CAUTIONARY NOTE REGARDINGCONCERNING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the Federal securities laws, whichthat involve substantial risks and uncertainties. Anyuncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements contained herein that are notin this prospectus other than statements of historical fact, may be deemedincluding statements regarding our strategy, future operations, future financial position, liquidity, future revenue, projected expenses, results of operations, expectations concerning the timing and our ability to becommence and subsequently report data from planned non-clinical studies and clinical trials, prospects, plans and objectives of management are forward-looking statements. Without limiting the foregoing, theThe words “outlook,“believe,” “believes,“may,” “plans,“will,” “intends,“estimate,” “expects,“continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” “opportunity,” “goals,” “potential,” “continues,” “may,”or “should,” “seeks,” “will,” “would,” “approximately,” “predicts,” “estimates,” “anticipates” and similar expressions are intended to identify forward-looking statements. Such statements although not allare based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements containas a result of many factors.

We based these words. You should readforward-looking statements largely on our current expectations and projections about future events and trends that contain these words carefully because they discusswe believe may affect our plans, strategies, prospects and expectations concerning our business, operating results, financial condition, results of operations, business strategy, short-term and other similar matters. We believe that it is importantlong-term business operations and objectives, and financial needs. These forward-looking statements are subject to communicate our future expectations to our investors. There will be eventsa number of risks, uncertainties, and assumptions, including those described in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this prospectus, and under a similar heading in any documentsother annual, periodic or current report incorporated by reference into this prospectus as well asor that we may file with the SEC in the future. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge quickly and from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any cautionary language in this prospectus, provide examplesfactor, or combination of risks, uncertainties and events thatfactors, may cause our actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the expectations we describefuture events and trends discussed in ourthis prospectus, may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. SuchWe undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, include, among other things, risks and uncertainties related to:readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.

Before you invest in our securities, youYou should be aware thatalso read carefully the occurrence of the eventsfactors described in these risk factors and elsewhere inthe “Risk Factors” section of this prospectus, and under thea similar heading “Risk Factors” and in any documentsother annual, periodic or current report incorporated by reference into this prospectus, could have a material adverse effect onto better understand the risks and uncertainties inherent in our business results of operations and financial position. Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ will emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publiclyunderlying any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.statements. You are advised to consult any further disclosures we make on related subjects in the reports we fileour future public filings.

PROSPECTUS SUMMARY

This summary highlights information about our company, this offering and information contained in greater detail in other parts of this prospectus or incorporated by reference into this prospectus from our filings with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d)listed in the section entitled “Information Incorporated by Reference.” Because it is only a summary, it does not contain all of the Securities Exchange Actinformation that you should consider before purchasing our securities in this offering and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere or incorporated by reference into this prospectus. You should read the entire prospectus, the registration statement of 1934, as amended (orwhich this prospectus is a part, and the “Exchange Act”).

USE OF PROCEEDSinformation incorporated by reference into this prospectus in their entirety, including the “Risk Factors” and our financial statements and the related notes incorporated by reference into this prospectus, before purchasing our securities in this offering.

Assuming full participationExcept as otherwise indicated herein or as the context otherwise requires, references in the rights offering, we estimate that the net proceeds from the rights offering will be approximately $12,232,000 after deducting expenses relatedthis prospectus to this offering payable by us estimated at approximately $1,268,000, including dealer-manager fees.“Sonnet Holdings,” “the Company,” “we,” “us” and “our” refer to Sonnet BioTherapeutics Holdings, Inc. and our consolidated subsidiaries.

RepaymentOverview

We are a clinical stage, oncology-focused biotechnology company with a proprietary platform for innovating biologic medicines of Debt Obligationssingle- or bi-specific action. Known as F_HAB™ (Fully Human Albumin Binding), the technology utilizes a fully human single chain antibody fragment that binds to and “hitch-hikes” on human serum albumin for transport to target tissues. We designed the construct to improve drug accumulation in specific tissues, as well as to extend the duration of activity in the body. F_HAB development candidates are produced in a mammalian cell culture, which enables glycosylation, thereby reducing the risk of immunogenicity. We believe our F_HAB technology, for which we received a U.S. patent in June 2021, is a distinguishing feature of our biopharmaceutical platform that is well suited for future drug development across a range of human disease areas, including in oncology, autoimmune, pathogenic, inflammatory, and hematological conditions.

Our current internal pipeline development activities are focused on cytokines, a class of cell signaling peptides that, among other important functions, serve as potent immunomodulatory agents. Working both independently and synergistically, specific cytokines have shown the ability to modulate the activation and maturation of immune cells that fight cancer and pathogens. However, because they do not preferentially accumulate in specific tissues and are quickly eliminated from the body, the conventional approach to achieving a treatment effect with cytokine therapy typically requires the administration of high and frequent doses. This can result in a reduced treatment effect accompanied by the potential for systemic toxicity, which poses challenges to the therapeutic application of this class of drugs.

Recent Developments

We will allocate upSB102 Clinical Data

On January 19, 2023, we issued a press release announcing that PK profile simulation of SON-1010 dosing has been completed in its randomized, placebo-controlled Phase 1 clinical trial in healthy volunteers. Historically, the therapeutic application of cytokines has been limited by relatively short half-lives and off-target toxicities that are typically associated with peak plasma levels. SON-1010 is a proprietary version of recombinant human interleukin-12 (“rhIL-12”), configured using our Fully Human Albumin Binding (“FHAB”) technology, which has been shown to $8,425,000 extend PK and to reduce peak drug levels for improving pharmacodynamic (“PD”) toxicity. The FHAB technology was designed to promote targeting to the tumor microenvironment (“TME”), particularly when levels of secreted protein acidic and rich in cysteine are elevated in the proceedsTME. Study SB102 (“SB102”) is a single-ascending dose trial in healthy volunteers (NCT05408572) that was initiated in July, 2022 to address the safety, PK, and PD of this offeringSON-1010 in subjects without interference from prior chemotherapy. The Safety Review Committee has found no significant safety concerns to payment of certain existing debt , including principal, unpaid accrued interestdate and fees.has approved advancing to each higher dose level.

Florida Mezzanine Fund, LLP ObligationTypical dose-related increases were seen with SON-1010 using a validated electrochemiluminescence assay after subcutaneous administration. Drug levels peaked at about 11 hours with a geometric mean maximum concentration (“C_max”) of 29, 68, and 125 pg/mL for the 50, 100, and 150 ng/kg dose groups, respectively. The mean elimination half-life (“T_½”) after a 150 ng/kg dose of SON-1010 was 112 hours, compared to 12 hours for rhIL-12.

OfObserved increases in interferon gamma (“IFNγ”) were most pronounced and were dose-related, controlled, and prolonged. SON-1010 induced IFNγ in all active-drug subjects, which peaked at 24 to 48 hours then returned to baseline after 2 weeks. The IFNγ geomean C_maxwas 398, 384, and 666 pg/mL after 50, 100, or 150 ng/kg of SON-1010, respectively, while the allocated financing proceeds,AUC over 48 hours was 6050, 10200, and 14600 h*pg/mL. Linear regression was used to predict the IFNγ C_max at higher doses, which remain well within the range of safety. Low amounts of IL-10 were induced in a dose-dependent manner, which could also be due to the increase in IFNγ. There were small transient increases in IL-6, IL-8, and TNFα after dosing but no consistent pattern was seen with IL-1β, IL-2, or IL-4 and there was no evidence of cytokine release syndrome. Safety was consistent with what has been reported previously; adverse events have generally been mild/moderate, transient in nature, and have all been tolerable.

SB102 is designed to robustly evaluate the safety, PK and PD of single ascending doses of SON-1010, using larger groups of healthy volunteers, and is being conducted at a single site in Australia. The study is done in a blinded fashion, comparing a single dose of SON-1010 to placebo utilizing up to $5,275,000five cohorts. Both PK and PD will be paid to Florida Mezzanine Fund, LLP (“Florida Mezz”) to be applied toward principal, unpaid accrued interest and fees. The obligation to Florida Mezz bears interest at a rate of 12% per annum and matures on January 31, 2017. On October 24, 2016, we entered into the Second Amendment to Assumption and Assignment Agreementclosely followed during dose escalation in this double-blind, placebo-controlled study, along with Florida Mezz. Pursuant to this amendment, we agreed to allocate up to $5,000,000an assessment of the proceedscellular immune responses at each dose using sophisticated fluorescence activated cell sorting analysis. The primary endpoint explores the safety and tolerability of SON-1010, with key secondary endpoints intended to measure PK, PD, and immunogenicity.

Collaboration with Roche

On January 9, 2023, we announced a clinical collaboration agreement with Roche for the rights offeringclinical evaluation of our SON-1010 with Roche’s atezolizumab in patients with platinum-resistant ovarian cancer (“PROC”). We intend to Florida Mezz to be applied toward the Company’s obligation. If payment is remitted on or prior to December 31, 2016, Florida Mezz will extend the maturity date of the note from January 31, 2017 to July 31, 2018. Only in the event the Florida Mezz obligation is not repaid in full by December 31, 2016, we will payuse a modification fee equal to five percent (5%) of the outstanding principal balance of the balance of the obligation after the application of the financing proceeds. Also only in the event that the Florida Mezz obligation is not repaid in full, we agreed to allocate 62.5%portion of the proceeds from this offering to help fund the saleclinical trial (“SB221”), which is expected to commence during the second calendar quarter of any asset prior2023.

SB221 will be conducted to July 31, 2018assess the safety and preliminary efficacy of SON-1010 in combination with Roche’s atezolizumab in patients with PROC. The companies would provide SON-1010 and atezolizumab, respectively, for use in the study. SB221 is a global Phase 1b/2a multicenter, dose-escalation and randomized proof-of-concept study to Florida Mezz. Providedassess the safety, tolerability, pharmacokinetics, pharmacodynamics, and efficacy of SON-1010 administered subcutaneously, either alone or in combination with atezolizumab given intravenously. The study is designed in Part 1 to rapidly establish the maximum tolerated dose of the combination in patients with advanced solid tumors in small dose-escalation groups and to expand the dataset at the recommended Phase 2 dose. This would be followed in Part 2 by an assessment in patients with PROC of the potential for improved efficacy of the combination over SON-1010 alone or the standard of care.

ATM Sales

We entered into an At-the-Market Sales Agreement with BTIG, LLC (“BTIG”) on August 15, 2022 (the “2022 Sales Agreement”). Pursuant to the 2022 Sales Agreement, we may offer and sell, from time to time, through BTIG, as sales agent and/or principal, shares of our common stock, having an aggregate offering price of up to $25.0 million, subject to certain limitations on the amount of common stock that we continuemay be offered and sold by us set forth in the 2022 Sales Agreement. Due to make timely interest only paymentsthe offering limitations applicable to Florida Mezz, a subsequent payment default does not occur,us under General Instruction I.B.6. of Form S-3 and we continue to complyour public float as of August 15, 2022, and in accordance with the terms of the amendment,2022 Sales Agreement, we could offer shares having an aggregate gross sales price of up to $6.1 million pursuant to the prospectus supplement dated August 15, 2022, filed in connection with the 2022 Sales Agreement. As of November 9, 2022, we had sold an aggregate of 2,477,287 shares of common stock for gross proceeds of $6.1 million, and we filed a prospectus supplement dated November 9, 2022 registering the offer and sale of shares of our common stock for an aggregate offering price of up to an additional $1.7 million pursuant to the 2022 Sales Agreement. As of January 11, 2023, we completed the offering under the November 9, 2022 prospectus supplement, selling an aggregate of 1,200,066 shares of common stock for gross proceeds of $1.7 million, and accordingly we are not able to sell any existing event of default was waived together with waiverfurther shares under the 2022 Sales Agreement as of the financial covenantsdate of this prospectus until July 31, 2018.

a new prospectus supplement is filed with respect to the 2022 Sales Agreement.

6% Secured Subordinate Convertible NotesCorporate Information

Of the allocated proceeds, up to $3,150,000 will be paid to the holders of our 6% Secured Subordinate Convertible Notes to be applied to principal, unpaid accrued interest and fees. The notes matured on August 2, 2016 and are in default. The interest rate on the notes has increased from 6% simple interest per annum to 21% simple interest per annum as a result of the default. The notes holders have a priority security interest in the Company’s Hooter’s store in Nottingham, England as well as a subordinated security interest in all of the Company’s other assets.

Other Uses

The remainder of the proceeds will be used for planned store related capital expenditures and for general working capital purposes.

We will retain broad discretionwere organized on October 21, 1999, under the name Tulvine Systems, Inc., under the laws of the useState of proceeds reservedDelaware. On April 25, 2005, Tulvine Systems, Inc. formed a wholly owned subsidiary, Chanticleer Holdings, Inc., and on May 2, 2005, Tulvine Systems, Inc. merged with, and changed its name to, Chanticleer Holdings, Inc. On April 1, 2020, we completed our business combination with Sonnet BioTherapeutics, Inc. (“Sonnet”), in accordance with the terms of the Agreement and Plan of Merger, dated as of October 10, 2019, as amended, by and among us, Sonnet and Biosub Inc., a wholly owned subsidiary of the Company (“Merger Sub”) (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Sonnet, with Sonnet surviving as a wholly owned subsidiary of us (the “Merger”). Under the terms of the Merger Agreement, we issued shares of common stock to Sonnet’s stockholders at an exchange rate of 0.106572 shares for working capital. You willeach share of Sonnet common stock outstanding immediately prior to the Merger. In connection with the Merger, we changed our name from “Chanticleer Holdings, Inc.” to “Sonnet BioTherapeutics Holdings, Inc.,” and the business conducted by us became the business conducted by Sonnet.

On September 16, 2022, we effected a reverse stock split of its issued and outstanding common stock, par value $0.0001 per share, at a ratio of 1-for-14 (the “2022 Reverse Stock Split”). Shares of common stock underlying outstanding stock options and other equity instruments convertible into common stock were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. No fractional shares were issued in connection with the 2022 Reverse Stock Split. Stockholders who would otherwise be relying on the judgmententitled to a fractional share of common stock instead receive a proportional cash payment. All of our management with regardhistorical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock included or incorporated by reference in this prospectus supplement have been adjusted, on a retroactive basis, to reflect the use of such proceeds,2022 Reverse Stock Split.

Our principal executive offices are located at 100 Overlook Center, Suite 102, Princeton, New Jersey 08540, and you willour telephone number is (609) 375-2227. Our website is www.sonnetbio.com. Our website and the information contained on, or that can be accessed through, our website shall not have the opportunity, asbe deemed to be incorporated by reference in, and are not considered part of, this prospectus supplement or the accompanying prospectus. You should not rely on any such information in making your investment decision whether to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any, return for the company.

If we fail to raise capital by the end of December 2016, we would expect to have to significantly decreasepurchase our growth plans and operating expenses, which will curtail the progress of our business.

The table below sets forth the breakdown of the use of proceeds from the rights offering, in order of priority and assuming full participation in the rights offering:

The following table sets forth our short-term debt and consolidated capitalization as of September 30, 2016 and our consolidated capitalization as adjusted to give effect to:Offering

(1) The number of shares of our common stock that will be outstanding immediately after this offering is based on 8,554,983 shares of common stock outstanding as of January 26, 2023, and assumes the sale and issuance by us of shares of common stock (and no sale of any pre-funded warrants) in this offering and excludes:

● 99,104 shares of common stock underlying restricted stock units outstanding as of January 26, 2023 (of which 46,113 restricted stock units were vested but not yet settled as of such date);

● 121,366 shares of common stock subject to restricted stock awards granted as of January 26, 2023 but not yet issued;

● 318,561 shares of common stock reserved for future issuance under the 2020 Omnibus Equity Incentive Plan as of January 26, 2023;

● 3,966,072 shares of common stock issuable upon the exercise of warrants outstanding as of January 26, 2023, with a weighted average exercise price of $18.59 per share;

● shares of common stock issuable upon the exercise of the pre-funded warrants issued in this offering;

● up to 10,810,810 shares (or 12,432,431 shares if the underwriters’ option to purchase additional common warrants is exercised in full) of common stock issuable upon the exercise of the common warrants issued in this offering; and

● 756,756 shares of common stock issuable upon the exercise of the underwriter warrants issued in this offering.

Unless otherwise indicated, this prospectus reflects and assumes no issuances or exercises of any other outstanding shares, options or warrants after January 26, 2023 and no exercise by the underwriters of their option to purchase additional shares.

RISK FACTORS

Investing in our securities involves a high degree of risk. We urge you to carefully consider all of the information contained in this prospectus and other information which may be incorporated by reference in this prospectus as provided under “Information Incorporated by Reference.” In particular, you should consider the risk factors below, together with those under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, which is incorporated by reference into this prospectus, as those risk factors are amended or supplemented by our subsequent filings with the SEC. These risks and uncertainties are not the only risks and uncertainties we face. Additional risks and uncertainties not currently known to us, or that we currently view as immaterial, may also impair our business. If any of the risks or uncertainties described below or in our SEC filings or any additional risks and uncertainties actually occur, our business, financial condition, results of operations and cash flow could be materially and adversely affected. As a result, you could lose all or part of your investment.

RISKS RELATED TO THIS OFFERING

If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. You should readwill experience further dilution if we issue additional equity or equity-linked securities in the future.

Because the price per share of our common stock being offered is substantially higher than the pro forma as adjusted net tangible book value per share of our common stock, you will suffer immediate and substantial dilution with respect to the net tangible book value of the common stock you purchase in this tableoffering. Based on an assumed combined public offering price of $1.11 per share of common stock and accompanying common warrant being sold in conjunctionthis offering, and our pro forma as adjusted net tangible book value as of September 30, 2022 of $0.71 per share, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $0.40 per share with “Management’s Discussionrespect to the pro forma as adjusted net tangible book value of the common stock. See the section entitled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.

If we issue additional shares of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including investors who purchase shares of common stock and/or pre-funded warrants and Analysisaccompanying common warrants in this offering, will experience additional dilution, and any such issuances may result in downward pressure on the price of Financial Conditionour common stock. We also cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and Resultsinvestors purchasing shares or other securities in the future could have rights superior to existing stockholders.

Future sales of Operations” includedsubstantial amounts of our common stock or securities convertible into or exchangeable or exercisable for shares of common stock, either by us or by our existing stockholders, or the possibility that such sales could occur, could adversely affect the market price of our common stock.

Future sales in the public market of shares of our common stock or securities convertible into or exchangeable or exercisable for shares of common stock, including shares referred to in the foregoing risk factor, shares held by our existing stockholders or shares issued upon exercise of our outstanding stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital.

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.

Holders of 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 our common stock.

Until holders of pre-funded warrants or common warrants acquire shares of our common stock upon exercise of such warrants, holders of pre-funded warrants or common warrants will have no rights with respect to the shares of our common stock underlying such warrants. Upon exercise of the pre-funded warrants or common warrants, the 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.

We are not currently in compliance with the continued listing requirements for the Nasdaq Capital Market. If we do not regain compliance and continue to meet the continued listing requirements, our common stock may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.

As previously announced, on August 22, 2022, the Nasdaq Listing Qualifications staff (the “Staff”) notified us that we no longer complied with Nasdaq Listing Rule 5550(b)(1) (the “Rule”). Under the Rule, companies listed on The Nasdaq Capital Market must maintain stockholders’ equity of at least $2,500,000 (the “Stockholders’ Equity Requirement”). In our Quarterly Report on Form 10-Q for the quarterly periodquarter ended SeptemberJune 30, 2016,2022, we reported stockholders’ equity of $764,205, which is incorporated herein by reference and our historical financial statements and notes to those financial statements that are incorporated by referencewas below the Stockholders’ Equity Requirement for continued listing. Additionally, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, market value of listed securities of at least $35 million, or net income of $500,000 from continuing operations in this prospectus.the most recently completed fiscal year, or in two of the three most recently completed fiscal years.

WeOn October 6, 2022, we submitted a plan to the Staff to regain compliance with the Stockholders’ Equity Requirement and on October 13, 2022, the Staff notified us (the “Letter”) that we were granted an extension until February 20, 2023, to demonstrate compliance with Listing Rule 5550(b)(1) to meet the continued listing requirements of The Nasdaq Capital Market, conditioned upon achievement of certain milestones included in a plan of compliance previously submitted to Nasdaq, including a plan to raise additional capital. If we are unable to predictdemonstrate compliance by February 20, 2023, we would be subject to delisting, but would have the actual levelright under Nasdaq rules to appeal any delist determination to the Nasdaq Hearing Panel and be able to present to a plan of participationcompliance.

We intend to regain compliance with the applicable continued listing requirements of The Nasdaq Capital Market prior to the end of the compliance period set forth in the offerings.

THE RIGHTS OFFERINGLetter, including through the consummation of this offering. However, until Nasdaq has reached a final determination that we have regained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of our common stock on Nasdaq. The delisting of our common stock from Nasdaq would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of its common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to us, if at all.

The Subscription Rights

We are distributing, at no charge,If we fail to holdersregain compliance with the Stockholders’ Equity Requirement or to meet the other applicable continued listing requirements for the Nasdaq Capital Market in the future and Nasdaq determines to delist our common stock, the delisting could adversely affect the market price and liquidity of our common stock and reduce our public warrants, non-transferable subscription rightsability to raise additional capital. In addition, if our common stock is delisted from Nasdaq and the trading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on Nasdaq that has a market price of less than $5.00 per share, subject to certain exceptions).

We will have broad discretion in the use of our existing cash and cash equivalents, including the proceeds from this offering, and may invest or spend our cash in ways with which you do not agree and in ways that may not increase the value of your investment.

We will have broad discretion over the use of our cash and cash equivalents, including the proceeds from this offering. You may not agree with our decisions, and our use of cash may not yield any return on your investment. We intend to use the net proceeds from this offering for research and development, including clinical trials, working capital and general corporate purposes. Our failure to apply the net proceeds from this offering effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $10.8 million from the sale of the securities offered by us in this offering, or approximately $12.4 million if the underwriters exercise their option to purchase up toadditional securities in full, based on an aggregateassumed combined public offering price of 1,000,000 units consisting of shares of our Series 1 Preferred Stock, liquidation value $13.50$1.11 per share and Series 1 Warrants to purchase sharesaccompanying common warrant, which was the last reported sales price of our common stock par value $0.0001 per share. Each subscription righton The Nasdaq Capital Market on January 26, 2023, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, excluding the proceeds, if any, from the exercise of the common warrants issued in this offering.

The foregoing discussion assumes no sale 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.

We currently intend to use the net proceeds from this offering for research and development, including clinical trials, working capital and general corporate purposes. See “Risk Factors” for a discussion of certain risks that may affect our intended use of the net proceeds from this offering.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot currently allocate specific percentages of the net proceeds that we may use for the purposes specified above, and we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will entitle you, subject to proration as described herein, to purchase one unit consisting of one shareactually spend on the uses set forth above. The amounts and timing of our Series 1 Preferredactual use of the net proceeds will vary depending on numerous factors, including our ability to obtain additional financing, the progress, cost and a warrant to purchase 10 sharesresults of our common stock, at a subscriptionpreclinical and clinical development programs, and whether we are able to enter into future licensing or collaboration arrangements.

Pending the use of the net proceeds from this offering, we intend to invest the net proceeds in investment-grade, interest-bearing instruments, certificates of deposit or direct or guaranteed obligations of the United States.

A $0.10 increase or decrease in the assumed public offering price of $13.50$1.11 per unit.share would increase or decrease the net proceeds to us from this offering by approximately $1.0 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each holderSimilarly, a 1.0 million share increase or decrease in the number of recordshares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us by approximately $1.0 million, based on the assumed public offering price of $1.11 per share remaining the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

DILUTION

If you invest in our common stock assecurities, your ownership interest will be diluted to the extent of the record date fordifference between the rightspublic offering will receive one subscription right for everyprice per share of our common stock and public warrant owned by such holderthe as pro forma adjusted net tangible book value per share of our common stock immediately after the closing of this offering.

Our historical net tangible book value (deficit) as of 5:00 p.m. Eastern time onSeptember 30, 2022 was $(2.5) million, or $(0.46) per share of common stock. Our historical net tangible book value (deficit) is the record date.

Each subscription right will entitle the holder to a basic subscription privilege and an over-subscription privilege, which are described below. The basic subscription privilege and the over-subscription privilege are both subject to proration. If all the rights were exercised, all subscription rights holders would be subject to prorationamount of their basic subscription privilege, and each subscription rights holder would be entitled to purchase aour total number of units of approximately 4.5% oftangible assets less our liabilities. Historical net tangible book value (deficit) per common share is our historical net tangible book value (deficit) divided by the number of subscription rights held by such subscription rights holder. If any proration is necessary, subscriptions for the units will be prorated.shares of common stock outstanding as of September 30, 2022.

Basic Subscription Privilege

The basic subscription privilege of each subscription right gives our rights holders of recordOur pro forma net tangible book value as of the record date the opportunity to purchase one unit consisting of oneSeptember 30, 2022 was $3.0 million, or $0.35 per share of our Series 1 Preferredcommon stock. Pro forma net tangible book value gives effect to the issuance and a Series 1 Warrant to purchase 10sale of an aggregate of 3,012,816 shares of our common stock that were sold from October 1, 2022 through January 11, 2023 for net proceeds of $5.5 million under our ATM offering program.

After giving effect to the sale of 10,810,810 shares of common stock and the accompanying common warrants in this offering at an assumed combined public offering price of $1.11 per share and accompanying common warrant, which was the last reported sale price of our common stock on The Nasdaq Capital Market on January 26, 2023, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, excluding the proceeds, if any, from the dateexercise of issuance through its expiration seven yearsthe common warrants issued in this offering, and assuming no sale of pre-funded warrants in this offering, our pro forma as adjusted net tangible book value as of September 30, 2022 would be $13.8 million, or $0.71 per share of common stock. This amount represents an immediate increase in pro forma net tangible book value of $0.36 per share to our existing stockholders and an immediate dilution of $0.40 per share to investors participating in this offering. We determine dilution per share to investors participating in this offering by subtracting pro forma as adjusted net tangible book value per share after this offering from the date of issuance, atassumed combined public offering price per share paid by investors participating in this offering.

The following table illustrates this dilution on a subscriptionper share basis to new investors:

Each $0.10 increase or decrease in the assumed combined public offering price of $13.50$1.11 per unit, subjectshare and accompanying common warrant, which was the last reported sale price of our common stock on The Nasdaq Capital Market on January 26, 2023, would increase or decrease the pro forma as adjusted net tangible book value per share by $0.05 per share and the dilution per share to proration. We have granted to each rights holderinvestors participating in this offering by $0.05 per share, assuming that the number of recordshares and/or pre-funded warrants offered by us, as of 5:00 p.m. Eastern timeset forth on the record date, one subscription right for everycover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We may also increase or decrease the number of shares we are offering. An increase of 1.0 million in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase the pro forma as adjusted net tangible book value per share by approximately $0.02 and decrease the dilution per share to new investors participating in this offering by approximately $0.02, based on an assumed combined public offering price of $1.11 per share and accompanying common warrant, which was the last reported sale price of our common stock on The Nasdaq Capital Market on January 26, 2023, remaining the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A reduction of 1.0 million in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by approximately $0.02 and increase the dilution per share to new investors participating in this offering by approximately $0.02, based on an assumed combined public offering price of $1.11 per share and accompanying common warrant, which was the last reported sale price of our common stock on The Nasdaq Capital Market on January 26, 2023, remaining the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share after giving effect to this offering would be $0.74 per share, which amount represents an immediate increase in the pro forma net tangible book value of $0.39 per share of our common stock to existing stockholders and every public warrant owned by such rights holder at that time. For example, if you owned 1,000 sharesan immediate dilution in net tangible book value of $0.37 per share of our common stock as of 5:00 p.m. Eastern time on the record dateto new investors purchasing shares and 50 public warrants, you would receive 1,050 subscription rights and would have the right to purchase 1,050 units, for $13.50 per unit, with your basic subscription privilege plus an unlimited over-subscription privilege, in each case subject to proration as described herein. You may exercise the basic subscription privilege of any number of your subscription rights, or you may choose not to exercise any subscription rights. If you do not exercise your basic subscription privilege in full, you will not be entitled to purchase any units under your over-subscription privilege.

If you hold your shares or publicaccompanying common warrants in the name of a broker, custodian bank, dealer or other nominee who uses the services of the Depository Trust Company, or DTC, DTC will issue one subscription right to the nominee for every shares of our common stock and public warrant you own at the record date. The basic subscription privilege of each subscription right can then be used to purchase one unit for $13.50 per unit, subject to proration.

If an insufficient number of units is available to fully satisfy all basic subscription privilege requests, we will allocate the available units pro-rata among those rights holders exercising their basic subscription privilege in proportion to the product (rounded down to the nearest whole number so that the aggregate number of units does not exceed the aggregate number offered) obtained by multiplying the number of units such rights holder subscribed for under the basic subscription privilege by a fraction (A) the numerator of which is 1,000,000 and (B) the denominator of which is the total number of units sought to be subscribed for under the basic subscription privilege by all holders exercising their basic subscription privilege. All subscriptions, including subscriptions pursuant to the basic subscription privilege, will be subject to proration. The subscription rights agent will notify subscription rights holders of the number of units allocated to each holder exercising the basic subscription privilege as promptly as may be practicable after the allocations are completed.this offering.

Any excess subscription payments received by the subscription rights agent will be promptly returned, without interest.

Over-Subscription Privilege

The over-subscription privilege provides each rights holder that fully exercises alltable and discussion above is based on 5,544,528 shares, actual, and 8,557,344, pro forma, of such holder’s basic subscription privilege the opportunity to purchase the units that are not purchased by other rights holders. If you fully exercise your basic subscription privilege, the over-subscription privilege entitles you to subscribe for additional units unclaimed by other holderscommon stock outstanding as of subscription rights in this offering at the same subscription price per unit. If an insufficient number of units is available to fully satisfy all over-subscription privilege requests, we will allocate the available units, pro-rata among those rights holders exercising their over-subscription privilege in proportion to the product (rounded down to the nearest whole number so that the subscription price multiplied by the aggregate number of units does not exceed the aggregate offering amount) obtained by multiplying the number of units such rights holder subscribed for pursuant to the over-subscription privilege by a fraction (A) the numerator of which is the number of unsubscribed unitsSeptember 30, 2022 and (B) the denominator of which is the total number of units sought to be subscribed for pursuant to the over-subscription privilege by all holders participating in such over-subscription. The subscription rights agent will notify subscription rights holders of the number of units, if any, allocated to each holder exercising the over-subscription privilege as promptly as may be practicable after the allocations are completed.

excludes:

To properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription privilege prior to the expiration● 47,798 shares of the subscription period. Because we will not know the total numbercommon stock underlying unvested restricted stock units outstanding as of unsubscribed units prior to the expiration of the rights offering, if you wish to maximize the number of units you purchase pursuant to your over-subscription privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of units available to you, assuming that no stockholder other than you has purchased any units pursuant to its basic subscription privilege and over-subscription privilege.September 30, 2022;

There may not be sufficient units available to purchase● 172,680 shares of common stock reserved for future issuance under the number2020 Omnibus Equity Incentive Plan as of unitsSeptember 30, 2022;

● 3,975,349 shares of common stock issuable upon the exercise of your basic subscription privilege or your over-subscription privilege. We will only honor over-subscription privileges to the extent sufficient unsubscribed units are available following thewarrants outstanding as of September 30, 2022, with a weighted average exercise price of subscription rights under the basic subscription privilege. We will not issue more than 1,000,000 units, consisting in the aggregate of 1,000,000 shares of Series 1 Preferred and Series 1 Warrants to purchase up to 10,000,000$19.20 per share;

● shares of common stock.

To the extent the aggregate subscription available to you pursuant to the subscription privileges is less than the amount you actually paid in connection withstock issuable upon the exercise of the subscription privileges, you will be allocated only the number of unsubscribed units available to you promptly after the expiration of the rights offering.pre-funded warrants issued in this offering;

To the extent the amount you actually paid in connection with● shares of common stock issuable upon the exercise of the subscription privileges is less than the aggregate subscription price of the maximum number of units available to you, you will be allocated the number of units for which you actually paidcommon warrants issued in connection with the privileges.

Any excess subscription payments received by the subscription rights agent will be promptly returned, without interest.this offering; and

Limitation on Exercise● shares of Basic Subscription Privilege and Over-Subscription Privilege

If the rights offering is over-subscribed, in which case the total number of units available in the rights offering will be allocated to participating rights holders on a pro-rata basis, as set forth more fully in this prospectus, then the number of units that each participating rights holder will be eligible to receive will depend upon the number of subscription rights exercised by the rights holder and the total number of subscription rights exercised. All subscriptions, including the basic subscription privilege, are subject to proration. If any proration is necessary, subscriptions for units will be prorated.

If the exercise by a rights holder of the basic subscription privilege or the over-subscription privilege could, as determined by us in our sole discretion, potentially result in a limitation on our company’s ability to use the Tax Attributes, under the Code and rules promulgated by the Internal Revenue Service, we may, but are under no obligation to, reduce the exercise by such rights holder of the basic subscription privilege or the over-subscription privilege to such number of units as we in our sole discretion shall determine to be advisable in order to preserve our company’s ability to use the Tax Attributes.

Allocations

The subscription rights agent will perform the allocations of the units in this offering. The subscription rights agent will notify rights holders who validly exercise their subscription rights the number of units allocated to each as promptly as may be practicable after completion of the allocation process.

Reasons for the Rights Offering

We are conducting this rights offering to raise capital. We will allocate up to $8,425,000 of the proceeds to payment of certain existing debt , including principal, unpaid accrued interest and fees. The remainder of the proceeds will be used for planned store related capital expenditures and for general working capital purposes. We cannot assure you that we will not need to seek additional financing in the future.

Method of Exercising Subscription Rights

To exercise your subscription rights, you must follow the process described in the subscription documents sent to you and also available from the information agent. For assistance you may contact Issuer Direct, the information agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.

The exercise of subscription rights will be irrevocable and may not be cancelled or modified, even if the rights offering is extended by our board of directors, unless we amend the subscription period to extend it by more than 30 days or make a fundamental change to the terms of the rights offering set forth in this prospectus. In any such case, you may cancel your subscription and receive a refund of any money you have advanced. You may exercise your subscription rights as follows:

Subscription By Registered Holder with U.S. or Canadian Address

To exercise your subscription right to buy units, you must (a) properly complete the subscription process as set forth in the subscription documents and (b) submit payment for all the subscription rights you elect to exercise under the basic subscription privilege and over-subscription privilege, to the subscription rights agent, Securities Transfer Corp., at the address set forth on the subscription documents prior to 5:00 p.m. Eastern time on December 22 , 2016, the expiration date of the rights offering. If the mail is used to forward subscription documents and/or a certified or bank check, it is recommended that insured, registered mail be used. Once you exercise your subscription rights, you cannot revoke your exercise. In addition, since we may terminate or withdraw the rights offering at our discretion, your participation in the rights offering is not assured.

Subscription By DTC Participants

Banks, trust companies, securities dealers and brokers that hold our equity securities or warrants therefor as nominee for more than one beneficial owner may, upon proper showing to the subscription rights agent, exercise their subscription privileges on the same basis as if the beneficial owners were record holders on the record date through the Depository Trust Company (the “DTC”). The DTC will issue one basic subscription privilege to purchase one unit to you for every share of our common stock and each public warrant that is held by you or is issuable to you as of the record date. Each basic subscription privilege can then be used to purchase one unit for $13.50 per unit. You may exercise these subscription privileges through DTC’s PSOP Function and instructing DTC to charge your applicable DTC account for the subscription payment for the units and deliver such amount to the subscription rights agent. DTC must receive the subscription instructions and payment for the units by the expiration date of the rights offering.

Subscription by Beneficial Owners

If you are a beneficial owner of our common stock or public warrants therefor that are registered in the name of a broker, custodian bank or other nominee, or if you hold certificates and would prefer to have an institution conduct the transaction relating to the subscription rights on your behalf, you should instruct your broker, custodian bank or other nominee or institution to exercise your subscription rights and deliver all documents and payment on your behalf prior to 5:00 p.m. Eastern time on the expiration date of this rights offering. Your subscription rights will not be considered exercised unless the subscription rights agent receives from you, your broker, custodian, nominee or institution, as the case may be, all of the required documents and your full subscription price payment prior to 5:00 p.m. Eastern time on the expiration date of the rights offering.

Payment Method

Payments must be made in full in U.S. currency by personal check, certified check or bank draft, or by wire transfer. You must timely pay the full subscription payment, including payment for the over-subscription privilege, if applicable, for the full number of units you wish to acquire pursuant toupon the exercise of subscription rights by delivering a:

Any personal check used to pay for units must clear the appropriate financial institutions prior to the expiration date of the rights offering. The clearinghouse may require five or more business days. Accordingly, rights holders who wish to pay the subscription price by means of an uncertified personal check are urged to make payment sufficiently in advance of the expiration date to ensure such payment is received and clears by such date. Subscription documents received after that time will not be honored, and we will return your payment to you, without interest or deduction.

The subscription rights agent will be deemed to receive payment upon:

You should read the instruction letter accompanying the subscription documents carefully and strictly follow it.DO NOT SEND SUBSCRIPTION DOCUMENTS OR PAYMENTS TO US. We will not consider your subscription received until the subscription rights agent has received delivery of a properly completed and duly executed subscription documents and payment of the full subscription amount. The risk of delivery of all documents and payments is on you or your nominee, not us or the subscription agent.

Unless a subscription document provides that the units are to be delivered to the record holder of such subscription rights or such document is submitted for the account of a bank or a broker, signatures on such subscription document must be guaranteed by an “Eligible Guarantor Institution,” as such term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, subject to any standards and procedures adopted by the subscription rights agent.

Calculation of Subscription Rights Exercised

If you do not indicate the number of subscription rights being exercised, or do not forward full payment of the total subscription price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised your basic subscription privilege and over subscription privilege with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription price payment you delivered to the subscription rights agent. If we do not apply your full subscription price payment to your purchase of units, we or the subscription rights agent will promptly return the excess amount to you by mail, without interest or deduction after the expiration date of this rights offering.

Expiration Date and Amendments

The subscription period during which you may exercise your subscription rights expires at 5:00 p.m. Eastern time on December 22 , 2016. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no longer be exercisable. We will not be required to issue units to you if the subscription rights agent receives your subscription documents or your subscription payment after that time, regardless of when the subscription documents and subscription payment were sent. We may extend the offering up to an additional 30 days, at our sole discretion. We do not presently intend to extend the rights offering. If we elect to extend the rights offering, we will issue a press release announcing such extension no later than 9:00 a.m. Eastern time on the next business day after the most recently announced expiration time of the rights offering. We will extend the rights offering as required by applicable law or regulation and may choose to extend it if we decide to give investors more time to exercise their subscription rights in the rights offering. If we elect to extend the rights offering for a period of more than 30 days, then holders who have subscribed for rights may cancel their subscriptions and receive a refund of all subscription payments advanced.

If the rights offering is not fully subscribed following expiration of the rights offering, Source Capital Group, Inc. has agreed to use its commercially reasonable efforts to place any unsubscribed units of this rights offering at the subscription price for an additional period of up to 45 days. The number of units that may be sold by us during this period will depend upon the number of units that are subscribed for pursuant to the exercise of subscription rights by our rights holders. No assurance can be given that any unsubscribed units, if available, will be sold during this period.

Our board of directors also reserves the right to amend or modify the terms of the rights offering. If we make any fundamental changes to the terms of the rights offering set forthunderwriter warrants issued in this prospectus, we will offer potential purchasers who have exercised their rights the opportunity to cancel their subscriptions and issue a refund of any subscription payments advanced by such rights holder and recirculate an updated prospectus. In addition, upon such event, we may extend the expiration date of the rights offering to allow holders of subscription rights ample time to make new investment decisions and for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect to the rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the closing of the rights offering. Although we do not presently intend to do so, we may choose to amend or modify the terms of the rights offering for any reason, including, without limitation, in order to increase participation in the rights offering. Such amendments or modifications may include a change in the subscription price, although no such change is presently contemplated.

Subscription Price

The purchaseinformation discussed above is illustrative only and will adjust based on the actual public offering price, was determined by our boardthe actual number of directors, taking into account the advice of the dealer-manager, Source Capital Group, as well as historicalshares and recent trading prices of our common stock. The purchase price is not the result of any negotiation between any person and us. The board of directors established the purchase price at $13.50 per unit and the Series 1 Warrant exercise price to equal surrender of one share of Series 1 Preferred with a liquidation value of $13.50 for 10 shares of common stock. The purchase price is not necessarily related to our book value, net worth or any other established criteria of value and may or may not be considered the fair value of the units offered in the rights offering. Subscription rights holders should consider the potential lack of liquidity carefully before making a decision to exercise their subscription rights for the units. See “Risk Factors”.

Conditions, Withdrawal and Termination

We reserve the right to withdraw the rights offering prior to the expiration of the rights offering for any reason. We may terminate the rights offering, in whole or in part, if at any time before completion of the rights offering there is any judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to the rights offeringwarrants that in the sole judgment of our board of directors would or might make the rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of the rights offering. We may choose to proceed with the rights offering even if one or more of these events occur. If we terminate, cancel or withdraw the rights offering, in whole or in part, we will issue a press release notifying the rights holders of such event, all affected subscription rights will expire without value, and all subscription payments received by the subscription rights agent will be promptly returned, without interest, following such termination, cancellation or withdrawal.

Cancellation Rights

Our board of directors may cancel the rights offering at any time prior to the time the rights offering is completed for any reason. If we cancel the rights offering, we will issue a press release notifying rights holders of the cancellation and all subscription payments received by the subscription rights agent will be promptly returned, without interest.

Subscription Rights Agent

The subscription rights agent for this offering is Securities Transfer Corp. To exercise your subscription rights for the units, you must follow the process described in the subscription documents sent to you and also available from the information agent. For assistance or copies of the documents you may contact Issuer Direct, the information agent for the rights offering, at (919) 744-2722 or by email attransfer@issuerdirect.com. To exercise your subscription rights for the units you will need to use the traditional paper documentation.

You should direct any questions or requests for assistance concerning the method of subscribing for the units, or for additional copies of this prospectus and subscription documents to Issuer Direct, the information agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.

Fees and Expenses

We will pay all fees related to the offering, including legal and accounting fees and fees charged by each of the transfer agent, the subscription rights agent and the information agent in connection with the rights offering. We have agreed to pay Source Capital Group as the dealer-manager a fee of 6.0% of the proceeds of the rights offering, plus a 1.8% non-accountable expense fee and an out-of-pocket accountable expense allowance of 0.2% of the proceeds of the offering. For any unsubscribed units placed by Source Capital Group after the expiration of the rights offering and extension, we have agreed to pay Source Capital Group a placement fee equal to 6%, in lieu of the dealer-manager fee, along with a continuing 1.8% non-accountable expense fee and an out-of-pocket accountable expense allowance of 0.2% of the proceeds of the offering, with such placement fee and expenses to be calculated in respect of the total gross proceeds paid to and received by us for subscriptions accepted by us from investors in connection with such placement and such placement fee and expenses not to exceed the aggregate amounts that would have been otherwise received by Source Capital Group if the rights offering were to have been fully subscribed. Neither the placement fee nor the expense allowance in connection with the placement will be payable with respect to any units purchased as result of the exercise of any basic subscription privilege or over-subscription privilege in the rights offering. Source Capital Group has informed us that it will re-allow 4.0% of its dealer-manager fee with respect to any such sale to each broker-dealer whose clients purchase unitsoffer in this offering, pursuant to the exercise some or all of their subscription rights. See “Plan of Distribution”. You are responsible for paying anyand other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights.

Transferability of Subscription Rights

The subscription rights granted to you are non-transferable and, therefore, you may not sell, transfer or assign your subscription rights to anyone. The subscription rights will not be listed for trading on any stock exchange or market.

Validity of Subscriptions

We will resolve all questions regarding the validity and form of the exercise of your subscription rights, including time of receipt and eligibility to participate in the rights offering. In resolving all such questions, we will review the relevant facts, consult with our legal advisors to the extent we deem necessary, and we may request input from the relevant parties. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable, and even if the rights offering is extended by our board of directors, and we will not accept any alternative, conditional or contingent subscriptions or directions. However, if we amend the rights offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms of the rightsthis offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money you have advanced. We reserve the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before the subscription period expires, unless waived by us in our sole discretion. Neither we nor the subscription rights agent has any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject to our right to withdraw or terminate the rights offering, only when the subscription rights agent has received a properly completed and duly executed subscription documents and any other required documents and the full subscription payment. Our interpretations of the terms and conditions of the rights offering will be final and binding.

Return of Funds

The subscription rights agent will hold funds received in payment for the units in a segregated account pending completion of the rights offering. The subscription rights agent will hold this money until the rights offering is completed or is withdrawn and canceled. If the rights offering is canceled for any reason, all subscription payments received by the subscription rights agent will be promptly returned, without interest. In addition, all subscription payments received by the subscription rights agent will be promptly returned, without interest, if subscription rights holders decide to cancel their subscription rights in the event that we extend the rights offering for a period of more than 30 days after the expiration date or if there is a fundamental change to the terms of the rights offering.

Foreign Rights Holders

Non-U.S. citizens or residents are permitted to purchase the units to the extent such purchases do not violate any law, rule, regulation or other requirement or prohibition of any non-U.S. governmental authority and do not require any registration or qualification or other action by or on behalf of the company or any other entity involved in the offering. To exercise subscription rights, our foreign rights holders must notify the subscription rights agent prior to 11:00 a.m. Eastern timedetermined at least three business days prior to the expiration of the rights offering.

No Revocation or Change

Once you submit the subscription documents to exercise any subscription rights, you have no right to revoke or change the exercise or request a refund of funds paid. All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights and even if the rights offering is extended by our board of directors, unless we amend the rights offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms of the rights offering set forth in this prospectus, in which case you may cancel your subscription and receive a refund of any money you have advanced. You should not exercise your subscription rights unless you are certain that you wish to purchase units at the purchase price.

Regulatory Limitations

We will not be required to issue to you any units in this rights offering if, in our opinion, you are or may be required to obtain prior clearance or approval from any state or federal regulatory authorities to purchase, own or control such units and if, at the time the subscription period expires, you have not obtained such clearance or approval. We also will not be required to issue to you any units in this rights offering if, in our opinion, any such issuance may violate any law, rule or regulation or other requirement or prohibition of any non-U.S. governmental authority or may require any registration or qualification or other action by or on behalf of the company or any other entity involved in the offering.

U.S. Federal Income Tax Treatment of Subscription Rights Distribution

We believe that our distribution and any rights holder’s receipt and exercise of the rights to purchase the units should not be taxable to our rights holders for the reasons described below in “Material U.S. Federal Income Tax Consequences to U.S. Holders”.

No Recommendation to Subscription Rights Holders

Our board of directors is making no recommendation regarding your exercise of the subscription rights. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see “Risk Factors” for a discussion of unique and material risks involved in investing in the units.

No Standby Commitment

We have not entered into any standby purchase arrangement in connection with this offering.

Listing

None of the subscription rights, the Series 1 Preferred or the Series 1 Warrants will be listed for trading on any national securities exchange or market. The subscription rights are completely non-transferrable. We intend to use our best efforts to list the units for trading on the Nasdaq Capital Market or quotation on the OTC marketplace. There is no assurance that the units will be traded on the Nasdaq Capital Market or quoted on the OTC marketplace. There will be no holders of units to help establish a trading market other than purchasers in this rights offering. Further, we do not expect to issue any additional units. Consequently, trading of the units may be very limited and possibly non-existent.

Other Matters

We are not making the rights offering in any state or other jurisdiction in which it would be unlawful to do so, nor are we distributing or accepting any offers to purchase any units from subscription rights holders who are residents of any such states or other jurisdictions or who arepricing. Except as indicated otherwise, prohibited by federal or state laws or regulations from accepting or exercising the subscription rights or holding units.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of the material U.S. federal income tax consequences of the ownership and disposition of the units. Unless otherwise noted below, the following discussion is the opinion of Cherry Bekaert LLP, our U.S. tax advisors, insofar as such discussion relates to matters of U.S. federal income tax law and conclusions with respect to those matters. This discussion does not describe all of the tax considerations that may be relevant to a particular holder’s ownership of the units. This discussion applies only to U.S. Holders that hold the units as a capital asset for tax purposes and does not address all of the tax consequences that may be relevant to holders subject to special rules, such as: regulated investment companies, real estate investment trusts, certain financial institutions, dealers and certain traders in securities or foreign currencies, insurance companies, persons holding the units as part of a hedge, straddle, conversion transaction or integrated transaction, persons whose “functional currency” is not the U.S. dollar, persons liable for the alternative minimum tax, tax-exempt organizations, and persons holding the units that own or are deemed to own 10% or more of our voting shares.

This discussion is based upon the tax laws of the United States including the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, as of the date hereof. These laws are subject to change, possibly with retroactive effect. The discussion does not address any state, local or non-U.S. tax consequences.

This discussion does not address all aspects of U.S. federal income taxation that may be applicable to holders in light of their particular circumstances or to holders subject to special treatment under the U.S. federal income tax laws, including, but not limited to, financial institutions, brokers and dealers in securities or currencies, insurance companies, regulated investment companies, real estate investment trusts, tax-exempt organizations, persons who hold their shares as part of a straddle, hedge, conversion or other risk-reduction transaction, persons liable for the alternative minimum tax, persons who have received their common stock pursuant to which the subscription rights in this rights offering have been granted through the exercise of employee stock options or otherwise as compensation for services, partnerships or other entities treated as partnerships for U.S. federal income tax purposes, U.S. expatriates, and persons whose functional currency is not the U.S. dollar and foreign taxpayers. This discussion does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction, or any U.S. federal tax considerations other than income taxation (such as estate or gift taxation). This discussion is limited to U.S. holders which hold our shares as capital assets and does not address U.S. holders which beneficially hold our shares through either a “foreign financial institution” (as such term is defined in Section 1471(d)(4) of the Code) or certain other non-U.S. entities specified in Section 1472 of the Code. For purposes of this discussion, a “U.S. holder” is a holder that is, for U.S. federal income tax purposes:

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) receives the subscription rights or holds the units received upon exercise of the subscription rights or the over-subscription privilege, the tax treatment of a partner in a partnership generally will depend upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to the U.S. federal income tax consequences of the receipt and ownership of the subscription rights or the ownership of the units received upon exercise of the subscription rights or, if applicable, upon exercise of the over-subscription privilege.

YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF YOUR RECEIPT, OWNERSHIP, AND EXERCISE OF THE SUBSCRIPTION RIGHTS, THE OWNERSHIP AND DISPOSITION OF SERIES 1 PREFERRED AND THE SERIES 1 WARRANTS, AND THE OWNERSHIP AND DISPOSITION OF COMMON STOCK RECEIVED UPON THE EXERCISE OF THE SERIES 1 WARRANTS TO PURCHASE OUR COMMON STOCK, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS.

Receipt of the Subscription Rights

Each subscription right entitles an eligible rights holder the right to purchase one unit consisting of one share of our Series 1 Preferred and Series 1 Warrants to purchase 10 shares of our common stock, from the date of issuance through its expiration seven years from the date of issuance, at a subscription price of $13.50 per unit. Generally, the distribution of stock by a corporation to its stockholders with respect their stock is not taxable to such stockholders pursuant to Section 305(a) of the Code. For such purpose, a distribution of rights to acquire stock of the distributing corporation constitutes a distribution of stock. However, if a distribution of stock or rights to acquire stock falls within one of several exceptions set forth in Section 305(b) to the general rule of Section 305(a) of the Code, the distribution may be taxable to the stockholders of the distributing corporation as described below.

Many of the exceptions to the general rule of Section 305(a) set forth in Section 305(b) involve preferred stock, such as the distribution of preferred stock in certain circumstances pursuant to Section 305(b)(5). Treasury regulation Section 1.305-5(a) defines preferred stock not for its preferred rights and privileges, but its inability to participate in corporate growth to any significant extent. The Series 1 Preferred does not in and of itself participate in the corporate growth. This would normally cause the distribution of the Series 1 Preferred stock to not qualify as a tax free distribution under Section 305(a). However, the Series 1 Preferred also is part of a unit that contains warrants for common stock. The common stock warrants alone would ordinarily qualify as a nontaxable distribution under Section 305(a). In this case, the common stock warrants are only exercisable by the surrender of the Series 1 preferred share. The Series 1 Preferred and the warrants, together function very much like convertible preferred stock due to the fact that they are bundled together as a unit and they cannot be separately traded or transferred. The unit as a whole participates in corporate growth since the holders of such stock have a right to exchange this stock for shares of the company’s common stock by exercising their warrants. It is not clear how the Internal Revenue Service will view the bundled units in this regard.

Distribution of convertible preferred stock is one of the exceptions to the general rule of Section 305(a). Section 305(b)(5) provides that a distribution of convertible preferred stock will be subject to tax unless it is established to the satisfaction of the Secretary of the Treasury that the distribution will not result in a disproportionate distribution as described in Section 305(b)(2), which will be addressed next.

Section 305(b)(2) is an exception to the general rule of Section 305(a) that applies to a “disproportionate distribution”. Pursuant to Section 305(b)(2), a distribution (or a series of distributions of which such a distribution is one) constitutes a “disproportionate distribution,” and is therefore taxable, if the distribution results in (i) the receipt of property by some stockholders, and (ii) an increase in the proportionate interest of other stockholders in the assets or earnings and profits of the distributing corporation. For this purpose, the term “property” means money, securities and any other property, except that such term does not include stock in the corporation making the distribution or rights to acquire such stock. A “series of distributions” encompasses all distributions of stock made or deemed made by a corporation which have the result of receipt of cash or property by some stockholders and an increase in the proportionate interests of other stockholders. It is not necessary for a distribution of stock to be considered as one of a series of distributions that such distribution be pursuant to a plan to distribute cash and property to some stockholders and to increase the proportionate interests of the other stockholders, rather it is sufficient if there is a distribution (or a deemed distribution) having such effect. In addition, there is no requirement that both elements of Section 305(b)(2) of the Code occur in the form of a distribution or series of distributions as long as the result is that some stockholders receive cash and property and other stockholders’ proportionate interests increase.

Under Treasury Regulation 1.305-3(b)(4), where the receipt of cash or property occurs more than 36 months following a distribution or series of distributions of stock, or where a distribution is made more than 36 months following the receipt of cash or property, such distribution or distributions will be presumed not to result in the receipt of cash or property by some stockholders and an increase in the proportionate interest of other stockholders, unless the receipt of cash or property by some stockholders and the distribution or series of distributions are made pursuant to a plan. Treasury Regulation 1.305-6 provides guidance on distributions of convertible preferred stock and rights. The examples under subsection (b) of this Regulation state that where the preferred stock is convertible into common stock no later than 4 months from the date of distribution, such a distribution will be treated as a dividend distribution, whereas in a situation where the preferred stock is convertible for a period of 20 years, there is no basis for predicting the extent the preferred stock will be converted and therefore the distribution of the preferred stock would not be treated as a dividend distribution. In the instant case, the conversion period is 7 years, which we believe provides sufficient doubt as to extent the preferred shares will be converted and therefore we believe the bundled units should not be treated as a dividend distribution.

The distribution of subscription rights in the rights offering should not constitute an increase in the proportionate interest of some stockholders in the assets or earnings and profits of the company for the purpose of Section 305(b)(2) based on the fact that all of our stockholders will receive rights in the rights offering based upon their respective ownership of our common stock. See Regulation Section 1.305-3(e) Ex.6. This opinion is not binding on the IRS or any court and there can be no assurance that the IRS or a court will agree with this opinion. The remainder of this discussion assumes that Section 305(b)(2) does not apply to the subscription rights offering.

Subject to the foregoing, you should not be required to recognize taxable income for U.S. federal income tax purposes in connection with the receipt of the subscription rights in the rights offering and the remainder of this discussion so assumes. However, in the event the IRS successfully asserts or a court determines that your receipt of subscription rights is currently taxable pursuant to Section 305(b)(2) of the Code, the discussion below underand table above assume (i) no sale of pre-funded warrants, which, if sold, would reduce the heading “Alternative Treatmentnumber of Subscription Rights” describes the tax consequences that will result from such a determination.

Tax Basis and Holding Period of the Subscription Rights

Generally, if a shareholder receives stock or stock rights to acquire shares in the corporation, the shareholder is required to allocate a portion of the basis of the shareholder’s existing shares to the new stock or rights received (Section 307(a)). However, under Section 307(b) your tax basis of the subscription rights for U.S. federal income tax purposes will depend on the fair market value of the subscription rights you receive and the fair market value of your existing shares of common stock that we are offering on the date you receive the subscription rights. The taxa one-for-one basis, (ii) no exercise of the subscription rights received by you in the subscription rights offering will be zero unless either (i) the fair market value of the subscription rights on the date such subscription rights are distributed is equalunderwriters’ option to at least 15% of the fair market value of such common stock on the date of distribution or (ii) you elect to allocate part of the tax basis of suchpurchase additional shares to the subscription rights. If either (i) or (ii) is applicable, then, if youand (iii) no exercise the subscription rights, the tax basis in your shares of common stock will be allocated between the subscription rights andwarrants accompanying the shares of common stock with respect to which the subscription rights were receivedsold in proportion to their respective fair market values on the date the subscription rights are distributed.

We have not obtained an independent appraisal of the valuation of the subscription rights and, therefore, you should consult with your tax advisor to determine the proper allocation of basis between the subscription rights and the shares of common stock with respect to which the subscription rights are received.

Your holding period for the subscription rights will include your holding period for the shares of common stock with respect to which the subscription rights were received; but see below for information on common stock acquired upon exercise of your warrants.

Expiration of the Subscription Rights

If you allow subscription rights received in the subscription rights offering to expire, you will not recognize any gain or loss. If you have tax basis in the subscription rights, the tax basis of the shares of common stock owned by you with respect to which such subscription rights were distributed will be restored to the tax basis of such shares immediately prior to the receipt of the subscription rights in thethis offering.

Alternative Treatment of Subscription Rights

Receipt. If the IRS were to successfully assert that the distribution of the subscription rights in the rights offering resulted in a “disproportionate” distribution or is otherwise taxable pursuant to Section 305(b) each holder would be considered to have received a distribution with respect to such holder’s stock in an amount equal to the fair market value of the subscription rights received by such holder on the date of the distribution. This distribution generally would be taxed as a dividend distribution to the extent of your ratable share of our current and accumulated earnings and profits. The amount of any distribution in excess of our earnings and profits will be applied to reduce, but not below zero, your tax basis in your stock, and any excess generally will be taxable to you as capital gain (long-term, if your holding period with respect to your capital stock is more than one year as of the date of distribution, and otherwise short-term). Your tax basis in the subscription rights received pursuant to the rights offering would be equal to their fair market value on the date of distribution and the holding period for the subscription rights would begin upon receipt.

Expiration. In the event that you allow your subscription rights to expire without exercising them, the tax basis in your shares of common stock with respect to which the subscription rights were received will be equal to their tax basis immediately before your receipt of the subscription rights (and, accordingly, the tax basis in your subscription rights will be deemed to be zero) and, therefore, you will not recognize any loss upon the expiration of the subscription rights. If the subscription rights expire without exercise after you have disposed of all or a portion of your shares of common stock, you should consult your own tax advisor regarding the ability to recognize a loss (if any) on the expiration of the subscription rights.

Exercise of the Subscription Rights; Tax Basis and Holding Period of the Shares

As discussed above, the exercise of the subscription rights by you or on your behalf likely should not be a taxable transaction for U.S. federal income tax purposes. Accordingly, your tax basis in the units acquired upon exercise of the subscription rights will equal the sum of the price paid for the units and your tax basis (as determined above), if any, in the subscription rights you exercised. The holding period of the units will begin on the day the subscription rights are exercised.

The holding period for the Series 1 Preferred and Series 1 Warrants acquired through exercise of the subscription rights will begin on the date the subscription rights are exercised.

Exercise of Warrants

You generally will not recognize gain or loss upon exercise of a Series 1 Warrant to acquire common stock.

Your holding period of common stock received upon exercise of a Series 1 Warrant will begin on the date the Series 1 Warrant is exercised.

In the event a Series 1 Warrant lapses unexercised, you will recognize a capital loss in an amount equal to the tax basis of the Series 1 Warrant. Such capital loss will be long-term if your holding period of such Series 1 Warrant was more than one year at the time of lapse. The deductibility of capital losses is subject to limitations.

Taxation of Series 1 Preferred

Distributions.Generally, any distribution with respect to the Series 1 Preferred that is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will constitute a dividend and will be includible in gross income by you when paid. Distributions with respect to the Series 1 Preferred in excess of our current or accumulated earnings and profits would be treated first as a non-taxable return of capital to the extent of your basis in the Series 1 Preferred (thus reducing such tax basis dollar-for-dollar), and thereafter as capital gain, which will be long-term capital gain if the your holding period for such stock at the time of distribution exceeds one year.

Taxation of Common Stock

Distributions.Distributions received with respect to our common stock will be treated as described above under “— Taxation of Series 1 Preferred — Distributions”.

Sale, Exchange or Other Disposition.Upon a sale, exchange or other disposition of our common stock, you generally will recognize capital gain or loss in the manner described above under “— Taxation of Series 1 Preferred— Sale, Exchange or Other Disposition”.

Additional Medicare Tax on Net Investment Income

An additional 3.8% tax will be imposed on the “net investment income” of certain U.S. citizens and resident aliens, and on the undistributed “net investment income” of certain estates and trusts with Modified Adjusted Gross Income in excess of certain threshold amounts. Among other items, “net investment income” generally includes gross income from dividends and net gain from the disposition of property, such as our capital stock, less certain deductions. You should consult your tax advisor with respect to this additional tax.

Information Reporting and Backup Withholding

In general, payments made to you of proceeds from the sale or other disposition of Series 1 Warrants, Series 1 Preferred, or our common stock may be subject to information reporting to the IRS and possible U.S. federal backup withholding at the then applicable backup withholding rate. Backup withholding will not apply if you furnish a correct taxpayer identification number (certified on the IRS Form W-9 or valid substitute Form W-9) or otherwise establish that you are exempt from backup withholding. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability. You may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

You should consult your own tax advisor regarding your qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if applicable.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the Nasdaq Capital Market under the trading symbol “HOTR”. On November 14, 2016, there were approximately 185 record holders of our common stock. This number does not include the number of persons or entities that hold stock in nominee or street name through various brokerage firms, banks and other nominees. On December 2 , 2016, the last closing sale price reported on the Nasdaq Capital Market for our common stock was $0.51 per share. Past price performance is not indicative of future price performance.

The following table sets forth the high and low sale prices of our common stock on Nasdaq for the periods indicated: