. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging such proposals, including proposals that are priced above the then-current market value of our common stock, because, among other reasons, such negotiation could result in an improvement of the terms of such proposals.
Charter and Bylaws
Certain provisions set forth in our Charter, Bylaws, and in Delaware law, which are summarized below, may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders.
Classified Board of Directors
Our Board is divided into three classes serving three-year terms, with one class being elected each year by a plurality of the votes cast by the stockholders entitled to vote on the election.
Proposals of business and nominations.
Our Bylaws generally regulate proposals of business and nominations for election of directors by stockholders. In general, Section 2.5 requires stockholders intending to submit proposals or nominations at a stockholders meeting to provide the Company with advance notice thereof, including information regarding the stockholder proposing the business or nomination as well as information regarding the proposed business or nominee. Sections 2.4 and 2.5 provides a time period during which business or nominations must be provided to the Company that will create a predictable window for the submission of such notices, eliminating the risk that the Company finds a meeting will be contested after printing its proxy materials for an uncontested election and providing the Company with a reasonable opportunity to respond to nominations and proposals by stockholders.
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Blank Check Preferred Stock.
Our Board has the right to issue preferred stock in one or more series and to determine the designations, rights, preferences of such preferred stock without stockholder approval.
Board Vacancies.
Our Bylaws generally provide that only our Board (and not the stockholders) may fill vacancies and newly created directorships.
While the foregoing provisions of our Charter, Bylaws and Delaware law may have an anti-takeover effect, these provisions are intended to enhance the likelihood of continuity and stability in the composition of the Board and in the policies formulated by the Board, and to discourage certain types of transactions that may involve an actual or threatened change of control. In that regard, these provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended 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, as a consequence, they also may inhibit fluctuations in the market price of our common stock that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management.
Delaware Anti-Takeover Statute
We are subject to the provisions of Section 203 of the Delaware General Corporation Law (“Section 203”) regulating corporate takeovers. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
| • | prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which 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 commenced, excluding for purposes of determining the voting stock outstanding, the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also officers and (ii) shares owned by 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 |
| • | at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of 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. |
Generally, a business combination includes a merger, asset, stock sale or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of Section 203 to have an anti-takeover effect with respect to transactions our Board does not approve in advance. We also anticipate that Section 203 may discourage business combinations or other attempts that might result in a premium over the market price for the shares of common stock held by our stockholders.
Listing
Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “TIVC.”
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Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Equiniti Trust Company. The transfer agent’s principal business address is 90 Park Avenue, 25th Floor, New York, NY 10016, and its telephone number is 800-468-9716.
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DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering an aggregate of up to shares of our common stock and/or Pre-Funded Warrants to purchase shares of our common stock. Our shares of Common Stock and/or Pre-Funded Warrants are being offered together with Common Warrants to purchase up to shares of our common stock. We are also registering the shares of common stock issuable from time to time upon exercise of the Pre-Funded Warrants and Common Warrants offered hereby.
Common Stock
The material terms and provisions of our common stock and each other class of our securities which qualifies or limits our common stock are described under the caption “Description of Capital Stock” in this prospectus.
Pre-Funded Warrants
The following summary of certain terms and provisions of the Pre-Funded Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the Pre-Funded Warrants, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Pre-Funded Warrant for a complete description of the terms and conditions of the Pre-Funded Warrants.
Duration and Exercise Price
Each Pre-Funded Warrant offered hereby will have an initial exercise price equal to $0.0001 per share of common stock. The Pre-Funded Warrants will be exercisable immediately, and may be exercised at any time until the Pre-Funded Warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate proportional adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of our common stock and the exercise price.
Exercisability
The Pre-Funded Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and within the earlier of (i) two trading days and (ii) the number of trading days comprising the standard settlement period with respect to the shares of common stock as in effect on the date of delivery of the notice of exercise thereafter, payment in full for the number of shares of common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder may not exercise any portion of the Pre-Funded Warrant to the extent that the holder, together with its affiliates and any other persons acting as group together with any such persons, would own more than 4.99% (or, at the election of the purchaser, 9.99%) of the number of shares of our common stock outstanding immediately after exercise (the “Beneficial Ownership Limitation”); provided that a holder with Beneficial Ownership Limitation of 4.99%, upon notice to use and effective 61 days after the date such notice is delivered to us may increase the Beneficial Ownership Limitation so long as it in no event exceeds 9.99% of the number of ordinary shares outstanding immediately after exercise.
Cashless Exercise
The Pre-Funded Warrants may also be exercised, in whole or in part, at any time by means of “cashless exercise” in which the holder shall be entitled to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Pre-Funded Warrants,
which generally provides for a number of shares of common stock equal to (A)(1) the volume weighted average price on (x) the trading day preceding the notice of exercise, if the notice of exercise is executed and delivered on d ay that is not a trading day or prior to the opening of “regular trading hours” on a trading day or (y) the trading
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day of the notice of exercise, if the notice of exercise is executed and delivered after the close of “regular trading hours” on such trading day, or (2) the bid price on the day of the notice of exercise, if the notice of exercise is executed during “regular trading hours” on a trading day and is delivered within two hours thereafter, less (B) the exercise price, multiplied by (C) the number of shares of common stock the Pre-Funded Warrant was exercisable into, with such product then divided by the number determined under clause (A) in the this sentence.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of the Pre-Funded Warrants. Rather, we will, at our election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price or round up to the next whole shares of common stock.
Transferability
Subject to applicable laws, a Pre-Funded Warrant may be transferred at the option of the holder upon surrender of the Pre-Funded Warrant to us together with the appropriate instruments of transfer and funds sufficient to pay any transfer taxes payable upon such transfer.
Trading Market
There is no trading market available for the Pre-Funded Warrants on any securities exchange or nationally recognized trading system. We do not intend to list the Pre-Funded Warrants on any securities exchange or nationally recognized trading system. The shares of common stock issuable upon exercise of the Pre-Funded Warrants are currently listed on The Nasdaq Capital Market under the symbol “TIVC.”
Rights as a Shareholder
Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of the underlying shares of common stock, the holders of the Pre-Funded Warrants do not have the rights or privileges of holders of shares of our common stock, including any voting rights, until they exercise their Pre-Funded Warrants.
Fundamental Transaction
In the event of a fundamental transaction, as described in the Pre-Funded Warrants and generally including any reorganization, recapitalization or reclassification of our shares of common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of our common stock, the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of the Pre-Funded Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such fundamental transaction.
Common Warrants
The following summary of certain terms and provisions of the Common Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the Common Warrants, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Common Warrant for a complete description of the terms and conditions of the Common Warrants.
Duration and Exercise Price
Each Common Warrant offered hereby will have an initial exercise price equal to $ per share. The Common Warrants will be immediately exercisable and will expire on the fifth anniversary of the initial exercise
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date. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate proportional adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of common stock and the exercise price.
Exercisability
The Common Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice and, within the earlier of (i) two trading days and (ii) the number of trading days comprising the standard settlement period with respect to the shares of common stock as in effect on the date of delivery of the notice of exercise thereafter, payment in full for the number of shares of common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder may not exercise any portion of the Common Warrant to the extent that the holder, together with its affiliates and any other persons acting as a group together with any such persons, would own more than 4.99% (or, at the election of the purchaser, 9.99%) of the number of ordinary shares outstanding immediately after exercise; provided that a holder with a Beneficial Ownership Limitation of 4.99%, upon notice to us and effective 61 days after the date such notice is delivered to us, may increase the Beneficial Ownership Limitation so long as it in no event exceeds 9.99% of the number of ordinary shares outstanding immediately after exercise.
Cashless Exercise
If, at the time a holder exercises its Common Warrants, a registration statement registering the issuance of the shares of common stock underlying the Common Warrants under the Securities Act of 1933, as amended (the “Securities Act”), is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Common Warrants, which generally provides for a number of shares of common stock equal to (A) (1) the volume weighted average price on (x) the trading day preceding the notice of exercise, if the notice of exercise is executed and delivered on a day that is not a trading day or prior to the opening of “regular trading hours” on a trading day or (y) the trading day of the notice of exercise, if the notice of exercise is executed and delivered after the close of “regular trading hours” on such trading day, or (2) the bid price on the day of the notice of exercise, if the notice of exercise is executed during “regular trading hours” on a trading day and is delivered within two hours thereafter, less (B) the exercise price, multiplied by (C) the number of shares of common stock the Common Warrant was exercisable into, with such product then divided by the number determined under clause (A) in this sentence.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of the Common Warrants. Rather, we will, at our election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price or round up to the next whole share.
Transferability
Subject to applicable laws, a Common Warrant may be transferred at the option of the holder upon surrender of the Common Warrant to us together with the appropriate instruments of transfer and funds sufficient to pay any transfer taxes payable upon such transfer.
Trading Market
There is no trading market available for the Common Warrants on any securities exchange or nationally recognized trading system. We do not intend to list the Common Warrants on any securities exchange or nationally recognized trading system. The shares of Common Stock issuable upon exercise of the Common Warrants are currently listed on The Nasdaq Capital Market under the symbol “TIVC.”
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Rights as a Shareholder
Except as otherwise provided in the Common Warrants or by virtue of such holder’s ownership of the underlying shares of common stock, the holders of the Common Warrants do not have the rights or privileges of holders of shares of our common Stock, including any voting rights, until they exercise their Common Warrants.
Fundamental Transaction
In the event of a fundamental transaction, as described in the Common Warrants and generally including any reorganization, recapitalization or reclassification of shares of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of our common stock, the holders of the Common Warrants will be entitled to receive upon exercise of the Common Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Common Warrants immediately prior to such fundamental transaction. Additionally, in the event of a fundamental transaction, we or any successor entity will, at the option of the holder of a Common Warrant exercisable at any time concurrently with or within 30 days after the consummation of the fundamental transaction (or, if later, the date of the public announcement thereof), purchase the Common Warrant from the holder by paying to the holder an amount of consideration equal to the value of the remaining unexercised portion of such Common Warrant on the date of consummation of the fundamental transaction based on the Black-Scholes option pricing model, determined pursuant to a formula set forth in the Common Warrants. The consideration paid to the holder will be the same type or form of consideration that was offered and paid to the holders of ordinary shares in connection with the fundamental transaction; provided that if no such consideration was offered or paid, the holders of ordinary shares will be deemed to have received ordinary shares of the successor entity in such fundamental transaction for purposes of this provision of the Common Warrants.
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PLAN OF DISTRIBUTION
We are offering on a reasonable best efforts basis up to shares of our common stock and Common Warrants to purchase up to shares of our common stock at a combined public offering price of $ per share and Common Warrant, which represents the closing price of our common stock on the Nasdaq capital market on , 2024, for gross proceeds of up to $ million, before deduction of placement agent commissions and offering expenses, in a best-efforts offering. There is no minimum amount of proceeds that is a condition to closing of this offering. The actual amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum number of securities being offered in this prospectus.
Pursuant to a placement agency agreement, dated as of , 2024, we have engaged Maxim Group LLC to act as our exclusive placement agent (the “Placement Agent”) to solicit offers to purchase the securities offered by this prospectus. The Placement Agent is not purchasing or selling any securities, nor is it required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use its “reasonable best efforts” to arrange for the sale of the securities by us. Therefore, we may not sell the entire number of securities being offered. Investors purchasing securities offered hereby will have the option to execute a securities purchase agreement with us. In addition to the rights and remedies available to all investors in this offering under federal and state securities laws, the investors which enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection with the purchase of our securities in this offering. The Placement Agent may engage one or more subagents or selected dealers in connection with this offering.
The placement agency agreement provides that the Placement Agent’s obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. There is no arrangement for funds to be received in escrow, trust or similar arrangement and the shares of common stock (or Pre-Funded Warrants in lieu thereof) will be offered at a fixed price and are expected to be issued in a single closing. We expect to deliver the securities being offered pursuant to this prospectus on or about , 2024.
Placement Agent Fees, Commissions and Expenses
Upon the closing of this offering, we will pay the Placement Agent a cash transaction fee equal to 7% of the aggregate gross cash proceeds to us from the sale of the securities in the offering. In addition, we will reimburse the Placement Agent for its out-of-pocket expenses incurred in connection with this offering, including the fees and expenses of the counsel for the placement agent, up to $100,000.
The following table shows the combined public offering price, placement agent fees and proceeds, before expenses, to us.
| Per Share of Common Stock and Accompanying Common Warrant |
Per Pre-Funded Warrant Accompanying Common Warrant |
Total | ||||||||||
| Public offering price |
$ | $ | $ | |||||||||
| Placement Agent Fees |
$ | $ | $ | |||||||||
| Proceeds to us, before expenses |
$ | $ | $ | |||||||||
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We estimate that the total expenses of the offering, including registration and filing fees, printing fees and legal and accounting expenses, but excluding the placement agent commission, will be approximately $ , all of which are payable by us. This figure includes, among other things, the Placement Agent’s fees and expenses (including the legal fees, costs and expenses for the Placement Agent’s legal counsel) up to $100,000.
Placement Agent Warrants
We have agreed to issue to the Placement Agent warrants to purchase up to shares of common stock (which represents 4.0% of the aggregate number of common stock and/or Pre-Funded Warrants issued in this offering) with an exercise price of $ per share (representing 110% of the combined public offering price per share of common stock and Common Warrant) exercisable commencing six (6) months after the closing of this offering for five (5) years from the date of the commencement of sales in this offering. Pursuant to FINRA Rule 5110(e), the Placement Agent Warrants and any shares issued upon exercise of the Placement Agent Warrants shall not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days from the date of commencement of sales in this offering, except for the transfer of any security as permitted by FINRA Rule 5110(e)(2). The Placement Agent Warrants will provide for cashless exercise and will contain provisions for one demand registration of the sale of the underlying shares at the Placement Agent’s expense and “piggyback” registration rights for a period of two (2) years from the commencement of sales in the offering. The Placement Agent Warrants will provide for anti-dilution protection as permitted by FINRA Rule 5110(g).
Right of First Refusal
Pursuant to the terms of the placement agency agreement, subject to the closing of this offering, for a period of six (6) months after the commencement of sales of securities in this offering, Maxim shall have a right of first refusal to act as lead managing underwriter and sole book runner, sole placement agent, or sole sales agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which we retain the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such six (6) month period for us, or any successor to us or any of our subsidiaries. We shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which we offer to retain Maxim. Such offer shall be made in writing in order to be effective. Maxim shall notify us within ten (10) business days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If Maxim should decline such retention, we shall have no further obligations to Maxim with respect to the offering for which we have offered to retain Maxim. Such right of first refusal shall not have a duration of more than three (3) years from commencement of sales in this offering.
Other Compensation
We have also agreed to pay the Placement Agent a tail fee equal to 7% of the gross proceeds of any equity, equity-linked or debt or other capital raising activity, if any investor, who was contacted or introduced by the Placement Agent during the term of its engagement, provides us with capital in such a financing during the twelve-month period following expiration or termination of our engagement with the representative.
Indemnification
We have agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the Placement Agent may be required to make for these liabilities.
Lock-Up Agreements
We and each of our officers and directors have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common
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stock or other securities convertible into or exercisable or exchangeable for our common stock for a period of ninety (90) days after this offering is completed without the prior written consent of the Placement Agent.
The Placement Agent may in its sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up period. When determining whether or not to release shares from the lock-up agreements, the Placement Agent will consider, among other factors, the security holder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time.
Regulation M
The Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the Placement Agent acting as principal. Under these rules and regulations, the Placement Agent (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
Determination of Offering Price and Warrant Exercise Price
The actual offering price of the securities we are offering, and the exercise price of the Common Warrants being sold together with the shares of common stock (or Pre-Funded Warrants in lieu thereof) that we are offering, were negotiated between us, the placement agent and the investors in the offering based on the trading of our shares of common stock prior to the offering, among other things. Other factors considered in determining the combined public offering price of the securities we are offering, as well as the exercise price of the common warrants that we are offering include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Electronic Distribution
A prospectus in electronic format may be made available on a website maintained by the Placement Agent. In connection with the offering, the Placement Agent or selected dealers may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
Other than the prospectus in electronic format, the information on the Placement Agent’s website and any information contained in any other website maintained by the Placement Agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the placement agent in its capacity as placement agent and should not be relied upon by investors.
Other Relationships
The Placement Agent and certain of its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.
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The Placement Agent and certain of its affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses. However, except as disclosed in this prospectus, we have no present arrangements with the placement agent for any further services.
In the ordinary course of their various business activities, the Placement Agent and certain of its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the Placement Agent or its affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. The Placement Agent and its affiliates may hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the securities offered hereby. Any such short positions could adversely affect future trading prices of the securities offered hereby. The Placement Agent and certain of its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Listing
Our common stock is traded on the Nasdaq Capital Market under the symbol “TIVC.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Broadridge Corporate Issuer Solutions, Inc.
Selling Restrictions
Canada. The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the placement agents are not required to comply with the disclosure requirements of NI 33-105 regarding placement agents conflicts of interest in connection with this offering.
European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
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| • | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
| • | to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or |
| • | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by us or any placement agents of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Israel. This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, placement agents, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals”, each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
United Kingdom. Each placement agent has represented and agreed that:
| • | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and |
| • | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
Switzerland. The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be
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filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of securities.
Australia. No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering.
This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act) and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons (the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in the Cayman Islands. No invitation, whether directly or indirectly, may be made to the public in the Cayman Islands to subscribe for our securities.
Taiwan. The securities have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the securities in Taiwan.
Notice to Prospective Investors in Hong Kong. The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice. Please note that (i) our shares may not be offered or sold in Hong Kong, by means of this prospectus or any document other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do not constitute an offer or invitation to the public for the purpose
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of the CO or the SFO, and (ii) no advertisement, invitation or document relating to our shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.
Notice to Prospective Investors in the People’s Republic of China. This prospectus may not be circulated or distributed in the PRC and the shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.
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LEGAL MATTERS
Procopio, Cory, Hargreaves & Savitch LLP, San Diego, California, has acted as the Company’s legal counsel and will pass upon the validity of the securities, other than the Common Stock Warrants, Pre-Funded Warrants and the Placement Agent Warrants, offered by this prospectus. Carter Ledyard & Milburn LLP, New York, New York, has acted as special New York counsel to the Company by providing an opinion on the validity of the Common Stock Warrants, Pre-Funded Warrants and the Placement Agent Warrants offered by this prospectus. The placement agent is represented by Ellenoff Grossman & Schole LLP.
EXPERTS
Rosenberg Rich Baker Berman, P.A., independent registered public accounting firm, has audited our financial statements at December 31, 2023 and 2022, and for the years then ended, as set forth in their report. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on Rosenberg Rich Baker Berman P.A.’s report, given on their authority as experts in accounting and auditing.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also, at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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 Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form S-1 under the Securities Act with respect to the securities offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the securities offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. The Commission also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the website is www.sec.gov.
We are subject to the periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with the Commission. These periodic reports, proxy statements and other information are available on the website of the Commission referred to above. We also maintain a website at www.tivichealth.com. You may access these materials at our corporate website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our corporate website is not a part of this prospectus and the inclusion of our corporate website address in this prospectus is an inactive textual reference only.
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Page |
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F-2 |
||||
F-3 |
||||
F-4 |
||||
F-5 |
||||
F-6 |
||||
| F-7 | ||||
December 31, 2023 |
December 31, 2022 |
|||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
||||||||
Inventory, net |
||||||||
Deferred offering costs |
— | |||||||
Prepaid expenses and other current assets |
||||||||
Total current assets |
||||||||
Property and equipment, net |
||||||||
Right-of-use |
||||||||
Other assets |
||||||||
Total assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | $ | ||||||
Other accrued expenses |
||||||||
Operating lease liability, current |
||||||||
Total current liabilities |
||||||||
Operating lease liability |
||||||||
Total liabilities |
||||||||
Commitments and contingencies (Note 6) |
||||||||
Stockholders’ equity |
||||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Total stockholders’ equity |
||||||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
Years Ended December 31, |
||||||||
2023 |
2022 |
|||||||
Revenue |
$ | $ | ||||||
Cost of sales |
||||||||
Gross profit |
||||||||
Operating expenses: |
||||||||
Research and development |
||||||||
Sales and marketing |
||||||||
General and administrative |
||||||||
Total operating expenses |
||||||||
Loss from operations |
( |
) | ( |
) | ||||
Other income: |
||||||||
Interest income |
||||||||
Total other income |
||||||||
Net loss before income taxes |
$ | ( |
) | $ | ( |
) | ||
Net loss per share - basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Weighted-average number of shares - basic and diluted |
||||||||
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated |
Total Stockholders’ |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Deficit |
Equity |
|||||||||||||||||||||||
Balances at January 1, 2022 |
— | $ | — | $ | — | $ | $ | ( |
) | $ | ||||||||||||||||||
Exercise of stock options |
— | — | — | — | ||||||||||||||||||||||||
Repurchase of restricted common stock |
— | — | ( |
) | — | — | — | — | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Balances at December 31, 2022 |
— | $ | — | $ | — | $ | $ | ( |
) | $ | ||||||||||||||||||
Issuance of common stock, net of issuance costs |
— | — | — | — | ||||||||||||||||||||||||
Issuance of warrants |
— | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock in lieu of fractional shares for stock split |
— | — | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Balances at December 31, 2023 |
— | $ | — | $ | — | $ | $ | ( |
) | $ | ||||||||||||||||||
Years Ended December 31, |
||||||||
2023 |
2022 |
|||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Stock based compensation |
||||||||
Depreciation |
||||||||
Amortization of right-of-use |
||||||||
Reserve for inventory obsolescence |
— | |||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Inventory |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) | ||||||
Accounts payable |
( |
) | ||||||
Accrued expenses |
||||||||
Lease liabilities |
( |
) | ( |
) | ||||
Other assets |
— | |||||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
Cash flows from investing activities |
||||||||
Acquisition of property and equipment |
( |
) | ( |
) | ||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Cash flows from financing activities |
||||||||
Proceeds from exercise of stock options |
— | |||||||
Proceeds from issuance of common stock, net of issuance costs |
— | |||||||
Offering costs in advance of sale of common stock |
— | ( |
) | |||||
Net cash provided by (used in) financing activities |
( |
) | ||||||
Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents |
||||||||
Beginning of period |
||||||||
End of period |
$ | $ | ||||||
Supplemental disclosure on noncash financing activities |
||||||||
Issuance of common stock warrant |
$ | $ | — | |||||
Deferred offering costs charged to additional paid-in-capital |
$ | $ | — | |||||
1. |
Formation and Business of the Company |
2. |
Summary of Significant Accounting Policies |
Year Ended December 31, |
||||||||
Product Revenue by Sales Channel |
2023 |
2022 |
||||||
Product Revenue |
||||||||
Direct-to-consumer |
$ | $ | ||||||
Reseller |
||||||||
Returns |
( |
) | ( |
) | ||||
Revenue |
$ | $ | ||||||
3. |
Financial Instruments and Fair Value Measurements |
As of December 31, 2023 |
||||||||||||||||||||
Carrying Amount |
Fair Value |
Quoted Priced in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
||||||||||||||||
Assets |
||||||||||||||||||||
Money market funds |
$ |
$ |
$ |
$ |
— |
$ |
— |
|||||||||||||
Total assets |
$ |
$ |
$ |
$ |
— |
$ |
— |
|||||||||||||
As of December 31, 2022 |
||||||||||||||||||||
Carrying Amount |
Fair Value |
Quoted Priced in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
||||||||||||||||
Assets |
||||||||||||||||||||
Money market funds |
$ |
$ |
$ |
$ |
— |
$ |
— |
|||||||||||||
Total assets |
$ |
$ |
$ |
$ |
— |
$ |
— |
|||||||||||||
4. |
Inventory, net (in thousands) |
December 31, 2023 |
December 31, 2022 |
|||||||
Raw materials |
$ | $ | ||||||
Work in process |
— | |||||||
Finished goods |
||||||||
Inventory at cost |
||||||||
Less reserve for obsolescence |
( |
) | — | |||||
Inventory |
$ | $ | ||||||
5. |
Property and equipment, net (in thousands) |
December 31, 2023 |
December 31, 2022 |
|||||||
Computers and equipment |
$ | $ | ||||||
Manufacturing tools and dies |
||||||||
Total property and equipment |
||||||||
Less accumulated depreciation |
( |
) | ( |
) | ||||
Property and equipment, net |
$ | $ | ||||||
6. |
Commitments and Contingencies |
December 31, 2023 |
December 31, 2022 |
|||||||
Operating lease cost |
$ | $ | ||||||
Short term lease cost |
||||||||
Total lease cost |
$ | $ | ||||||
Right-of-use |
$ | |||
Operating lease liabilities, current |
$ | |||
Operating lease liabilities, non-current |
||||
Total operating lease liabilities |
$ | |||
Remaining lease term (in years) |
||||
Discount rate |
% |
Fiscal Year |
||||
2024 |
||||
2025 |
||||
Total minimum lease payments |
||||
Less imputed interest |
( |
) | ||
Present value of lease payments |
$ | |||
7. |
Other Accrued Expenses (in thousands) |
December 31, 2023 |
December 31, 2022 |
|||||||
Accrued payroll and related |
$ | $ | ||||||
Accrued secondary offering costs |
— | |||||||
Delaware franchise tax |
— | |||||||
Other |
||||||||
Total other accrued expenses |
$ | $ | ||||||
8. |
Preferred Stock |
9. |
Common Stock |
December 31, 2023 |
December 31, 2022 |
|||||||
Warrants to purchase common stock |
||||||||
Options issued and outstanding |
||||||||
Shares available for future stock option grants |
||||||||
Total |
||||||||
10. |
Common Stock Warrants |
2023 |
||||||||
Minimum |
Maximum |
|||||||
Expected life (in years) |
||||||||
Expected volatility |
% | % | ||||||
Risk-free interest rate |
% | % | ||||||
Dividend yield |
% | % | ||||||
Class of Shares |
Number of Warrants |
Exercise Price |
Expiration Date |
|||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
Common Stock |
$ | |||||||||||
11. |
Equity Incentive Plans |
Options Outstanding |
||||||||||||||||||||||||
Shares Available For Grant |
Number of Options |
Weighted Average Exercise Price |
Weighted- Average Grant Date Fair Value |
Weighted- Average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value (in thousands) |
|||||||||||||||||||
Balances, January 1, 2022 |
$ | $ | $ | |||||||||||||||||||||
Shares reserved for issuance |
— | |||||||||||||||||||||||
Reserved shares cancelled |
— | — | ||||||||||||||||||||||
Options granted |
( |
) | $ | $ | ||||||||||||||||||||
Options forfeited / cancelled |
— | ( |
) | $ | $ | |||||||||||||||||||
Options expired |
— | — | $ | — | $ | — | ||||||||||||||||||
Options exercised |
— | ( |
) | $ | $ | |||||||||||||||||||
Balances, December 31, 2022 |
$ | $ | $ | |||||||||||||||||||||
Shares reserved for issuance |
— | |||||||||||||||||||||||
Reserved shares cancelled |
— | — | ||||||||||||||||||||||
Options granted |
( |
) | $ | $ | ||||||||||||||||||||
Options forfeited / cancelled |
( |
) | $ | $ | ||||||||||||||||||||
Options expired |
— | — | $ | — | $ | — | ||||||||||||||||||
Options exercised |
— | — | $ | — | $ | — | ||||||||||||||||||
Balances, December 31, 2023 |
$ | $ | $ | — | ||||||||||||||||||||
At December 31, 2023 |
||||||||||||||||||||||||
Vested and exercisable |
$ | $ | — | |||||||||||||||||||||
Number of Shares |
Weighted- Average Grant-Date Fair Value Per Share |
|||||||
Non-vested as of January 1, 2022 |
$ | |||||||
Vested |
( |
) | $ | |||||
Cancelled |
( |
) | $ | |||||
Non-vested as of December 31, 2022 |
$ | |||||||
2023 |
2022 |
|||||||
Expected life (in years) |
||||||||
Expected volatility |
% | % | ||||||
Risk-free interest rate |
% | % | ||||||
Dividend yield |
% | % | ||||||
2023 |
2022 |
|||||||
Research and development |
$ | $ | ||||||
Sales and marketing |
||||||||
General and administrative |
||||||||
Total stock-based compensation |
$ | $ | ||||||
12. |
Income Taxes |
For the Years Ended |
||||||||
December 31, 2023 |
December 31, 2022 |
|||||||
Income tax provision at statutory rate |
% | % | ||||||
State income taxes, net of federal benefit |
( |
)% | % | |||||
Research and development credits |
( |
)% | % | |||||
Change in valuation allowance |
( |
)% | ( |
)% | ||||
Effective income tax rate |
% | % | ||||||
For the Years Ended |
||||||||
December 31, 2023 |
December 31, 2022 |
|||||||
Deferred tax assets: |
||||||||
Net operating loss carryforwards |
$ | $ | ||||||
Research and development credits |
||||||||
Research and development costs |
||||||||
Lease liability |
||||||||
Other temporary differences |
||||||||
Total deferred tax assets |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Deferred tax assets recognized |
||||||||
Deferred tax liabilities: |
||||||||
Right-of-use |
( |
) | ( |
) | ||||
Total deferred tax liabilities |
( |
) | ( |
) | ||||
Net deferred tax assets |
$ | $ | ||||||
For the Years Ended |
||||||||
December 31, 2023 |
December 31, 2022 |
|||||||
Unrecognized tax benefits, beginning of year |
$ | $ | ||||||
Additions related to current year tax positions |
( |
) | ||||||
Net deferred tax assets |
$ | $ | ||||||
13. |
Net Loss per Share |
For the Years Ended December 31, |
||||||||
2023 |
2022 |
|||||||
Common stock warrants |
||||||||
Common stock options issued and outstanding |
||||||||
Total |
||||||||
For the Years Ended December 31, |
||||||||
2023 |
2022 |
|||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Weighted-average number of shares - basic and diluted |
||||||||
Net loss per share - basic and diluted |
$ | ( |
) | $ | ( |
) | ||
14. |
Related Party Transactions |
15. |
Subsequent Events |
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Up to Shares of Common Stock
Up to Pre-Funded Warrants
Up to Common Warrants
Up to Shares of Common Stock Underlying the Common Warrants
and Pre-Funded Warrants
Tivic Health Systems, Inc.
PRELIMINARY PROSPECTUS
Maxim Group LLC
, 2024
Until , 2024 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as placement agent and with respect to their unsold allotments or subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. All of the amounts shown are estimates, except for the Securities and Exchange Commission registration fee and FINRA filing fee.
| Amount to be Paid |
||||
| SEC Registration Fee |
$2,111.86 | |||
| FINRA filing fee |
||||
| Legal fees and expenses |
||||
| Accounting fees and expenses |
||||
| Transfer agent and registrar fees |
||||
| Miscellaneous expenses |
||||
|
|
|
|||
| Total |
$ | |||
|
|
|
|||
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102 of the Delaware General Corporation Law, we have adopted provisions in our Charter and Bylaws that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
| • | any breach of the director’s duty of loyalty to us or our stockholders; |
| • | any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • | any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or |
| • | any transaction from which the director derived an improper personal benefit. |
These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our Charter authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.
As permitted by Section 145 of the Delaware General Corporation Law, our Bylaws will provide that:
| • | we may indemnify our directors, officers, and employees to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; |
| • | we may advance expenses to our directors, officers and employees in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and |
| • | the rights provided in our Bylaws are not exclusive. |
Our Charter provides that we will indemnify each person who was or is a party, or is or was threatened to be made a party, to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons
Table of Contents
being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our amended and restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
The above discussion of our Charter, Bylaws and Delaware law is not intended to be exhaustive and is respectively qualified in its entirety by such Charter, Bylaws and applicable Delaware law.
We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.
We maintain standard policies of insurance that provide coverage for certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.
To the extent that our directors and officers are indemnified under the provisions contained in our Charter, Bylaws, Delaware law or contractual arrangements against liabilities arising under the Securities Act, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
All share and per share data from the period prior to August 31, 2021 included in this Item 15 has been retrospectively adjusted to reflect the 1-for-4 reverse stock split of our common stock, which was effected on August 31, 2021, and all share and per share date from the period prior to August 23, 2023 included in this Item 15 has been retrospectively adjusted to reflect the 1-for-100 reverse stock split of our common stock, which was effected on August 23, 2023.
Convertible Debt
From March 2021 through April 2021, we issued unsecured convertible promissory notes in the amount of approximately $0.4 million to certain accredited investors pursuant to the terms of a Note Purchase Agreement. These notes were issued as part of an offering of additional promissory notes in 2020 (all such notes collectively, the “Bridge Notes”), accrued interest at a rate of 3% per annum, were scheduled to mature on June 1, 2022, and were generally convertible into the Company’s equity securities at a per share conversion price to be computed on the basis of a Cap of $40 million or a Discount Rate of 25%, whichever resulted in the issuance of a greater
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number of equity securities to the investors. In August 2021, the Bridge Notes were amended to provide that, in addition to the foregoing conversion terms, in the event that the Company consummated an initial public offering of its common stock prior to the occurrence of a Qualified Financing, a Change of Control or the Maturity (all as defined in the Bridge Notes), then, at the election of the Company, all accrued but unpaid interest thereon was to be converted into shares of common stock as of immediately prior to the consummation of the initial public offering at a per share price equal to the lesser of (i) 75% of the per share public offering price and (ii) the quotient resulting from dividing the $40 million Cap by the Company’s capitalization on a fully diluted basis, as of immediately prior to closing of the initial public offering.
The Bridge Notes, including those issued in 2020, in the aggregate principal amount of approximately $1,987,500, converted into an aggregate of 5,457 shares of our common stock in connection with closing of our initial public offering (“IPO”), based on accrued interest of approximately $58,600 as of November 10, 2021, and a conversion price of $375 per share (75% of the IPO price per share).
From June 2021 through July 2021, we issued convertible notes payable for total proceeds of approximately $1.86 million to certain accredited investors, of which proceeds a total of $0.45 million was not received by the Company until July 2021. The notes were issued at an original issue discount of approximately $0.24 million with principal outstanding of approximately $2.11 million. The notes were unsecured, had a term of twenty-three months, and accrued interest at a rate of 3% per annum.
In June 2021, we issued a convertible note payable to our Chief Executive Officer for total proceeds of $0.10 million. The note was unsecured, had a term of twenty-three months, and accrued interest at a rate of 3% per annum.
In June 2021, we issued convertible notes payable for total proceeds of approximately $0.23 million. The notes were unsecured, had a term of twenty-three months, and accrued interest at a rate of 3% per annum.
All of the convertible notes payable issued in June and July 2021 (collectively, the “2021 Notes”) were generally convertible into the Company’s equity securities at a per share conversion price to be computed on the basis of a Cap of $40 million or a Discount Rate of 25%, whichever resulted in the issuance of a greater number of equity securities to the investors. In the event that the Company consummated an initial public offering of its common stock prior to the occurrence of a Qualified Financing, a Change of Control or the Maturity (all as defined in the 2021 Notes), then the outstanding principal amount and, at the election of the Company, all accrued but unpaid interest thereon as of the date of conversion was to be converted into shares of common stock as of immediately prior to the consummation of the initial public offering at a per share price equal to the lesser of (i) 75% of the per share public offering price and (ii) the quotient resulting from dividing the $40 million Cap by the Company’s capitalization on a fully diluted basis, as of immediately prior to closing of the initial public offering.
The 2021 Notes, in the aggregate principal amount of approximately $2,442,221, converted into an aggregate of 6,586 shares of our common stock in connection with the IPO, based on accrued interest of approximately $27,352 as of November 10, 2021, and a conversion price of $375 per share (75% of the IPO price per share).
Preferred Stock Financing
All outstanding shares of our Series Seed-1 Preferred Stock, Series Seed-2 Preferred Stock, Series Seed-3 Preferred Stock and Series Seed-4 Preferred Stock outstanding as of November 10, 2021, which preferred shares were sold and issued in from July 2019 through January 2020, converted into shares of our common stock on a 400:1 basis (with any fractional shares resulting from the conversion to be cashed out by the Company) into an aggregate of 22,272 shares of common stock in connection with our IPO.
Stock Option Exercises
In March 2021, one employee purchased 500 shares of our common stock at an exercise price of $12.00 per share, for total consideration of $6,000, upon the exercise of stock options granted pursuant to our 2017 Equity
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Incentive Plan. In August 2021, six employees and one former employee purchased an aggregate of 3,470 shares of our common stock at a weighted average exercise price of $16.00 per share, for total consideration of approximately $55,800, upon the exercise of stock options granted pursuant to our 2017 Equity Incentive Plan. The shares of common stock issued upon exercise of these stock options were unregistered at the time of issuance, but were subsequently registered under the S-8 Registration Statement (File No. 333-261044), filed by the Company with the Commission on November 12, 2021, after completion of the IPO.
Stock Option Grants
In June 2021, we granted options to purchase 500 shares of our common stock, all of which are outstanding. All such stock options have an exercise price of $160.00 per share. These stock options were unregistered at the time of issuance, but were subsequently registered under the S-8 Registration Statement (File No. 333-261044), filed by the Company with the Commission on November 12, 2021, after completion of the IPO.
Restricted Stock Grants
On July 29, 2021, we issued 1,125 shares of restricted stock under our 2017 Equity Incentive Plan to our former CFO. These shares were unregistered at the time of issuance, but were subsequently registered under the S-8 Registration Statement (File No. 333-261044), filed by the Company with the Commission on November 12, 2021, after completion of the IPO.
Warrants
On July 1, 2021, we issued a warrant to purchase 5,000 shares of our common stock to a consultant as partial consideration for services provided to the Company, and issued an additional 5,000 warrants to purchase common stock in November 2021 after completion of the IPO. The warrants are exercisable upon issuance, have an exercise price of $104.00 per share and have a term of five years.
On July 11, 2023, we issued warrants to purchase an aggregate of 13,000 shares of our common stock to a placement agent as partial consideration for services provided to the Company in connection with the registered public offering that closed on the same day. The warrants have a term of five years from the commencement of sales under the offering, are exercisable commencing six months from closing, and have an exercise price of $6.60 per share of common stock.
On July 19, 2023, we issued warrants to purchase an aggregate of 20,500 shares of our common stock to a placement agent as partial consideration for services provided to the Company in connection with the registered public offering that closed on the same day. The warrants have a term of five years from the commencement of sales under the offering, are exercisable commencing six months from closing, and have an exercise price of $4.80 per share of common stock.
On August 9, 2023, we issued warrants to purchase an aggregate of 13,270 shares of our common stock to a placement agent as partial consideration for services provided to the Company in connection with the registered public offering that closed on the same day. The warrants have a term of five years from the commencement of sales under the offering, are exercisable commencing six months from closing, and have an exercise price of $4.92 per share of common stock.
Applicable Exemptions
No underwriters were used in the foregoing transactions, and no underwriting discounts or commissions were paid for the transactions described in this item. All sales of securities described in this item were exempt from the registration requirements of the Securities Act in reliance on Section 4(a)(2) of the Securities Act, Rule 701 promulgated under the Securities Act or Regulation D promulgated under the Securities Act, relating to transactions by an issuer not involving a public offering. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
The registrant has filed the exhibits listed on the accompanying Exhibit Index of this registration statement.
(b) Financial Statement Schedules.
All financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or in the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(4) That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(5) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
(6) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.
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EXHIBIT INDEX
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| * | To be filed by amendment. |
| ** | Furnished herewith. |
| # | Indicates management contract or compensatory plan. |
| † | Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hayward, State of California, on March 29, 2024.
| TIVIC HEALTH SYSTEMS, INC. | ||
| By:
|
/s/ Jennifer Ernst | |
| Jennifer Ernst | ||
| Chief Executive Officer | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Jennifer Ernst, as his or her true and lawful attorneys-in-fact and agent with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) under the Securities Act of 1933 increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact, proxy, and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| NAME |
TITLE |
DATE | ||
| /s/ Jennifer Ernst Jennifer Ernst |
Chief Executive Officer (Principal Executive) |
March 29, 2024 | ||
| /s/ Kimberly Bambach Kimberly Bambach |
Interim Chief Financial Officer (Principal Financial and Accounting Officer) | March 29, 2024 | ||
| /s/ Sheryle Bolton Sheryle Bolton |
Chair of the Board of Directors | March 29, 2024 | ||
| /s/ Karen Drexler Karen Drexler |
Director | March 29, 2024 | ||
| /s/ Dean Zikria Dean Zikria |
Director | March 29, 2024 | ||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of our report dated March 25, 2024 (which includes an explanatory paragraph relating to Tivic Health Systems, Inc.’s ability to continue as a going concern) relating to the financial statements of Tivic Health Systems, Inc. as of and for the years ended December 31, 2023 and 2022 appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading “Experts” in such Prospectus.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
March 29, 2024