LIPELLA PHARMACEUTICALS INC.

Item 1A. Risk Factors.

Our business is subject to substantial risks and uncertainties. An investment in our securities involves a high degree of risk. The information presented below supplements the risk factors previously disclosed in Part I, Item 1A. Risk Factors, in our Annual Report. In addition to the other information set forth in this report and in our other SEC filings from time to time, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report, as supplemented by the information below, which could materially affect our business, financial condition or future results. The risks described in our Annual Report, as supplemented by the information below, may not be the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

We may never be able to satisfy the listing requirements for our Common Stock to be listed on a national securities exchange, which may cause the trading of our Common Stock to suffer, cause the trading market for our Common Stock to be less liquid and subject our Common Stock price to increased volatility.

In June 2025, our Common Stock was suspended from the Nasdaq Capital Market. Since such time, our Common Stock has traded on the OTC Markets. We may not ever be able to satisfy the listing requirements for our Common Stock to be relisted on a national securities exchange, which is often a more widely traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our Common Stock is otherwise rejected for listing, the trading price of our Common Stock could suffer, the trading market for our Common Stock may be less liquid and our Common Stock price may be subject to increased volatility.

The designation of our Common Stock as a penny stock limits the liquidity of our Common Stock.

Our Common Stock is deemed a penny stock (as that term is defined under Rule 3a51-1 of the Exchange Act). Generally, penny stock is common stock that is not listed on a securities exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be limited. Penny stocks in start-up companies are among the riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchasers written agreement to the purchase. Many brokers and investors choose not to participate in penny stock transactions, which may result in further liquidity constraints and declines in the trading price of our Common Stock. Because of the penny stock rules, there may be less trading activity in penny stocks in any market that develops for our Common Stock in the future and stockholders are likely to have difficulty selling their shares of our Common Stock.

Financial Industry Regulatory Authority (FINRA) sales practice requirements may limit a stockholders ability to buy and sell our stock.

FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. These FINRA requirements make it more difficult for broker-dealers to recommend that at least some of their customers buy our Common Stock, which may limit the ability of our stockholders to buy and sell our Common Stock and could have an adverse effect on the market for our Common Stock.

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The issuance of Common Stock upon conversion of our Series B Preferred Stock and Series C Preferred Stock will cause immediate dilution to existing shareholders and could cause our stock price to decline.

As of AugustNovember 13, 2025, we had outstanding 1,260 shares of our Series B Preferred Stock, convertible into 53,096 shares of Common Stock, and 153,442 shares of our Series C Preferred Stock, convertible into 153,442 shares of Common Stock. In addition, as of August 13, 2025, we had outstanding Series B Warrants to purchase up to 72,000 shares of Series B Preferred Stock. The shares of Series B Preferred Stock issuable upon exercise of the Series B Warrants are convertible into 3,333,319 shares of Common Stock at a conversion price of $2.16. If any of the Series B Warrants are exercised, additional shares of Series C Preferred Stock will be issued to Spartan as per the terms of the Spartan Agreements.

Each holder of the outstanding shares of Series B Preferred Stock may, at its option, convert its shares of Series B Preferred Stock into that number of shares of Common Stock equal to the stated value of such share of Series B Preferred Stock, $100 per share, divided by the conversion price. The conversion prices of the outstanding shares of Series B Preferred Stock range from $2.18 to $3.00. Each holder of the outstanding shares of Series C Preferred Stock may, at its option, convert its shares of Series C Preferred Stock into that number of shares of Common Stock equal to the stated value of such share of Series C Preferred Stock, $1.00 per share, divided by the conversion price, $1.00 per share.

The issuance of Common Stock upon conversion of the outstanding shares Series B Preferred Stock and Series C Preferred Stock and addadditional shares, if any, issued in connection with the exercise of the Series B Warrants, will result in immediate dilution to the existing holders of our Common Stock.

In addition, the availability of shares of Common Stock upon conversion of the Series B Preferred Stock and Series C Preferred Stock fofor public resale, as well as any actual resales of these shares, could adversely affect the trading price of our Common Stock. We cannot predict the size of future issuances of our Common Stock upon the conversion of our Series B Preferred Stock and Series C Preferred Stock, or the effect, if any, that future issuances and sales of shares of our Common Stock may have on the market price of our Common Stock. Sales or distributions of substantial amounts of our Common Stock upon the conversion of our Series B Preferred Stock and Series C Preferred Stock, oor the perception that such sales could occur, may cause the market price of our Common Stock to decline.

The rights of holders of our Series B Preferred Stock rank senior to the rights of the holders of our Common Stock.

The rights of the holders of shares of our Series B Preferred Stock, including the shares of Series B Preferred Stock issued upon the exercise of any of the Series B Warrants, while such shares remain outstanding, rank senior to the rights of the holders of shares of our Common Stock as to dividends and payments upon liquidation, dissolution or winding up of our affairs. Upon liquidation, dissolution or winding up of our affairs and certain fundamental transactions, a holder of the Series B Preferred Stock will be entitled to receive, before any distribution or payment may be made with respect to the holders of our Common Stock, an amount equal to the greater of (i) the aggregate stated value of the holders Series B Preferred Stock and (ii) the amount the holder would be entitled to receive if the shares of Series B Preferred Stock held by such holder were fully converted to Common Stock.