DEF 14A: Tivic Health Seeks Shareholder Approval for Key Capital Raises and Equity Plan Expansion Amidst Biopharma Push

Tivic Health Systems, Inc. is calling its stockholders to a virtual annual meeting on June 30, 2025, to vote on critical proposals including a significant increase in its equity incentive plan, and the issuance of common stock tied to recent strategic license agreements and substantial capital funding initiatives.

Summary

• Tivic Health Systems, Inc. will hold its 2025 Annual Meeting of Stockholders virtually on Monday, June 30, 2025, at 1:00 p.m. Pacific Time.
• Key proposals include the re-election of one Class I director, approval of an amendment to the 2021 Equity Incentive Plan to increase authorized shares by 425,000, and ratification of Rosenberg Rich Baker Berman, P.A. as the independent auditor for fiscal year 2025.
• Stockholders will vote on the issuance of common stock related to the conversion of Series A Non-Voting Convertible Preferred Stock, which was issued as consideration for the exclusive worldwide license rights to Entolimod from Statera Biopharma, Inc., and for future milestone payments.
• Approval is also sought for the issuance of common stock upon conversion of Series B Non-Voting Convertible Preferred Stock and exercise of warrants, pursuant to a Securities Purchase Agreement with an investor for up to $8.4 million.
• A proposal to approve the sale and issuance of common stock to Mast Hill Fund, L.P. under an Equity Purchase Agreement (Equity Line of Credit) for up to $25 million is also on the agenda.
• The Board of Directors unanimously recommends a 'FOR' vote on all proposals, emphasizing their importance for the Company's growth, talent retention, and financial flexibility.
• As of May 14, 2025, there were 878,341 shares of common stock issued and outstanding, held by approximately 95 stockholders of record.

Sentiment

Score: 4

Explanation: The document outlines critical steps for the company's future, including securing significant capital and expanding its equity incentive plan, which are positive for operational funding and talent retention. However, the substantial potential dilution from these capital raises (Series A, Series B, and ELOC) and the explicit risks associated with not obtaining shareholder approval for these dilutive events present considerable downside for existing shareholders. The need for multiple approvals for already-signed agreements highlights a reliance on future shareholder consent for full financial flexibility.

Positives

• The Board's unanimous recommendation for all proposals indicates strong internal alignment on the strategic direction and financial initiatives.
• The proposed amendment to the 2021 Equity Incentive Plan, increasing shares by 425,000, aims to enhance the Company's ability to attract, retain, and incentivize key officers, directors, employees, and service providers, which is crucial for long-term success.
• The Company has secured agreements for significant potential capital raises, including up to $8.4 million from the Preferred Purchase Agreement and up to $25 million from the Equity Line of Credit, providing much-needed working capital for business growth and product development.
• The acquisition of worldwide exclusive license rights to Entolimod and the option for additional indications (like neutropenia) expands Tivic Health's clinical pipeline into biologic immunotherapy, launching a TLR5 focused biopharma program.
• The hiring of Michael Handley as Chief Operating Officer and President of Tivic Biopharma brings significant industry expertise and leadership to the newly expanded biopharma segment.

Negatives

• The multiple capital raising proposals (Series A, Series B, and Equity Line of Credit) involve substantial potential dilution to existing stockholders, impacting their voting power and economic rights.
• The Series B Preferred Stock carries cumulative dividends at an annual rate of 10% of the Stated Value, which can be paid in cash or by adding to the Stated Value (PIK Dividends), potentially increasing the Company's financial obligations.
• The Series B Preferred Stock ranks senior to both Common Stock and Series A Preferred Stock with respect to dividend rights and liquidation distributions, which could negatively impact other equity holders in adverse scenarios.
• The Warrants issued with the Series B Preferred Stock include a provision for downward adjustment of the exercise price if future Warrants are issued at a lower price, potentially leading to further dilution.
• Failure to obtain stockholder approval for the capital raise proposals will severely limit the Company's access to the full committed capital and will require the Company to incur significant legal expenses by convening additional stockholder meetings every 90 or 120 days.
• The Annual Meeting will not feature a live Q&A session, limiting direct real-time interaction between management and stockholders.

Risks

• Significant dilution to existing stockholders' voting power and economic rights is a potential outcome from the issuance of shares under the amended 2021 Equity Incentive Plan, conversion of Series A and Series B Preferred Stock, and sales under the Equity Line of Credit.
• The issuance of a large number of new shares may result in a decline in the price of the Company's Common Stock or lead to greater price volatility.
• The Company's ability to access the full committed capital from the Preferred Purchase Agreement and Equity Line of Credit is contingent upon obtaining stockholder approval, and failure to do so could severely limit funding for operations and product development.
• The conversion prices for Series A and Series B Preferred Stock and the purchase price for the Equity Line of Credit are tied to future VWAP or closing prices, making the exact number of dilutive shares uncertain and potentially higher if the stock price declines.
• The Series B Preferred Investor holds a right of first refusal for future variable rate transactions and a right to participate in subsequent financings (up to 20%), potentially limiting the Company's flexibility in future capital raises.
• The Series B Preferred Investor has the right to require the Company to redeem shares using 25% of the proceeds from any future financing, which could impact the Company's cash reserves from new capital.

Future Outlook

Tivic Health expects to continue hiring additional employees and engaging service providers to support the expansion and development of its TLR5 biopharma business, including pre-clinical and clinical trials, research and development activities, regulatory approval, and potential commercialization of drug candidates. The Company anticipates needing significant additional capital to fund these initiatives and will convene further stockholder meetings every 90 or 120 days if the necessary approvals for current capital raises are not obtained at the upcoming Annual Meeting.

Management Comments

• "Our Board of Directors has carefully reviewed and considered the foregoing proposals, and has concluded that each proposal is in the best interests of the Company and its stockholders."
• "We believe that the grant of equity awards to our officers, directors, employees and service providers provides additional incentive for such individuals to further the growth, development and financial success of the Company."
• "Given our limited cash resources and planned investments in our pre-clinical and clinical programs, we believe that our ability to grant equity as a component of our compensation programs is particularly important for long-term incentives."
• "Overall, we believe that adoption of the Plan Amendment will significantly enhance our ability to attract and retain highly qualified officers, directors, employees and key service providers, increase our flexibility in developing meaningful compensation plans that motivate such individuals to expend maximum effort to improve our business results, and provide those individuals an opportunity to acquire or increase a direct proprietary interest in our operations and the future success they drive to create."
• "Our Board believes that the current structure [separated Chairperson and CEO roles] is appropriate at this time in that it enables Ms. Ernst to focus on her role as Chief Executive Officer of the Company, while enabling Ms. Bolton, Chairperson of the Board, to continue to provide leadership on policy at the Board level."

Industry Context

Tivic Health is expanding its focus into the biopharmaceutical sector by acquiring exclusive worldwide license rights to Entolimod, a late-stage Toll-like Receptor 5 (TLR5) agonist, for acute radiation syndrome and other potential indications like neutropenia. This move signifies a strategic shift or expansion into biologic immunotherapy, a growing area within the healthcare industry. The Company acknowledges the competitive market for quality personnel, particularly in the healthcare and biopharma sectors, and emphasizes the importance of equity compensation to attract and retain talent, aligning with common industry practices for early-stage or growth-focused biotech companies with limited cash resources.

Management Changes

Corporate Governance

Related Party Transactions

• No transactions or series of similar transactions since January 1, 2023, exceeding $120,000 or one percent of average total assets, involving directors, executive officers, 5%+ holders, or their immediate family, other than disclosed equity and other compensation, termination, change in control, and other arrangements with directors and executive officers.

Stakeholder Impact

• **Shareholders**: Face significant potential dilution from the proposed capital raises (Series A, Series B, and Equity Line of Credit), which could reduce their ownership percentage, voting power, and the per-share value of their investment. Failure to approve these proposals could limit the Company's access to crucial capital, potentially hindering growth and increasing financial risk.
• **Employees, Directors, and Service Providers**: The proposed increase in the 2021 Equity Incentive Plan aims to provide more equity awards, enhancing the Company's ability to attract, retain, and motivate key talent by aligning their interests with the Company's long-term success.
• **Company Operations and Future Growth**: Access to the capital from the Preferred Purchase Agreement ($8.4M) and the Equity Line of Credit (up to $25M) is critical for funding the Company's strategic expansion into biopharma, including pre-clinical and clinical trials, research and development, and potential commercialization of new drug candidates.
• **Creditors/Investors in Series B Preferred Stock**: These investors benefit from cumulative 10% annual dividends and a senior ranking in liquidation compared to Common Stock and Series A Preferred, providing them with a preferential position in the Company's capital structure.
• **Statera Biopharma, Inc.**: As the licensor of Entolimod, Statera benefits from the initial license fee and potential future milestone payments, which may be satisfied through the issuance of Series A Preferred Stock, aligning their interests with Tivic Health's development success.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on June 30, 2025, virtually.
• Elect one Class I director to hold office until the 2028 annual meeting.
• Vote on the amendment to the Amended and Restated 2021 Equity Incentive Plan to increase authorized shares by 425,000.
• Ratify the selection of Rosenberg Rich Baker Berman, P.A. as the independent registered public accounting firm for fiscal year 2025.
• Vote on the approval of common stock issuance related to the Statera License Agreement (Series A Preferred conversion).
• Vote on the approval of common stock issuance related to the Preferred Purchase Agreement (Series B Preferred and Warrants).
• Vote on the approval of the sale and issuance of common stock to Mast Hill pursuant to the Equity Line of Credit.
• Vote on the adjournment of the Annual Meeting, if necessary, to solicit additional proxies.
• File a Current Report on Form 8-K with the SEC announcing preliminary and final voting results within four business days of the Annual Meeting.
• If stockholder approvals for capital raises are not obtained, convene additional stockholder meetings every 90 or 120 days until approval is secured.
• Continue to hire additional employees and engage service providers for the expansion and development of the TLR5 biopharma business, including pre-clinical and clinical trials, research and development, regulatory approval, and potential commercialization.

Key Dates

Recommendation

Keywords

Tivic Health Systems, SEC Filing, Proxy Statement, Annual Meeting, Stockholder Vote, Equity Incentive Plan, Capital Raise, Dilution, Series A Preferred Stock, Series B Preferred Stock, Warrants, Equity Line of Credit, Mast Hill Fund, Statera Biopharma, Entolimod, TLR5 Agonist, Biopharma, Neutropenia, Corporate Governance, Director Election, Auditor Ratification, Nasdaq Listing Rules