What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 856 added, 723 removed, 1090 unchanged (59% of the section changed)

LIPOCINE INC.

FINANCIAL STATEMENTS

AND SUBSIDIARIES

31 unchanged sentences

Total liabilities and stockholders' equity

See accompanying notes

to unaudited condensed consolidated financial statements

LIPOCINE INC.

See accompanying notes to unaudited condensed consolidated financial statements

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

and Comprehensive Loss

Three Months Ended March 31,

Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses:

6 unchanged sentences

Interest expense

Loss on warrant liability

Total other expense, net

Unrealized loss on warrant liability

Loss before income tax expense

(12,140,085 )

Income tax expense

1 unchanged sentence

$ (3,430,597 )

$ (12,140,285 )

$ (6,655,069 )

Basic loss per share attributable to common stock

5 unchanged sentences

$ (3,430,597 )

Net unrealized gain on available-for-sale securities

$ (12,140,285 )

$ (6,655,069 )

Net unrealized gain (loss) on available-for-sale securities

Comprehensive loss

1 unchanged sentence

$ (3,429,069 )

accompanying notes to unaudited condensed consolidated financial statements

$ (12,140,351 )

$ (6,651,189 )

See accompanying notes to unaudited condensed consolidated financial

LIPOCINE INC.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’

For the Three Months Ended March 31, 2020 and 2019

the Three and Six Months Ended June 30, 2020 and 2019

Treasury Stock

Comprehensive

Stockholders'

Balances at December 31, 2018

Balances at March 31, 2019

$ 153,872,876

$ (141,284,317 )

Unrealized net gain on

marketable investment securities

net gain on marketable investment securities

Stock-based compensation

Common stock sold through ATM offering

Balances at June 30, 2019

$ 154,600,442

$ (144,714,914 )

Comprehensive

Stockholders'

at December 31, 2018

$ 147,533,019

$ (138,059,845 )

net gain on marketable investment securities

stock sold through ATM offering

Balances at March

at June 30, 2019

$ 154,600,442

$ (144,714,914 )

Balances at December 31, 2019

Comprehensive

Stockholders'

at March 31, 2020

$ 163,426,502

$ (156,837,840 )

Unrealized net gain on

marketable investment securities

Stock-based compensation

Common stock sold through

equity offering

net gain on marketable investment securities

of restricted stock units

stock issued for warrant exercises

Balances at March

of warrant liability on warrant exercises

associated with ATM offering

at June 30, 2020

$ 176,327,120

$ (163,207,474 )

See accompanying notes to unaudited condensed consolidated financial

Comprehensive

Stockholders'

at December 31, 2019

$ 157,391,969

$ (151,067,189 )

(12,140,285 )

net loss on marketable investment securities

of restricted stock units

stock sold through equity offering

stock issued for warrant exercises

of warrant liability on warrant exercises

associated with ATM offering

at June 30, 2020

$ 176,327,120

$ (163,207,474 )

accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash

Three Months Ended March 31,

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Cash flows from operating activities:

1 unchanged sentence

$ (6,655,069 )

Adjustments to reconcile net loss to cash used in

operating activities:

Adjustments to reconcile net

loss to cash used in operating activities:

Depreciation expense

11 unchanged sentences

Purchases of marketable investment securities

(12,530,190 )

Maturities of marketable investment securities

Cash provided by (used in) investing activities

Cash used in investing activities

Cash flows from financing activities:

Debt repayments

Proceeds from debt

Net proceeds from common stock offering

Net proceeds exercise of warrants

Net proceeds from sale of common stock through (costs associated with) ATM

Net proceeds from exercise of warrants

Cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Supplemental disclosure of cash flow information:

2 unchanged sentences

Supplemental disclosure of non-cash investing and financing activity:

Net unrealized gain on available-for-sale securities

Settlement of warrant liability on warrant exercises

Net unrealized gain (loss) on available-for-sale securities

Accrued final payment charge on debt

See accompanying notes to unaudited condensed consolidated

financial statements

LIPOCINE INC.

Other accrued interest

See accompanying notes to unaudited condensed consolidated financial statements

Notes to Condensed Consolidated Financial

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in accordance with rules and regulations of the SEC.

Operating results for the three months ended March 31, 2020 are not necessarily

indicative of the results that may be expected for any future period or for the year ending December 31, 2020.

These unaudited condensed consolidated financial

statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for

the year ended December 31, 2019.

Operating results for the three and six months ended June 30, 2020

are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31,

unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial

statements and the notes thereto for the year ended December 31, 201 9.

The preparation of the unaudited condensed consolidated

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Actual results could differ from these estimates.

Certain prior year amounts have been reclassified

for consistency with the current year presentation.

These reclassifications had no effect on the previously reported net loss.

The Company believes that its existing capital resources,

together with interest thereon, will be sufficient to meet its projected operating requirements through at least February 15, 2021.

prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect

on the previously reported net loss.

Company believes that its existing capital resources, together with interest thereon, will be sufficient to meet its projected

operating requirements through at least September 30, 2021 which includes an on-going clinical study for LPCN 1144, compliance

with regulatory requirements, including the Company’s NDA submission for TLANDO™, and on-going litigation activities.

The Company has based this estimate on assumptions that may prove to be wrong, and the Company could utilize its available capital

resources sooner than it currently expects.While the Company believes it has sufficient liquidity and capital resources to fund

our projected operating requirements through at least February 15, 2021, the Company will need to raise additional capital at some

point through the equity or debt markets or through out-licensing activities, before or after February 15, 2021, to support its

operations, on-going clinical study for LPCN 1144, compliance with regulatory requirements, including the Company’s NDA submission

for TLANDO™, and on-going litigation activities.

resources sooner than it currently expects if additional activities are performed by the company including pre-commercial and commercial

activities for TLANDO and new clinical studies for LPCN 1144, TLANDO XR and LPCN 1148 .While the Company believes it has sufficient

liquidity and capital resources to fund our projected operating requirements through at least September 30, 2021, the Company will

need to raise additional capital at some point through the equity or debt markets or through out-licensing activities, before or

after September 30, 2021, to support its operations.

If the Company is unsuccessful in raising additional capital, its ability

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Conversely, the Company’s capital resources could last

longer if it reduces expenses, reduces the number of activities currently contemplated under our operating plan or if it terminates,

modifies the design or suspends on-going clinical studies.

longer if it reduces expenses, reduces the number of activities currently contemplated under our operating plan, if it terminates,

modifies the design or suspends on-going clinical studies, or if it terminates or settles any on-going litigation activities.

( 2) Earnings (Loss) per Share

Basic earnings (loss) per share is calculated by

dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during

Diluted earnings (loss) per share is based on the weighted average number of common shares outstanding plus, where

applicable, the additional potential common shares that would have been outstanding related to dilutive options, warrants and,

unvested restricted stock units to the extent such shares are dilutive.

The following table sets forth the computation of

basic and diluted earnings (loss) per share of common stock for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31,

earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average

number of common shares outstanding during the period.

Diluted earnings (loss) per share is based on the weighted average

number of common shares outstanding plus, where applicable, the additional potential common shares that would have been outstanding

related to dilutive options, warrants and, unvested restricted stock units to the extent such shares are dilutive.

following table sets forth the computation of basic and diluted earnings (loss) per share of common stock for the three

and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

Basic loss per share attributable to common stock:

$ (6,369,634 )

$ (3,430,597 )

$ (12,140,285 )

$ (6,655,069 )

Weighted avg.

2 unchanged sentences

Diluted loss per share attributable to common stock:

$ (6,369,634 )

$ (3,430,597 )

$ (12,140,285 )

$ (6,655,069 )

Weighted avg.

1 unchanged sentence

Diluted loss per share attributable to common stock

The computation of diluted loss per share for the three months ended March 31, 2020 and 2019

does not include the following stock options and unvested restricted stock units to purchase shares in the computation of diluted

loss per share because these instruments were antidilutive:

computation of diluted loss per share for the six months ended June 30, 2020 and 2019 does not include the following stock

options and unvested restricted stock units to purchase shares in the computation of diluted loss per share because these instruments

were antidilutive:

Stock options

1 unchanged sentence

(3) Marketable Investment Securities

The Company has classified its marketable investment

securities as available-for-sale securities, all of which are debt securities.

These securities are carried at fair value with

unrealized holding gains and losses, net of the related tax effect, included in accumulated other comprehensive income (loss) in

stockholders’

Com pany has classified its marketable investment securities as available-for-sale securities, all of which are debt securities.

These securities are carried at fair value with unrealized holding gains and losses, net of the related tax effect, included in

accumulated other comprehensive income (loss) in stockholders’

equity until realized.

Gains and losses on investment security transactions are reported on the specific-identification

Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis.

The amortized

cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major

security type and class of security at March 31, 2020 and December 31, 2019 were as follows:

March 31, 2020

Gains and losses on investment security

transactions are reported on the specific-identification method.

Dividend income is recognized on the ex-dividend date and interest

income is recognized on an accrual basis.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses,

and fair value for available-for-sale securities by major security type and class of security at June 30, 2020 and December 31,

2019 were as follows:

June 30, 2020

Government treasury bills

Corporate bonds, notes and commercial paper

2 unchanged sentences

Maturities of debt securities

classified as available-for-sale securities at March 31, 2020 are as follows:

March 31, 2020

classified as available-for-sale securities at June 30, 2020 are as follows:

June 30, 2020

Amortized Cost

Aggregate fair value

Due within one year

There were no sales of marketable investment securities

during the three months ended March 31, 2020 and 2019 and therefore no realized gains or losses.

Additionally, $4.4 million and

$4.7 million of marketable investment securities matured during the three months ended March 31, 2020 and 2019, respectively.

Company determined there were no other-than-temporary impairments for the three months ended March 31, 2020 and 2019.

There were no sales of marketable investment

securities during the three and six months ended June 30, 2020 and 2019 and therefore no realized gains or losses.

Additionally, there were no marketable investment securities that matured during the three months ended June 30, 2020 and

$4.3 million of marketable investment securities matured during the three months ended June 30, 2019, respectively, and $4.3

million and $9.0 million of marketable investment securities matured during the six months ended June 30, 2020 and 2019,

respectively.

The Company determined there were no other-than-temporary impairments for the three and six months ended June

30, 2020 and 2019.

( 4) Fair Value

6 unchanged sentences

Level 1 Inputs:

prices for identical instruments in active markets.

Quoted prices for identical instruments in active markets.

Level 2 Inputs:

prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active,

and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets.

Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets.

Level 3 Inputs:

derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

All of the Company’s financial instruments

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The following table presents the placement in the fair value hierarchy of assets and liabilities

that are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019:

that are measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019:

Fair value measurements at reporting date using

March 31, 2020

June 30, 2020

Level 1 inputs

1 unchanged sentence

Level 3 inputs

Cash equivalents - money market funds and corporate bonds

Cash equivalents - money market funds and commercial paper

Government treasury bills

Corporate bonds, notes and commercial paper

30 unchanged sentences

The significant assumptions used

in preparing the option pricing model for valuing the warrant liability as of March 31, 2020, include (i) volatility of 224.53%,

in preparing the option pricing model for valuing the warrant liability as of June 30, 2020, include (i) volatility of 140.22%,

(ii) risk free interest rate of 0.29%, (iii) strike price of $0.50, (iv) fair value of common stock of

6 unchanged sentences

transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

There were no transfers into or out of Level 1 or Level 2 for the three months ended March 31, 2020.

(5) Loan and Security Agreement

There were no transfers into or out of Level 1, Level 2 or Level 3 for the three and six months ended June 30, 2020.

(5) Loan and Security Agreements

Silicon Valley Bank Loan

On January 5, 2018, the Company entered into a Loan

3 unchanged sentences

at a rate equal to the Prime Rate, as reported in the money rates section of The Wall Street Journal or any successor publication

representing the rate of interest per annum then in effect, plus one percent per annum (4.25% as of March 31, 2020), which interest

representing the rate of interest per annum then in effect, plus one percent per annum (4.25% as of June 30, 2020), which interest

is payable monthly.

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At its option, the Company may prepay all amounts owed under the

Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge), subject to a prepayment charge

if the loan has been outstanding less than two years, which prepayment charge is determined based on the date the loan is prepaid.

Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge).

In connection with the Loan and Security Agreement,

16 unchanged sentences

greater than $100,000 individually or in the aggregate.

Future maturities of principal payments on debt at

March 31, 2020, are as follows:

Future maturities of principal payments on the Loan

and Security Agreement at June 30, 2020, are as follows:

Years Ending December 31,

(in thousands)

Amount (in thousands)

The following table provides a reconciliation of

1 unchanged sentence

amounts shown in the statement of cash flows.

March 31, 2020

June 30, 2020

Cash and cash equivalents

Restricted cash

Cash, cash equivalents, and restricted cash shown in the statement of cash flows

Cash, cash equivalents, and restricted

cash shown in the statement of cash flows

Amounts included in restricted cash represent those

1 unchanged sentence

The restriction will lapse if and when TLANDO is approved by the FDA.

Payroll Protection Program Loan

On April 21, 2020, the Company was

granted a loan from SVB in the aggregate amount of $233,537, pursuant to the Paycheck Protection Program (the “PPP”)

under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP loan, which was in the form

of a note dated April 21, 2020 issued by SVB, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable

monthly commencing on November 21, 2020 (“Note”).

The Note may be prepaid by the Company at any time prior to maturity

with no prepayment penalties.

Funds from the PPP loan may only be used for payroll costs, costs used to continue group health care

benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

intends to use the entire PPP loan amount for qualifying expenses.

Under the terms of the PPP loan, certain amounts of the PPD

loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

Future maturities of principal payments on the PPP

Loan at June 30, 2020, are as follows:

Years Ending December 31,

Amount (in thousands)

June 15, 2020, the Company began deferring Federal Insurance Contributions Act (“FICA”) taxes under the CARES Act Section

Payment of these tax deferrals are delayed to December 31, 2021 and December 31, 2022.

( 6) Income Taxes

4 unchanged sentences

estimated tax rate changes, the Company makes a cumulative adjustment.

At March 31, 2020 and December 31, 2019, the

Company had a full valuation allowance against its deferred tax assets, net of expected reversals of existing deferred tax liabilities,

as it believes it is more likely than not that these benefits will not be realized.

June 30, 2020 and December 31, 2019, the Company had a full valuation allowance against its deferred tax assets, net

of expected reversals of existing deferred tax liabilities, as it believes it is more likely than not that these benefits will

not be realized.

( 7) Contractual Agreements

(a) Abbott Products, Inc.

On March 29, 2012, the Company terminated its collaborative

agreement with Solvay Pharmaceuticals, Inc.

(later acquired by Abbott Products, Inc.) for TLANDO.

As part of the termination, the

Company reacquired the rights to the intellectual property from Abbott.

All obligations under the prior license agreement have

been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales.

Such royalties are limited to $1.0 million

in the first two calendar years following product launch, after which period there is not a cap on royalties and no maximum aggregate

If generic versions of any such product are introduced, then royalties are reduced by 50%.

The Company did not incur any

royalties during the three months ended March 31, 2020 and 2019.

March 29, 2012, the Company terminated its collaborative agreement with Solvay Pharmaceuticals, Inc.

(later acquired by

Abbott Products, Inc.) for TLANDO.

As part of the termination, the Company reacquired the rights to the intellectual property from

All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual

1% royalty on net sales.

Such royalties are limited to $1.0 million in the first two calendar years following product launch, after

which period there is not a cap on royalties and no maximum aggregate amount.

If generic versions of any such product are introduced,

then royalties are reduced by 50%.

The Company did not incur any royalties during the three and six months ended June 30, 2020

( b) Contract Research and Development

The Company has entered into agreements with various

contract organizations that conduct preclinical, clinical, analytical and manufacturing development work on behalf of the Company

as well as a number of independent contractors and primarily clinical researchers who serve as advisors to the Company.

incurred expenses of $1.9 million and $1.4 million, respectively, for the three months ended March 31, 2020 and 2019 under these

agreements and has recorded these expenses in research and development expenses.

On August 6, 2004, the Company assumed a non-cancelable

operating lease for office space and laboratory facilities in Salt Lake City, Utah.

On May 6, 2014, the Company modified and extended

the lease through February 28, 2018.

On February 8, 2018, the Company extended the lease through February 28, 2019, on January

2, 2019, the Company extended the lease through February 29, 2020, and on February 24, 2020, the Company extended the lease through

February 28, 2021.

minimum lease payments under non-cancelable operating leases as of March 31, 2020 are:

Company has entered into agreements with various contract organizations that conduct preclinical, clinical, analytical and manufacturing

development work on behalf of the Company as well as a number of independent contractors and primarily clinical researchers

who serve as advisors to the Company.

The Company incurred expenses of $1.2 million and $1.4 million, respectively, for the three

months ended June 30, 2020 and 2019 and $2.9 million and $2.8 million, respectively, for the six months ended June 30, 2020 and

2019 under these agreements and has recorded these expenses in research and development expenses.

August 6, 2004, the Company assumed a non-cancelable operating lease for office space and laboratory facilities in Salt Lake

On May 6, 2014, the Company modified and extended the lease through February 28, 2018 .

On February 8, 2018,

the Company extended the lease through February 28, 2019, on January 2, 2019, the Company extended the lease through February 29,

2020, and on February 24, 2020, the Company extended the lease through February 28, 2021.

minimum lease payments under non -cancelable operating leases as of June 30, 2020 are:

Year ending December 31:

1 unchanged sentence

The Company’s rent expense

was $83,000 and $81,000, respectively, for the three months ended March 31, 2020 and 2019.

was $83,000 for each of the three-month periods ended June 30, 2020 and 2019 and was $165,000 and $164,000, respectively, for the

six months ended June 30, 2020 and 2019.

(9) Stockholders’

4 unchanged sentences

The gross proceeds from the February 2020 Offering were approximately $6.0 million,

before deducting placement agent fees and other offering expenses of $347,000.

In the February 2020 Offering, the Company sold

10,084,034 Class A Units at an offering price of $0.595 per unit, with each Class A Unit consisting of one share of its common

stock and one-half of a common warrant to purchase one share of common stock at an exercise price of $0.53 per share of common

before deducting placement agent fees and other offering expenses of approximately $347,000.

In the February 2020 Offering, the

Company sold 10,084,034 Class A Units at an offering price of $0.595 per unit, with each Class A Unit consisting of one share of

its common stock and one-half of a common warrant to purchase one share of common stock at an exercise price of $0.53 per share

of common stock.

Additionally, the common stock warrants were immediately exercisable and expire on February 27, 2025.

By their terms, however,

the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such

exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving

effect to such exercise.

terms, however, the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially

own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding

after giving effect to such exercise.

On November 18, 2019, the Company completed a public

20 unchanged sentences

and warrant liability, respectively.

In March 2017, the Company entered into a Controlled

Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”), to

sell shares of our common stock, with aggregate gross sales proceeds of up to $20.0 million, from time to time, through an “at

the market”

(“ATM”), equity offering program, under which Cantor acts as sales agent.

The shares of common stock

to be sold under the Sales Agreement were originally sold and issued pursuant to the Company’s Registration Statement on

Form S-3 (File No.

333-199093) (the “Prior Form S-3”), which was previously declared effective by the Securities and

Exchange Commission, and the related prospectus and one or more prospectus supplements.

On October 13, 2017, the Company filed

a Form S-3 (File No.

333-220942) (the “New Form S-3”) to replace the Prior Form S-3.

The New Form S-3 has been

declared effective by the Securities and Exchange Commission, and the Prior Form S-3 has been terminated.

The New Form S-3

registered the sale of up to $150.0 million of any combination of common stock, preferred stock, debt securities, warrants and

units pursuant to a shelf registration statement.

The New Form S-3 also contains a prospectus pursuant to which we may sell,

from time to time, shares of our common stock having an aggregate offering price of up to $25.0 million through Cantor as our sales

agent, pursuant to the Sales Agreement.

On April 10, 2020, the Company filed a prospectus supplement in which the Company disclosed

that the Company was subject to the limitations of General Instruction I.B.6.

of Form S-3 with the amount of shares of our common

stock available for sale under the New Form S-3 limited to one-third of the aggregate market value of our common equity held by

non-affiliates of the Company over any rolling 12-month period and further limited the future amount sold under the Sales Agreement

to $5.0 million.

As of March 31, 2020, we had sold an aggregate of

6,635,535 shares at a weighted-average sales price of $3.02 per share under the ATM for aggregate gross proceeds of $20.0 million

and net proceeds of $19.3 million, after deducting sales agent commission and discounts and our other offering costs.

three months ended March 31, 2020, the Company did not sell any shares under the ATM.

During the three months ended March 31, 2019,

the Company sold an aggregate of 2,843,467 shares at a weighted-average sales price of $2.20 per share under the ATM for aggregate

gross proceeds of $6.2 million and $6.1 million in net proceeds.

March 2017, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with

Cantor Fitzgerald & Co.

(“Cantor”), to sell shares of our common stock, with aggregate gross sales proceeds of

up to $20.0 million, from time to time, through an “at the market”

(“ATM”), equity offering program, under

which Cantor acts as sales agent.

The shares of common stock to be sold under the Sales Agreement were originally sold and issued

pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-199093) (the “Prior Form S-3”), which

was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus

On October 13, 2017, the Company filed a Form S-3 (File No.

333-220942) (the “New Form S-3”) to replace

the Prior Form S-3.

The New Form S-3 has been declared effective by the Securities and Exchange Commission, and the Prior

Form S-3 has been terminated.

The New Form S-3 registered the sale of up to $150.0 million of any combination of common stock,

preferred stock, debt securities, warrants and units pursuant to a shelf registration statement.

The New Form S-3 also contains

a prospectus pursuant to which we may sell, from time to time, shares of our common stock having an aggregate offering price of

up to $25.0 million through Cantor as our sales agent, pursuant to the Sales Agreement.

On April 10, 2020, the Company filed a

prospectus supplement in which the Company disclosed that the Company was subject to the limitations of General Instruction I.B.6.

of Form S-3 with the amount of shares of our common stock available for sale under the New Form S-3 limited to one-third of the

aggregate market value of our common equity held by non-affiliates of the Company over any rolling 12-month period and further

limited the future amount sold under the Sales Agreement to $5.0 million.

of June 30, 2020, we had sold an aggregate of 6,635,535 shares at a weighted-average sales price of $3.02 per share

under the ATM for aggregate gross proceeds of $20.0 million and net proceeds of $19.3 million, after deducting sales agent

commission and discounts and our other offering costs.

During the three and six months ended June 30, 2020, the Company did

not sell any shares under the ATM.

During the three months ended June 30, 2019, the Company sold an aggregate of 149,037

shares at a weighted-average sales price of $1.95 per share under the ATM for aggregate gross proceeds of $290,000 and

$281,000 in net proceeds.

During the six months ended June 30, 2019, the Company sold an aggregate of 2,992,504

shares at a weighted-average sales price of $2.18 per share under the ATM for aggregate gross proceeds of $6.5 million and

$6.3 million in net proceeds.

(b) Rights Agreement

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acquiring beneficial ownership of 15% or more of the outstanding shares of common stock of the Company.

In general, in the event a person becomes an Acquiring

Person, then each Right not owned by such Acquiring Person will entitle its holder to purchase from the Company, at the Right’s

then current exercise price, in lieu of shares of Series A Junior Participating Preferred Stock, common stock of the Company with

a market value of twice the Purchase Price.

In addition, if after any person has become an Acquiring Person, (a) the Company is

acquired in a merger or other business combination, or (b) 50% or more of the Company’s assets, or assets accounting for

50% or more of its earning power, are sold, leased, exchanged or otherwise transferred (in one or more transactions), proper provision

shall be made so that each holder of a Right (other than the Acquiring Person, its affiliates and associates and certain transferees

thereof, whose Rights became void) shall thereafter have the right to purchase from the acquiring corporation, for the Purchase

Price, that number of shares of common stock of the acquiring corporation which at the time of such transaction would have a market

value of twice the Purchase Price.

general, in the event a person becomes an Acquiring Person, then each Right not owned by such Acquiring Person will entitle its

holder to purchase from the Company, at the Right’s then current exercise price, in lieu of shares of Series A Junior Participating

Preferred Stock, common stock of the Company with a market value of twice the Purchase Price.

In addition, if after any

person has become an Acquiring Person, (a) the Company is acquired in a merger or other business combination, or (b) 50% or more

of the Company’s assets, or assets accounting for 50% or more of its earning power, are sold, leased, exchanged or otherwise

transferred (in one or more transactions), proper provision shall be made so that each holder of a Right (other than the Acquiring

Person, its affiliates and associates and certain transferees thereof, whose Rights became void) shall thereafter have the right

to purchase from the acquiring corporation, for the Purchase Price, that number of shares of common stock of the acquiring corporation

which at the time of such transaction would have a market value of twice the Purchase Price.

The Company will be entitled to redeem the Rights

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The Company recognizes stock-based compensation

expense for grants of stock option awards, restricted stock units and restricted stock under the Company’s Incentive Plan

to employees and nonemployee members of the Company’s board of directors based on the grant-date fair value of those awards.

The grant-date fair value of an award is generally recognized as compensation expense over the award’s requisite service

In addition, the Company grants stock options to nonemployee consultants from time to time in exchange for services performed

for the Company.

The Company uses the Black-Scholes model to compute

the estimated fair value of stock option awards.

Using this model, fair value is calculated based on assumptions with respect to

(i) expected volatility of the Company’s common stock price, (ii) the periods of time over which employees and

members of the board of directors are expected to hold their options prior to exercise (expected term), (iii) expected dividend

yield on the Common Stock, and (iv) risk-free interest rates.

Stock-based compensation expense also includes an estimate,

which is made at the time of grant, of the number of awards that are expected to be forfeited.

This estimate is revised, if necessary,

in subsequent periods if actual forfeitures differ from those estimates.

Stock-based compensation cost that has been expensed in

the statements of operations amounted to $322,000 and $277,000, respectively, for the three months ended March 31, 2020 and 2019,

is allocated as follows:

Three Months Ended

Company recognizes stock-based compensation expense for grants of stock option awards, restricted stock units and restricted stock

under the Company’s Incentive Plan to employees and nonemployee members of the Company’s board of directors based on

the grant-date fair value of those awards.

The grant-date fair value of an award is generally recognized as compensation expense

over the award’s requisite service period.

In addition, the Company grants stock options to nonemployee consultants from

time to time in exchange for services performed for the Company .

Company uses the Black-Scholes model to compute the estimated fair value of stock option awards.

Using this model, fair value is

calculated based on assumptions with respect to (i) expected volatility of the Company’s common stock price, (ii) the

periods of time over which employees and members of the board of directors are expected to hold their options prior to exercise

(expected term), (iii) expected dividend yield on the Common Stock, and (iv) risk-free interest rates.

Stock-based compensation

expense also includes an estimate, which is made at the time of grant, of the number of awards that are expected to be forfeited.

This estimate is revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Stock-based compensation

cost that has been expensed in the statements of operations amounted to $ 465,000 and $446,000, respectively, for the three

months ended June 30, 2020 and 2019 and amounted to $787,000 and $723,000, respectively, for the six months ended June 30, 2020

and 2019, and is allocated as follows:

Months Ended June 30,

Research and development

General and administrative

The Company issued 626,000 stock options during

the three months ended March 31, 2020 and did not issue any options during the three months ended March 31, 2019.

The Company did

not issue any restricted stock units during the three months ended March 31, 2020 and 2019.

Company issued 113,000 stock options and 739,000 stock options, respectively, during the three and six months ended June

30, 2020 and issued 55,000 stock options during the three and six months ended June 30, 2019.

Key assumptions used in the determination of the

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and that have the contractual term to satisfy the performance condition, the contractual term was used.

Risk-Free Interest Rate :

The risk-free interest

rate used was based on the implied yield currently available on U.S.

Treasury issues with an equivalent remaining term.

Expected Dividend :

The expected dividend

assumption is based on management’s current expectation about the Company’s anticipated dividend policy.

does not anticipate declaring dividends in the foreseeable future.

Expected Volatility :

Since the Company did

not have sufficient trading history, the volatility factor was based on the average of similar public companies through August

When selecting similar companies, the Company considered the industry, stage of life cycle, size, and financial leverage.

Beginning in August 2014, the volatility factor is based on a combination of the Company's trading history since March 2014 and

the average of similar public companies.

Beginning in July 2017, the volatility factor is based solely on the Company’s trading

history since March 2014.

FASB ASC 718, Stock Compensation, requires

the Company to recognize compensation expense for the portion of options that are expected to vest.

Therefore, the Company applied

estimated forfeiture rates that were derived from historical employee termination behavior.

If the actual number of forfeitures

differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

As of March 31, 2020, there was $613,000 of total

unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock

That cost is expected to be recognized over a weighted average period of 1.83 years and will be adjusted for subsequent

changes in estimated forfeitures.

Additionally, as of March 31, 2020, there was $753,000 of total unrecognized compensation cost

related to unvested restricted stock units that have either time-based or performance vesting.

Interest Rate :

The risk-free interest rate used was based on the implied yield currently available on U.S.

issues with an equivalent remaining term.

The expected dividend assumption is based on management’s current expectation about the Company’s

anticipated dividend policy.

The Company does not anticipate declaring dividends in the foreseeable future.

Since the Company did not have sufficient trading history, the volatility factor was based on the average

of similar public companies through August 2014.

When selecting similar companies, the Company considered the industry, stage of

life cycle, size, and financial leverage.

Beginning in July 2017, the volatility factor is based solely on the Company’s

trading history since March 2014.

ASC 718, Stock Compensation, requires the Company to recognize compensation expense for the portion of options that are

expected to vest.

Therefore, the Company applied estimated forfeiture rates that were derived from historical employee termination

If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation

expense may be required in future periods.

of June 30, 2020, there was $556,000 of total unrecognized compensation cost related to unvested share-based compensation

arrangements granted under the Company’s stock option plan.

That cost is expected to be recognized over a weighted average

period of 1.68 years and will be adjusted for subsequent changes in estimated forfeitures.

Additionally, as of June 30, 2020, there

was $408,000 of total unrecognized compensation cost related to unvested restricted stock units that have either time-based or

performance vesting.

(d) Stock Option Plan

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the 2014 Plan from 2,471,906 to 3,221,906.

The board of directors, on an option-by-option basis, determines the number of shares,

exercise price, term, and vesting period for options granted.

Finally, upon receiving shareholder approval in June 2020, the 2014 Plan was further

amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted

under the 2014 Plan from 3,221,906 to 5,721,906.

The board of directors, on an option-by-option basis, determines the number of

shares, exercise price, term, and vesting period for options granted.

Options granted generally have a ten-year contractual life.

issues shares of common stock upon the exercise of options with the source of those shares of common stock being either newly issued

shares or shares held in treasury.

An aggregate of 3,221,906 shares are authorized for issuance under the 2014 Plan, with 36,263

shares remaining available for grant as of March 31, 2020.

A summary of stock option activity is as follows:

The Company issues shares of common stock upon the exercise of options with the source of those shares of common stock being either

newly issued shares or shares held in treasury.

An aggregate of 5,721,906 shares are authorized for issuance under the 2014 Plan,

with 2,491,332 shares remaining available for grant as of June 30, 2020.

summary of stock option activity is as follows:

Outstanding stock options

Weighted average exercise price

Weighted average

exercise price

Balance at December 31, 2019

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Options cancelled

Balance at March 31, 2020

The following table summarizes information about

stock options outstanding and exercisable at March 31, 2020:

Balance at June 30, 2020

Options exercisable at June 30, 2020

following table summarizes information about stock options outstanding and exercisable at June 30, 2020:

Options outstanding

Options exercisable

Weighted average remaining contractual life

The intrinsic value for stock options is defined

as the difference between the current market value and the exercise price.

There were no stock options exercised during the three

months ended March 31, 2020 and 2019.

intrinsic value for stock options is defined as the difference between the current market value and the exercise price.

no stock options exercised during the three and six months ended June 30, 2020 and 2019.

( e) Restricted Stock Units

A summary of restricted stock unit activity is as

Number of unvested restricted stock units

summary of restricted stock unit activity is as follows:

Balance at December 31, 2019

Balance at March 31, 2020

Balance at June 30, 2020

( f) Common Stock Warrants

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model with certain defined assumptions upon a fundamental transaction.

As of March 31, 2020, the

Company had 11,879,000 warrants outstanding from the November 2019 Offering to purchase an equal number of shares of common stock.

The fair value of these warrants on December 31, 2019 and March 31, 2020 was determined using the Black-Scholes option pricing

model with the following Level 3 inputs (as defined in the November 2019 Offering):

March 31, 2020

December 31, 2019

As of June 30, 2020, the

Company had 1,873,000 common stock warrants outstanding from the November 2019 Offering to purchase an equal number of shares of

common stock.

The fair value of these warrants on December 31, 2019 and June 30, 2020 was determined using the Black-Scholes option

pricing model with the following Level 3 inputs (as defined in the November 2019 Offering):

Expected life in years

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Dividend yield

During the three months

ended March 31, 2020, the Company recorded a non-cash loss of $1.1 million from the change in fair value of the November 2019 Offering

The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs:

During the three and six

months ended June 30, 2020, the Company recorded a non-cash loss of $2.1 million and $3.2 million, respectively, from the change

in fair value of the November 2019 Offering warrants.

The following table is a reconciliation of the warrant liability measured

at fair value using level 3 inputs:

Warrant Liability

Balance at December 31, 2019

Settlement of liabilty on warrant exercise

Change in fair value of common stock warrants

Balance at March 31, 2020

Balance at June 30, 2020

Additionally, in the February

2020 Offering, the Company issued 5,024,017 warrants.

However, the February 2020 Offering warrants do not provide the warrant holder

the option to receive an amount of cash equal to the Black-Scholes value of the warrants upon a fundamental transaction.

the Company has not recorded a warrant liability with respect to the warrants issued in the February 2020 Offering.

2020 Offering, the Company issued 5,024,017 common stock warrants.

However, the February 2020 Offering warrants do not provide

the warrant holder the option to receive an amount of cash equal to the Black-Scholes value of the warrants upon a fundamental

Therefore, the Company has not recorded a warrant liability with respect to the warrants issued in the February 2020

The following table summarizes

the number of warrants outstanding and the weighted average exercise price:

Weighted Average Exercise Price

the number of common stock warrants outstanding and the weighted average exercise price:

Weighted Average

Exercise Price

Outstanding at December 31, 2019

Balance at March 31, 2020

The following table summarizes information about

warrants outstanding at March 31, 2020:

(13,618,807 )

Balance at June 30, 2020

the three and six months ended June 30, 2020 , 13,497,807, and 13,618,807, respectively, common stock warrants to purchase

one share of our common stock were exercised resulting in proceeds of approximately $6.9 million in each of the three and six-month

periods ending June 30, 2020.

following table summarizes information about common stock warrants outstanding at June 30, 2020:

Warrants outstanding

Number exercisable

average remaining contractual life (Years)

Weighted average exercise price

Aggregate intrinsic value

Weighted average

remaining contractual

Weighted average

exercise price

Aggregate intrinsic

(10 ) Commitments and Contingencies

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when a particular contingency is probable and estimable.

On February 15, 2019, a

purported shareholder filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware, John Wajda,

derivatively on behalf of Lipocine Inc.

Mahesh Patel, et al., against certain of the Company’s current and former

officers and directors as well as the Company as a nominal defendant.

The complaint asserts claims for alleged breaches of

fiduciary duty and unjust enrichment arising out of the Company’s dissemination of purportedly false and misleading statements

relating to the filing of the New Drug Application (“NDA”) for TLANDO.

The relief sought in the complaint includes

unspecified damages, changes to the Company’s corporate governance procedures, equitable and/or injunctive relief, restitution,

and attorneys’

February 15, 2019, a purported shareholder filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware,

John Wajda, derivatively on behalf of Lipocine Inc.

Mahesh Patel, et al., against certain of the Company’s current

and former officers and directors as well as the Company as a nominal defendant.

The complaint asserts claims for alleged

breaches of fiduciary duty and unjust enrichment arising out of the Company’s dissemination of purportedly false and misleading

statements relating to the filing of the New Drug Application (“NDA”) for TLANDO.

The relief sought in the complaint

includes unspecified damages, changes to the Company’s corporate governance procedures, equitable and/or injunctive relief,

restitution, and attorneys’

On August 16, 2019, defendants filed a motion to dismiss the complaint.

Plaintiff’s response

to the motion to dismiss was due on October 18, 2019;

however rather than file an opposition brief, plaintiffs filed an amended

stockholder derivative complaint.

the plaintiff’s filed an amended stockholder derivative complaint.

Defendants’

motion to dismiss the amended complaint was filed on December 12, 2019;

plaintiff’s

response was filed on January 27, 2020 and defendants’

reply was filed on February 26, 2020.

The Company intends to vigorously

defend itself and its current and former officers and directors against these allegations and has not recorded a liability related

to this derivative complaint as the outcome is not probable nor can an estimate be made of loss, if any.

On April 2, 2019, the Company filed a lawsuit against

Clarus in the United States District Court for the District of Delaware alleging that Clarus’s JATENZO®

product infringes

six of Lipocine’s issued U.S.

motion to dismiss the amended complaint

was filed on December 12, 2019;

plaintiff’s response was filed on January 27, 2020 and defendants’

reply was filed

on February 26, 2020.

Oral arguments on the motion to dismiss were held on July 28, 2020.

On July 30, 2020, the court entered an

order dismissing the complaint in its entirety.

April 2, 2019, the Company filed a lawsuit against Clarus in the United States District Court for the District of Delaware

alleging that Clarus’s JATENZO®

product infringes six of Lipocine’s issued U.S.

and 6,923,988.

Clarus has answered

the complaint and asserted counterclaims of non-infringement and invalidity.

The Company answered Clarus’s counterclaims

on April 29, 2019.

The Court held a scheduling conference on August 15, 2019, a claim construction hearing on February 11, 2020

and scheduled a five-day jury trial beginning on February 8, 2021.

On February 11, 2020, the Company voluntarily dismissed allegations

of patent infringement for expired U.S.

6,569,463 and 6,923,988 in an effort to streamline the issues and associated

costs for dispute.

The parties are currently engaged in the fact discovery phase of the lawsuit.

Clarus has answered the complaint and asserted counterclaims of non-infringement

and invalidity.

The Company answered Clarus’s counterclaims on April 29, 2019.

The Court held a scheduling conference

on August 15, 2019, a claim construction hearing on February 11, 2020 and scheduled a five-day jury trial beginning on February

On February 11, 2020, the Company voluntarily dismissed allegations of patent infringement for expired U.S.

6,569,463 and 6,923,988 in an effort to streamline the issues and associated costs for dispute.

The parties are currently engaged

in the fact discovery phase of the lawsuit.

On November 14, 2019, the Company and certain of

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payable by the Company under our policy is $1.25 million.

The Company intends to vigorously defend itself and its current and former

officers and directors against these allegations and has not recorded a liability related to this shareholder class action lawsuit

as the outcome is not probable nor can an estimate be made of loss, if any.

Beyond John Wajda, derivatively on behalf of Lipocine

The Company filed a motion to dismiss the class action lawsuit on July

Further, the Company intends to vigorously defend itself and its current and former officers and directors against these

allegations and has not recorded a liability related to this shareholder class action lawsuit as the outcome is not probable nor

can an estimate be made of loss, if any.

John Wajda, derivatively on behalf of Lipocine Inc.

Mahesh Patel, et al.

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Lipocine Inc.

et al ., 2:19-cv-00906-PM, management does not currently

believe that any other matter, individually or in the aggregate, will have a material adverse effect on our financial condition,

liquidity or results of operations.

et al ., 2:19-cv-00906-PM, management does not currently believe that any other matter, individually or in the aggregate, will

have a material adverse effect on our financial condition, liquidity or results of operations.

Guarantees and Indemnifications

5 unchanged sentences

( 11) Spriaso, LLC

On July 23, 2013, the Company entered into an

assignment/license and a services agreement with Spriaso, a related-party that is majority-owned by certain current and former

directors of Lipocine Inc.

July 23, 2013, the Company entered into an assignment/license and a services agreement with Spriaso, a related-party that

is majority-owned by certain current and former directors of Lipocine Inc.

and their affiliates.

Under the license agreement, the Company assigned and transferred to Spriaso all

of the Company’s rights, title and interest in its intellectual property to develop products for the cough and cold field.

In addition, Spriaso received all rights and obligations under the Company’s product development agreement with a third-party.

In exchange, the Company will receive a royalty of 20 percent of the net proceeds received by Spriaso, up to a maximum of $10.0

Spriaso also granted back to the Company an exclusive license to such intellectual property to develop products outside

of the cough and cold field.

Under the service agreement, the Company provided facilities and up to 10 percent of the services

of certain employees to Spriaso for a period of 18 months which expired January 23, 2015.

Effective January 23, 2015, the Company

entered into an amended services agreement with Spriaso in which the Company agreed to continue providing up to 10 percent of the

services of certain employees to Spriaso at a rate of $230/hour for a period of six months.

The agreement was further amended on

July 23, 2015, on January 23, 2016, on July 23, 2016, on January 23, 2017, on July 23, 2017, on January 23, 2018, on July 23, 2018

and again on January 23, 2019 to extend the term of the agreement for an additional six months.

The agreement was further amended

on July 23, 2019 to extend the term of the agreement for an additional twelve months.

The agreement may be extended upon written

agreement of Spriaso and the Company.

The Company did not receive any reimbursements during the three months ended March 31, 2020

and 2019, respectively.

Additionally, the Company did not receive any royalty payments from Spriaso during the three month periods

ended March 31, 2020 and 2019, respectively.

Spriaso filed its first NDA and as an affiliated entity of the Company, it used up

the one-time waiver for user fees for a small business submitting its first human drug application to the FDA.

Spriaso is considered

a variable interest entity under the FASB ASC Topic 810-10, Consolidations , however the Company is not the primary beneficiary

and has therefore not consolidated Spriaso.

Under the license agreement, the

Company assigned and transferred to Spriaso all of the Company’s rights, title and interest in its intellectual property

to develop products for the cough and cold field.

In addition, Spriaso received all rights and obligations under the Company’s

product development agreement with a third-party.

In exchange, the Company will receive a royalty of 20 percent of the net proceeds

received by Spriaso, up to a maximum of $10.0 million.

Spriaso also granted back to the Company an exclusive license to such intellectual

property to develop products outside of the cough and cold field.

Under the service agreement, the Company provided facilities

and up to 10 percent of the services of certain employees to Spriaso for a period of 18 months which expired January 23, 2015.

Effective January 23, 2015, the Company entered into an amended services agreement with Spriaso in which the Company agreed to

continue providing up to 10 percent of the services of certain employees to Spriaso at a rate of $230/hour for a period of six

The agreement was further amended on July 23, 2015, on January 23, 2016, on July 23, 2016, on January 23, 2017, on July

23, 2017 , on January 23, 2018, on July 23, 2018 and again on January 23, 2019 to extend the term of the agreement for an

additional six months.

The agreement was further amended on July 23, 2019 and again on July 23, 2020 to extend the term of the

agreement for an additional twelve months.

The agreement may be extended upon written agreement of Spriaso and the Company.

Company did not receive any reimbursements during the three and six months ended June 30, 2020 and 2019, respectively.

Additionally,

the Company did not receive any royalty payments from Spriaso during the three and six months ended June 30, 2020 and 2019, respectively.

Spriaso filed its first NDA and as an affiliated entity of the Company, it used up the one-time waiver for user fees for a small

business submitting its first human drug application to the FDA.

Spriaso is considered a variable interest entity under the FASB

ASC Topic 810-10, Consolidations , however the Company is not the primary beneficiary and has therefore not consolidated

(1 2) Recent Accounting Pronouncements

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(1 3) Subsequent Events

On April 21, 2020, the Company was

granted a loan (the “Loan”) from SVB in the aggregate amount of $233,537, pursuant to the Paycheck Protection Program

(the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the form of

a Note dated April 21, 2020 issued by the Borrower, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable

monthly commencing on November 21, 2020.

The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment

Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage

payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

The Company intends to use

the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they

are used for qualifying expenses as described in the CARES Act.

Subsequent to June 30, 2020, the

Company has received an aggregate of approximately $688,000 in cash proceeds from the exercises of warrants to purchase 1,375,344

shares of the Company’s common stock.

Subsequent to June 30, 2020, the

Company has sold an aggregate of 2,830,000 shares at a weighted-average sales price of $1.43 per share under the ATM for aggregate

gross proceeds of $4.0 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial

condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements

and the related notes thereto and other financial information included elsewhere in this report.

For additional context with which

to understand our financial condition and results of operations, see the management’s discussion and analysis included in

our Form 10-K, filed with the SEC on March 13, 2020 as well as the financial statements and related notes contained therein.

following discussion of our financial condition and results of operations should be read in conjunction with our unaudited

condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in

For additional context with which to understand our financial condition and results of operations, see the management’s

discussion and analysis included in our Form 10-K, filed with the SEC on March 13, 2020 as well as the financial statements and

related notes contained therein.

As used in the discussion below, “we,”

2 unchanged sentences

refers to Lipocine.

Forward-Looking Statements

This section and other parts of this report

contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E

of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.

Forward-looking statements provide current

expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical

or current fact.

Forward-looking statements may refer to such matters as products, product benefits, pre-clinical and clinical

development timelines, clinical and regulatory expectations and plans, expected responses to regulatory actions, anticipated financial

performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market

performance, expected research and development and other expenses, future expectations for liquidity and capital resources needs

and similar matters.

Such words as “may”, “will”, “expect”, “continue”, “estimate”,

“project”, and “intend”

and similar terms and expressions are intended to identify forward looking statements.

Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results

discussed in the forward-looking statements.

Factors that might cause such differences include, but are not limited to, those discussed

in Part II, Item 1A (Risk Factors) of this Form 10-Q or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with

the SEC on March 13, 2020.

Except as required by applicable law, we assume no obligation to revise or update any forward-looking

statements for any reason.

Forward -Looking

section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act

of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement

that does not directly relate to any historical or current fact.

Forward-looking statements may refer to such matters as products,

product benefits, pre-clinical and clinical development timelines, clinical and regulatory expectations and plans, expected

responses to regulatory actions, anticipated financial performance, future revenues or earnings, business prospects, projected

ventures, new products and services, anticipated market performance, expected research and development and other expenses, future

expectations for liquidity and capital resources needs and similar matters.

Such words as “may”, “will”,

“expect”, “continue”, “estimate”, “project”, and “intend”

terms and expressions are intended to identify forward looking statements.

Forward-looking statements are not guarantees of future

performance and our actual results may differ significantly from the results discussed in the forward-looking statements.

that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A (Risk Factors) of our

Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 7, 2020 or Item 1A (Risk Factors) of this Form 10-Q

or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 13, 2020.

Except as required by applicable

law, we assume no obligation to revise or update any forward-looking statements for any reason.

Overview of Our Business

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interactions that limit bioavailability.

Our most advanced product candidate, TLANDO™,

is an oral testosterone replacement therapy (“TRT”).

On November 8, 2019 we received a Complete Response Letter ("CRL")

from the United States Food and Drug Administration ("FDA") regarding our New Drug Application ("NDA") filed

in May 2019 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known

as hypogonadism.

A CRL is a communication from the FDA that informs companies that an application cannot be approved in its present

The CRL identified one deficiency stating the efficacy trial did not meet the three secondary endpoints for maximal testosterone

concentrations (“Cmax”).

The CRL did not identify any specific issues relating to chemistry, manufacturing and controls

(“CMC”) of TLANDO.

We had our Post Action meeting with the FDA in January 2020 and discussed a potential path forward

for the approval of TLANDO.

Based on the Post Action meeting and written feedback, the FDA indicated our approach to addressing

the deficiency through the reanalysis of existing data in accordance with FDA feedback appears to be a reasonable path forward.

The FDA requested that the information generated by the reanalysis be submitted as part of an NDA resubmission with a six-month

Prescription Drug User Fee Act (“PDUFA”) clock.

We resubmitted the NDA on February 28, 2020 and it has been assigned

a PDUFA date of August 28, 2020.

most advanced product candidate, TLANDO™, is an oral testosterone replacement therapy (“TRT”).

On November 8,

2019 we received a Complete Response Letter ("CRL") from the United States Food and Drug Administration ("FDA")

regarding our New Drug Application ("NDA") filed in May 2019 for TLANDO as a TRT in adult males for conditions associated

with a deficiency of endogenous testosterone, also known as hypogonadism.

A CRL is a communication from the FDA that informs companies

that an application cannot be approved in its present form.

The CRL identified one deficiency stating the efficacy trial did not

meet the three secondary endpoints for maximal testosterone concentrations (“Cmax”).

The CRL did not identify any

specific issues relating to chemistry, manufacturing and controls (“CMC”) of TLANDO.

We had our Post Action meeting

with the FDA in January 2020 and discussed a potential path forward for the approval of TLANDO.

Based on the Post Action

meeting and written feedback, the FDA indicated our approach to addressing the deficiency through the reanalysis of existing data

in accordance with FDA feedback appears to be a reasonable path forward.

The FDA requested that the information generated by the

reanalysis be submitted as part of an NDA resubmission with a six-month Prescription Drug User Fee Act (“PDUFA”) clock.

We resubmitted the NDA on February 28, 2020 and it has been assigned a PDUFA date of August 28, 2020.

Additional pipeline candidates include

LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU for the treatment of pre-cirrhotic non-alcoholic steatohepatitis

LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU for the treatment of non-cirrhotic non-alcoholic steatohepatitis

(“NASH”), TLANDO XR, a next generation oral TRT product with the potential for once daily dosing which has completed

Phase 2 testing, LPCN 1148, an oral prodrug of bioidentical testosterone for the treatment of NASH cirrhosis, and LPCN 1107, potentially

Phase 2 testing, LPCN 1148, an oral prodrug of bioidentical testosterone for the treatment of cirrhosis, and LPCN 1107, potentially

the first oral hydroxyprogesterone caproate product indicated for the prevention of recurrent preterm birth, which has completed

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using magnetic resonance imaging, proton density fat fraction (“MRI-PDFF”) technique.

To date, we have funded our operations primarily

through the sale of equity securities, debt and convertible debt and through up-front payments, research funding and royalty and

milestone payments from our license and collaboration arrangements.

We have not generated any revenues from product sales and we

do not expect to generate revenue from product sales unless and until we obtain regulatory approval of TLANDO or other products.

We have incurred losses in most years since

our inception.

As of March 31, 2020, we had an accumulated deficit of $156.8 million.

Income and losses fluctuate year to year,

primarily depending on the nature and timing of research and development occurring on our product candidates.

Our net loss was

$5.8 million for the three months ended March 31, 2020, compared to $3.2 million for the three months ended March 31, 2019.

Substantially

all of our operating losses resulted from expenses incurred in connection with our product candidate development programs, our

research activities and general and administrative costs associated with our operations.

To date, we have

funded our operations primarily through the sale of equity securities, debt and convertible debt and through up-front payments,

research funding and royalty and milestone payments from our license and collaboration arrangements.

We have not generated any

revenues from product sales and we do not expect to generate revenue from product sales unless and until we obtain regulatory approval

of TLANDO or other products.

have incurred losses in most years since our inception.

As of June 30, 2020, we had an accumulated deficit of $163 million.

Income and losses fluctuate year to year, primarily depending on the nature and timing of research and development occurring on

our product candidates.

Our net loss was $12.1 million for the six months ended June 30, 2020 and $6.7 million for the six months

ended June 30, 2019.

Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate

development programs, our research activities and general and administrative costs, including on-going litigation activities, associated

with our operations.

We expect to continue to incur significant

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maintain, expand and protect our intellectual property portfolio;

provide general and administrative support for our operations, including on-going litigation.

provide general and administrative support for our operations ,

including on-going litigation.

To fund future long-term operations, we

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Our current portfolio includes

our most advanced product candidate, TLANDO, an oral testosterone replacement therapy product candidate, which received a CRL on

November 8, 2019.

Additionally, we are in the process of establishing our pipeline of other clinical candidates including an oral

androgen therapy for the treatment of pre-cirrhotic NASH, LPCN 1144, a next-generation potential once daily oral testosterone replacement

therapy, TLANDO XR, an androgen therapy for the treatment of NASH cirrhosis, LPCN 1148, and an oral therapy for the prevention

our most advanced product candidate, TLANDO, an oral testosterone replacement therapy product candidate, which has a FDA PDUFA

date of August 28, 2020 .

Additionally, we are in the process of establishing our pipeline of other clinical candidates including

an oral androgen therapy for the treatment of non-cirrhotic NASH, LPCN 1144, a next-generation potential once daily oral testosterone

replacement therapy, TLANDO XR, an androgen therapy for the treatment of cirrhosis, LPCN 1148, and an oral therapy for the prevention

of preterm birth, LPCN 1107.

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NDA PDUFA Outcome

On November 8, 2019 we received

a CRL from the FDA regarding our NDA filed in May 2019 for TLANDO as a TRT in adult males for conditions associated with a deficiency

of endogenous testosterone, also known as hypogonadism.

The CRL identified one deficiency stating the efficacy trial did not meet

the three Cmax secondary endpoints.

The CRL does not identify any specific issues relating to CMC of TLANDO.

We had a Post Action

meeting with the FDA in January 2020 and discussed a potential path forward for the approval of TLANDO.

Based on the Post Action

meeting and written feedback, the FDA indicated our approach to addressing the deficiency through the reanalysis of existing data

in accordance with FDA feedback appears to be a reasonable path forward.

The FDA requested that the information generated by the

reanalysis be submitted as part of an NDA resubmission with a six-month PDUFA clock.

We resubmitted the NDA on February 28, 2020

and it has been assigned a PDUFA date of August 28, 2020.

Previously, we have received two other CRL’s from the FDA on TLANDO

NDA submissions.

The first CRL was received on June 28, 2016 and the second CRL was received on May 8, 2018.

November 8, 2019 we received a CRL from the FDA regarding our NDA filed in May 2019 for TLANDO as a TRT in adult males for conditions

associated with a deficiency of endogenous testosterone, also known as hypogonadism.

The CRL identified one deficiency stating

the efficacy trial did not meet the three Cmax secondary endpoints.

The CRL does not identify any specific issues relating to CMC

We had a Post Action meeting with the FDA in January 2020 and discussed a potential path forward for the approval of

Based on the Post Action meeting and written feedback, the FDA indicated our approach to addressing the deficiency through

the reanalysis of existing data in accordance with FDA feedback appears to be a reasonable path forward.

The FDA requested that

the information generated by the reanalysis be submitted as part of an NDA resubmission with a six-month PDUFA clock.

We resubmitted

the NDA on February 28, 2020 and it has been assigned a PDUFA date of August 28, 2020.

Previously, we have received two

other CRL’s from the FDA on TLANDO NDA submissions.

The first CRL was received on June 28, 2016 and the second CRL was received

on May 8, 2018.

We are exploring the possibility of licensing TLANDO to a third party should it receive approval, although no licensing

agreement has been entered into by us yet.

We are unable to estimate whether or when we will be able to out-license TLANDO, should

it be approved.

Additionally, the timing of the potential commercial launch of TLANDO should it receive approval, is uncertain.

The timing of any commercial launch of TLANDO is contingent upon numerous factors including FDA approval, the availability of commercial

launch supplies, the impact of COVID-19, our financial resources and our ability to license TLANDO to a third party or build out

a commercial sales and marketing team/organization.

Results from the ABPM Study

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weighted average 24-hour ABPM data at both baseline and at the end of the study.

receiving treatment in the ABPM Study had following baseline parameters:

Subjects receiving treatment in the ABPM Study had the following baseline parameters:

Baseline Parameters

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24h DBP (mm Hg)

= Standard Deviation, BMI = Body Mass Index, SBP = Systolic Blood Pressure, DBP = Diastolic Blood Pressure

SD = Standard Deviation, BMI = Body Mass

Index, SBP = Systolic Blood Pressure, DBP = Diastolic Blood Pressure

Additionally, among the subjects enrolled

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1.20 (0.31, 2.08)

= Confidence Interval, SBP = Systolic Blood Pressure, DBP = Diastolic Blood Pressure

the subjects (n=25) with baseline 24-hour average systolic blood pressure (“SBP”) greater than 140 mm Hg, 32% of the

subjects were less than or equal to 140 mm Hg at the end of study.

Additionally, of the subjects (n=93) with baseline 24-hour

average SBP of less than or equal to 140 mm Hg, 9.7% of the subjects were greater than 140 mm Hg at the end of study.

CI = Confidence Interval, SBP = Systolic

Blood Pressure, DBP = Diastolic Blood Pressure

Of the subjects (n=25) with baseline

24-hour average systolic blood pressure (“SBP”) greater than 140 mm Hg, 32% of the subjects were less than or equal

to 140 mm Hg at the end of study.

Additionally, of the subjects (n=93) with baseline 24-hour average SBP of less than or equal

to 140 mm Hg, 9.7% of the subjects were greater than 140 mm Hg at the end of study.

Results from the Definitive Phlebotomy Study

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violator, exceeded the 2500 ng/dL limit independent of per dose or per day dose analyses.

Through reanalysis of Cmax data in the

DV study, we resubmitted the NDA to the FDA on February 28, 2020 and have a PDUFA date of August 28, 2020.

The DF study SS met all Cmax thresholds in per dose

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TLANDO was well tolerated during 52 weeks of dosing;

Overall AE profile for TLANDO was comparable to the active control;

Overall AE profile for TLANDO was comparable to the active

Cardiac AE profiles were consistent between treatment groups and none of the observed cardiac AEs

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has been launched and is commercially available.

Additionally on October 2, 2019, Clarus filed a Citizens Petition with the FDA

requesting the FDA establish clear, written guidance regarding the safety and efficacy standards required for oral testosterone

The Citizens Petition also requested that the FDA not approve any oral testosterone drugs until the written guidance is

provided by the FDA.

On February 27, 2020, the FDA denied Clarus’

Citizen Petition.

An Oral Prodrug of Bioidentical Testosterone

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We are currently evaluating LPCN

1144, an oral prodrug of bioidentical testosterone comprised of TU, for the treatment of pre-cirrhotic NASH.

1144, an oral prodrug of bioidentical testosterone comprised of TU, for the treatment of non-cirrhotic NASH.

NASH is a more advanced

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arm) with a 1:1:1 randomization ratio.

We currently expect top-line liver fat reduction data in the fourth quarter of 2020 as measured

by MRI-PDFF at 12 weeks, followed by 36-week biopsy data which is expected by the second quarter of 2021.

The projected timing

of primary endpoint results as well as biopsy data is subject to potential delays as a result of on-going COVID-19 quarantine measures.

A Next-Generation Long-Acting Oral Product

Candidate for TRT

We currently expect top-line liver fat reduction data by the end of 2020 as measured by

MRI-PDFF at 12 weeks, followed by 36-week biopsy data which is expected by the end of the second quarter of 2021.

Enrollment in

the LiFT Phase 2 clinical study has been impacted by COVID-19 quarantine measures and may be further impacted which would

result in delays to the projected timing of primary endpoint results as well as biopsy results.

Further due to COVID-19, we are

uncertain as to the actual number of subjects that will be enrolled in the clinical study and we believe that subject drop-out

rates and the number of subjects that ultimately complete the clinical study could be negatively impacted by COVID-19.

A Next-Generation Long-Acting Oral Product Candidate for TRT

TLANDO XR is a next-generation,

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with the FDA to discuss these pre-clinical results and to discuss the Phase 3 clinical study and path forward for TLANDO XR.

on the results of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we are designing a Phase

3 protocol for TLANDO XR and will solicit FDA feedback once the protocol is complete.

Additionally, the FDA previously requested

that a food effect study be completed, and that ABPM be included as part of the Phase 3 clinical study.

Based on our capital resources

and the clinical status of our product candidates, we plan to primarily focus our efforts in 2020 on TLANDO and LPCN 1144.

not anticipate the initiation of a Phase 3 study with TLANDO XR to occur in 2020 unless and until additional capital is secured

or the product candidate is out-licensed.

We are exploring the possibility of licensing TLANDO XR to a third party, although no

licensing agreement has been entered into by the Company

on the results of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we have designed a Phase

3 protocol for TLANDO XR and have solicited FDA feedback.

Based on initial FDA feedback, we expect the Phase 3 clinical trial design

to follow the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”)

guidelines and will include a three-month efficacy treatment period and a one-year safety component for up to 100 subjects.

continue to refine the Phase 3 protocol and plan to request FDA approval of the protocol once it is finalized.

Additionally, the

FDA previously requested that a food effect study be completed, and that ABPM be included as part of the Phase 3 clinical study.

Based on our capital resources and the clinical status of our product candidates, we plan to primarily focus our efforts in 2020

on TLANDO and LPCN 1144.

We do not anticipate the initiation of a Phase 3 study with TLANDO XR to occur in 2020 unless and until

additional capital is secured or the product candidate is out-licensed.

We are exploring the possibility of licensing TLANDO XR

to a third party, although no licensing agreement has been entered into by the Company.

An Oral Prodrug of Bioidentical Testosterone Product

Candidate for the Treatment of NASH in Cirrhotic patients

NASH cirrhosis is an end stage NAFLD for which there is no FDA

approved drug treatment.

Liver cirrhosis is estimated to affect in excess of 600,000 Americans, with men affected at twice the

rate of women, and results in approximately 45,000 deaths every year.

Due to a lack of available organs, only a third of waitlisted

patients are getting liver transplants, and patient that do receive a transplant are increasingly being described as frail.

testosterone affects up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including ascites,

hepatic encephalopathy, and clinically significant portal hypertension.

Candidate for the Treatment of Cirrhosis

Cirrhosis is an end stage NAFLD for which there is no FDA approved

drug treatment.

Liver cirrhosis is estimated to affect in excess of 600,000 Americans, with men affected at twice the rate of women,

and results in approximately 45,000 deaths every year.

Due to a lack of available organs, only a third of waitlisted patients are

getting liver transplants, and patients that do receive a transplant are increasingly being described as frail.

Low testosterone

affects up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including ascites, hepatic encephalopathy,

and clinically significant portal hypertension.

We are currently formulating plans

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Financial Operations Overview

To date, we have not generated any revenues

from product sales and do not expect to do so until one of our product candidates receives approval from the FDA.

Revenues to date

have been generated substantially from license fees, royalty and milestone payments and research support from our licensees.

our inception through March 31, 2020, we have generated $28.1 million in revenue under our various license and collaboration arrangements

and from government grants.

We may never generate revenues from TLANDO or any of our other clinical or preclinical development

programs or licensed products as we may never succeed in obtaining regulatory approval or commercializing any of these product

date, we have not generated any revenues from product sales and do not expect to do so until one of our product candidates receives

approval from the FDA.

Revenues to date have been generated substantially from license fees, royalty and milestone payments

and research support from our licensees.

Since our inception through June 30, 2020, we have generated $28.1 million in revenue

under our various license and collaboration arrangements and from government grants.

We may never generate revenues from TLANDO

or any of our other clinical or preclinical development programs or licensed products as we may never succeed in obtaining regulatory

approval or commercializing any of these product candidates.

Research and Development Expenses

Research and development expenses consist

primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to external service providers

such as contract research organizations and contract manufacturing organizations, contractual obligations for clinical development,

clinical sites, manufacturing and scale-up for late-stage clinical trials, formulation of clinical drug supplies, and expenses

associated with regulatory submissions.

Research and development expenses also include an allocation of indirect costs, such as

those for facilities, office expense, travel, and depreciation of equipment based on the ratio of direct labor hours for research

and development personnel to total direct labor hours for all personnel.

We expense research and development expenses as incurred.

Since our inception, we have spent approximately $114 million in research and development expenses through March 31, 2020.

As a result of the CRL we received from

the FDA on TLANDO’s NDA, we are uncertain as to whether we will incur additional research and developments costs for TLANDO.

On January 16, 2020, we met with the FDA in a Post Action Meeting to review our CRL, and based on these discussions, we do not

expect to conduct any additional clinical trials with TLANDO for TRT However, any further expenditures, if needed, are subject

to numerous uncertainties regarding timing and cost to completion.

and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid

to external service providers such as contract research organizations and contract manufacturing organizations, contractual obligations

for clinical development, clinical sites, manufacturing and scale-up for late-stage clinical trials, formulation of clinical drug

supplies, and expenses associated with regulatory submissions.

Research and development expenses also include an allocation of

indirect costs, such as those for facilities, office expense, travel, and depreciation of equipment based on the ratio of direct

labor hours for research and development personnel to total direct labor hours for all personnel.

We expense research and development

expenses as incurred.

Since our inception, we have spent approximately $ 116 million in research and development expenses

through June 30, 2020.

a result of the CRL we received from the FDA on TLANDO’s NDA, we are uncertain as to whether we will incur additional research

and developments costs for TLANDO.

On January 16, 2020, we met with the FDA in a Post Action Meeting to review our CRL,

and based on these discussions, we do not expect to conduct any additional clinical trials with TLANDO for TRT.

However, any further

expenditures, if needed, are subject to numerous uncertainties regarding timing and cost to completion.

We expect to continue to incur significant

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table summarizes our research and development expenses:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

External service provider costs:

TLANDO XR (LPCN 1111)

Total external service provider costs

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We expect research and development expenses

to increase in the future as we conduct future clinical studies, including the LiFT Phase 2 clinical study with LPCN 1144

and as we manufacture commercial supplies of TLANDO pre-approval, and when and if we conduct Phase 2 clinical studies with LPCN

1148 and Phase 3 clinical studies with TLANDO XR and LPCN 1107.

However, if we are unable to raise additional capital, we may need

to reduce research and development expenses in order to extend our ability to continue as a going concern.

to increase in the future as we complete on-going clinical studies, including the LiFT Phase 2 clinical study with LPCN

1144, as we conduct future clinical studies, including when and if we conduct Phase 2 clinical studies with LPCN 1148 and Phase

3 clinical studies with TLANDO XR and LPCN 1107, and as we manufacture commercial supplies of TLANDO pre-approval.

we are unable to raise additional capital, we may need to reduce research and development expenses in order to extend our ability

to continue as a going concern.

General and Administrative Expenses

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intellectual property-related claims, including our on-going patent interference and patent infringement lawsuits against Clarus.

expect that general and administrative expenses will increase in the future as we incur additional legal fees in the on-going

court cases with Clarus.

Additional areas that may see increases as we mature as a public company include legal and consulting

fees, accounting and audit fees, director fees, increased directors’

We expect that general and administrative

expenses will increase in the future as we incur additional legal fees in the on-going court cases with Clarus.

Additional areas

that may see increases as we mature as a public company include legal and consulting fees, accounting and audit fees, director

fees, increased directors’

and officers’

insurance premiums, fees for investor

relations services and enhanced business and accounting systems, litigation costs, professional fees and other costs.

if we are unable to raise additional capital, we may need to reduce general and administrative expenses in order to extend our

ability to continue as a going concern.

insurance premiums, fees for investor relations services and enhanced business

and accounting systems, litigation costs, professional fees and other costs.

However, if we are unable to raise additional capital,

we may need to reduce general and administrative expenses in order to extend our ability to continue as a going concern.

Other Expense (Income), Net

Other expense (income), net consists primarily

of interest income earned on our cash, cash equivalents and marketable investment securities and interest expense incurred on our

outstanding Loan and Security Agreement.

expense (income), net consists primarily of interest income earned on our cash, cash equivalents and marketable investment

securities, interest expense incurred on our outstanding Loan and Security Agreement and

losses (gains) on our warrant liability.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and

following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31,

of the Three Months Ended June 30, 2020 and 2019

following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Research and development expenses

General and administrative expenses

Other expense, net

Unrealized loss on warrant liability

Interest and investment income

Interest expense

Loss on warrant liability

Research and Development Expenses

increase in research and development expenses during the three months ended June 30, 2020 was primarily due to increased

contract research organization and outside consulting and manufacturing costs related to the LPCN 1144 LiFT Phase 2 clinical

study in NASH subjects of $965,000, as well as a $213,000 increase in personnel expense.

These increases were offset by a $727,000

decrease in costs incurred in conjunction with TLANDO with the completion of the ABPM study in the first half of 2019, a $96,000

decrease in costs for TLANDO XR, a $25,000 decrease in contract manufacturing costs for LPCN 1107 and a $25,000 decrease in other

research and development expenses.

General and Administrative Expenses

increase in general and administrative expenses during the three months ended June 30, 2020 was primarily due to a $613,000

increase in legal costs associated with the following activities:

lawsuit filed against Clarus Therapeutics Inc.

for patent infringement

in April 2019, interference cases filed against Clarus and the on-going class action lawsuit defense.

In addition, there was a

$48,000 increase in personnel costs, offset by a $41,000 decrease marketing expense, a $34,000 decrease in administrative travel

expenses and a $19,000 decrease in other general and administrative expenses.

Interest and Investment Income

decrease in interest and investment income during the three months ended June 30, 2020 was due to lower interest rates and

lower average balances of marketable securities in 2020 compared to 2019.

Interest Expense

decrease in interest expense during the three months ended June 30, 2020 was due to a decrease in interest expense on our

Loan and Security Agreement with SVB, as a result of lower principal balances and lower interest rates in 2020 compared to 2019.

on Warrant Liability

We recorded a $2.1 million loss on warrant

liability during the three months ended June 30, 2020 related to the change in the fair value of outstanding common stock warrants

issued in the November 2019 Offering.

We did not record a similar change during the three months ended June 30, 2019 as there were

no similar warrants outstanding during this period.

The loss in 2020 was mainly attributable to an increase in the value of both

warrants exercised during the period and warrants outstanding as of June 30, 2020 as compared to March 31, 2020 due to an increase

in our stock price.

There were 10,006,000 common stock warrants exercised during the three months ended June 30, 2020.

are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option

to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option

pricing model with certain defined assumptions upon a change of control.

The warrant liability will continue to fluctuate in the

future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility

of our stock price, and the risk-free interest rate and the number of common stock warrants outstanding.

of the Six Months Ended June 30, 2020 and 2019

following table summarizes our results of operations for the six months ended June 30, 2020 and 2019:

Six months ended June 30,

Research and development expenses

General and administrative expenses

Interest and investment income

Interest expense

Loss on warrant liability

Income tax expense

Research and Development Expenses

The increase in research and development

expenses during the three months ended March 31, 2020 was primarily due to increased contract research organization and outside

consulting and manufacturing costs for the LPCN 1144 LiFT Phase 2 clinical study in NASH subjects of $1.7 million, a $50,000

increase in costs for TLANDO XR and a $56,000 increase in personnel expense.

increase in research and development expenses during the six months ended June 30, 2020 was primarily due to increased contract

research organization and outside consulting and manufacturing costs related to the LPCN 1144 LiFT Phase 2 clinical study

in NASH subjects of $2.6 million and a $270,000 increase in personnel expense.

These increases were offset by a $1.9 million decrease

in costs incurred in conjunction with TLANDO with the completion of the ABPM study and the filing of the NDA in the first half

of 2019 and a $12,000 decrease in contract manufacturing costs for LPCN 1107.

in costs incurred in conjunction with TLANDO with the completion of the ABPM study in the first half of 2019, a $46,000 decrease

in costs for TLANDO XR, a $37,000 decrease in contract manufacturing costs for LPCN 1107 and a $20,000 decrease in other research

and development expenses.

General and Administrative Expenses

The increase in general and administrative

expenses during the three months ended March 31, 2020 was primarily due to a $1.0 million increase in legal costs associated with

the lawsuit filed against Clarus for patent infringement in April 2019 in addition to costs associated with interference cases

filed against Clarus, offset by a $59,000 decrease in personnel costs and a $26,000 decrease in administrative travel expenses.

Other Expense, Net

The decrease in other expense, net, during

the three months ended March 31, 2020 was due to a $90,000 decrease in interest expense on our Loan and Security Agreement with

SVB, as a result of lower principal balances and lower interest rates in 2020 compared to 2019, which was offset by a $65,000 decrease

in interest income earned during the three months ended March 31, 2020 due to lower average balances of cash and lower interest

rates, cash equivalents and marketable securities.

Unrealized Loss on Warrant Liability

We recorded a $1.1 million unrealized loss

on warrant liability during the three months ended March 31, 2020 related to the change in the fair value of outstanding warrants

increase in general and administrative expenses during the six months ended June 30, 2020 was primarily due to a $1.7 million

increase in legal costs associated with the with the following activities:

lawsuit filed against Clarus for patent infringement

in April 2019, interference cases filed against Clarus and the on-going class action lawsuit defense, offset by a $11,000 decrease

in personnel costs, a $60,000 decrease in administrative travel expense, a $41,000 decrease in marketing expense and a $112,000

decrease in other administrative expenses.

Interest and Investment Income

decrease in interest and investment income during the six months ended June 30, 2020 was due to lower average balances of

marketable securities and lower interest rates in 2020 compared to 2019.

Interest Expense

decrease in interest expense during the six months ended June 30, 2020 was due to a decrease in interest expense on our

Loan and Security Agreement with SVB, as a result of lower principal balances and lower interest rates in 2020 compared to 2019.

on Warrant Liability

We recorded a $3.2 million loss on warrant

liability during the six months ended June 30, 2020 related to the change in the fair value of outstanding common stock warrants

issued in the November 2019 Offering.

We did not record a similar change during the three months ended March 31, 2019 as there

were no similar warrants outstanding during this period.

The loss in 2020 was attributable to an increase in the stock price of

our common stock from December 31, 2019 to March 31, 2020.

The warrants are classified as a liability due to a provision contained

within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value

of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a

change of control.

The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including

our current stock price, the remaining life of the warrants, the volatility of our stock price, and the risk-free interest rate.

We did not record a similar change during the six months ended June 30, 2019 as there were

no similar warrants outstanding during this period.

The loss in 2020 was mainly attributable to an increase in the value of both

warrants exercised during the period and warrants outstanding as of June 30, 2020 as compared to March 31, 2020 due to an increase

in our stock price.

There were 10,127,000 common stock warrants exercised during the three months ended June 30, 2020.

are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option

to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option

pricing model with certain defined assumptions upon a change of control.

The warrant liability will continue to fluctuate in the

future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility

of our stock price, and the risk-free interest rate and the number of common stock warrants outstanding.

Liquidity and Capital Resources

Since our inception, our operations have

been primarily financed through sales of our equity securities, debt and payments received under our license and collaboration

arrangements.

We have devoted our resources to funding research and development programs, including discovery research, preclinical

and clinical development activities.

We have incurred operating losses in most years since our inception and we expect to continue

to incur operating losses into the foreseeable future as we evaluate our options related to TLANDO and as we advance clinical development

of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1107 and any other product candidate, including continued research efforts.

As of March 31, 2020, we had $15.6 million

of unrestricted cash, cash equivalents and marketable investment securities compared to $14.1 million at December 31, 2019.

Additionally, as of March 31, 2020 and December 31, 2019 we had $5.0 million of restricted cash, which is required to be maintained

as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved by the FDA.

our inception, our operations have been primarily financed through sales of our equity securities, debt and payments received under

our license and collaboration arrangements.

We have devoted our resources to funding research and development programs, including

discovery research, preclinical and clinical development activities.

We have incurred operating losses in most years since our

inception and we expect to continue to incur operating losses into the foreseeable future as we evaluate our options related to

TLANDO should it receive approval and as we advance clinical development of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1107 and

any other product candidate, including continued research efforts.

of June 30, 2020, we had $18.3 million of unrestricted cash, cash equivalents and marketable investment securities compared

to $14.1 million at December 31, 2019.

Additionally, as of June 30, 2020 and December 31, 2019 we had $5.0 million of restricted

cash, which is required to be maintained as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved

On April 21, 2020, we entered

into a loan (the “Loan”) from SVB in the aggregate amount of $233,537, pursuant to the Paycheck Protection Program

(the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the

form of a Note dated April 21, 2020 issued by us, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable

monthly commencing on November 21, 2020.

The Note may be prepaid by us at any time prior to maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent,

utilities, and interest on other debt obligations incurred before February 15, 2020.

We intend to use the entire Loan amount for

qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses

as described in the CARES Act.

into a loan (the “Loan”) from Silicon Valley Bank (“SVB”) in the aggregate amount of $234,000, pursuant

to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March

The Loan, which was in the form of a note dated April 21, 2020 issued by us, matures on April 21, 2022 and bears interest

at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020.

The Loan may be prepaid by us at any time prior to

maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group health

care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

intend to use the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven

if they are used for qualifying expenses as described in the CARES Act.

On February 27, 2020, we completed a registered

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The gross proceeds from the February 2020 Offering were approximately $6.0 million,

before deducting placement agent fees and other offering expenses of $347,000.

In the February 2020 Offering, the Company sold

10,084,034 Class A Units, with each Class A Unit consisting of one share of common stock and a one-half of one common warrant to

purchase one share of common stock, at a price of $0.595 per Class A Unit.

The common stock warrants were immediately exercisable

at an exercise price of $0.53 per share, subject to adjustment, and expire on February 27, 2025.

By their terms, however, the common

stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise,

more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to

such exercise.

before deducting placement agent fees and other offering expenses of approximately $347,000.

In the February 2020 Offering, the

Company sold 10,084,034 Class A Units, with each Class A Unit consisting of one share of common stock and a one-half of one common

warrant to purchase one share of common stock, at a price of $0.595 per Class A Unit.

The common stock warrants were immediately

exercisable at an exercise price of $0.53 per share, subject to adjustment, and expire on February 27, 2025.

By their terms, however,

the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such

exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving

effect to such exercise.

of June 30, 2020, 3,491,807 common warrants to purchase one share of our common stock from the February 2020 Offering have

been exercised resulting in proceeds of approximately $1.9 million.

On November 18, 2019, we completed a public

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9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

of June 30, 2020, 10,127,000 common warrants to purchase one share of our common stock from the November 2019 Offering

have been exercised resulting in proceeds of approximately $5.1 million.

On January 5, 2018, we entered into the

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Under the Deferral Agreement,

principal repayments are deferred by six months and the we are only required to make monthly interest payments.

The loan matures

on June 1, 2022.

Previously, we were only required to make monthly interest payments until December 31, 2018, following which we

also made equal monthly payments of principal and interest until the signing of the Deferral Agreement.

We will also be required

to pay an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”).

At our option, we may

prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment

Charge), subject to a prepayment charge if the loan has been outstanding for less than two years, which prepayment charge is determined

based on the date the loan is prepaid.

In connection with the Loan and Security Agreement, we granted to SVB a security interest

in substantially all of our assets now owned or hereafter acquired, excluding intellectual property and certain other assets.

addition, as TLANDO was not approved by the FDA by May 31, 2018, we are required to maintain $5.0 million of cash collateral at

SVB until such time as TLANDO is approved by the FDA.

While any amounts are outstanding under the Loan and Security Agreement,

we are subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, business

combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants.

The credit facility also includes events of default, the occurrence and continuation of which could cause interest to be charged

at the rate that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent, with the right to exercise remedies

against us and the collateral securing the credit facility, including foreclosure against the property securing the credit facilities,

principal repayments are deferred by six months and we are only required to make monthly interest payments during the deferral

The loan matures on June 1, 2022.

Previously, we were only required to make monthly interest payments until December 31,

2018, following which we also made equal monthly payments of principal and interest until the signing of the Deferral Agreement.

We will also be required to pay an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”).

At our option, we may prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid interest

and the Final Payment Charge).

In connection with the Loan and Security Agreement, we granted to SVB a security interest in substantially

all of our assets now owned or hereafter acquired, excluding intellectual property and certain other assets.

In addition, as TLANDO

was not approved by the FDA by May 31, 2018, we are required to maintain $5.0 million of cash collateral at SVB until such time

as TLANDO is approved by the FDA.

While any amounts are outstanding under the Loan and Security Agreement, we are subject to a

number of affirmative and negative covenants, including covenants regarding dispositions of property, business combinations or

acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants.

facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate

that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent, with the right to exercise remedies against

us and the collateral securing the credit facility, including foreclosure against the property securing the credit facilities,

including its cash.

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one or more prospectus supplements.

On April 10, 2020, we filed a prospectus supplement in which we disclosed that we are subject

to the limitations of General Instruction I.B.6.

of Form S-3 with the amount of shares of our common stock available for sale under

the New Form S-3 limited to one-third of the aggregate market value of our common equity held by non-affiliates of the Company

over any rolling 12-month period and further limited the future amount sold under the Sales Agreement to $5.0 million.

We are not obligated to make any sales

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prior notice.

As of March 31, 2020, we have sold 6,635,535

shares of our common stock resulting in net proceeds of approximately $19.3 million under the Sales Agreement which is net of $716,000

in expenses consisting of commissions paid to Cantor in connection with these sales and other offering and accounting costs.

We believe that our existing capital resources,

together with interest thereon, will be sufficient to meet our projected operating requirements through at least February 15, 2021.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner

than we currently expect.

While we believe we have sufficient liquidity and capital resources to fund our projected operating requirements

through at least February 15, 2021, we will need to raise additional capital at some point through the equity or debt markets or

through out-licensing activities, either before or after February 15, 2021, to support our operations, on-going clinical study

for LPCN 1144, ongoing intellectual property litigation with Clarus and compliance with regulatory requirements.

If the Company

is unsuccessful in raising additional capital its ability to continue as a going concern will be limited.

of June 30, 2020, we have sold 6,635,535 shares of our common stock resulting in net proceeds of approximately $19.3 million

under the Sales Agreement which is net of $716,000 in expenses consisting of commissions paid to Cantor in connection with these

sales and other offering and accounting costs.

believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating

requirements through at least September 30, 2021 which includes an on-going clinical study for LPCN 1144, compliance with

regulatory requirements, including the NDA submission for TLANDO, and on-going litigation activities.

We have based this estimate

on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect

if additional activities are performed by us including pre-commercial and commercial activities for TLANDO and new clinical studies

for LPCN 1144, TLANDO XR and LPCN 1148.

While we believe we have sufficient liquidity and capital resources to fund our projected

operating requirements through at least September 30, 2021, we will need to raise additional capital at some point through the

equity or debt markets or through out-licensing activities, either before or after September 30, 2021, to support our operations.

If we are unsuccessful in raising additional capital our ability to continue as a going concern will be limited.

Further, our operating

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last longer if we reduce expenses, reduce the number of activities currently contemplated under our operating plan or if we terminate

or suspend on-going clinical studies or intellectual property litigation.

We can raise capital pursuant to the Sales

Agreement in the ATM Offering when not restricted due to the terms of a previous financing but may choose not to issue common stock

if our market price is too low to justify such sales in our discretion.

or suspend on-going clinical studies or intellectual property litigation, or if we terminate or settle any on-going litigation

We can raise capital pursuant to the

Sales Agreement in the ATM when not restricted due to terms of previous financings but may choose not to issue common stock if

our market price is too low to justify such sales in our discretion.

There are numerous risks and uncertainties associated with

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commercialization of our product candidates.

We are unable to precisely estimate the amounts of increased capital outlays and operating

expenditures associated with our anticipated or unanticipated clinical studies and ongoing development and pre-commercialization

We are unable to precisely estimate the amounts of increased capital outlays and

operating expenditures associated with our anticipated or unanticipated clinical studies and ongoing development and pre-commercialization

All of these factors affect our need for additional capital resources.

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all of our product candidates, including LPCN 1144, TLANDO XR, LPCN 1148 and LPCN 1107;

the scope of clinical and other work required to obtain approval of TLANDO and our other product candidates;

the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products

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the extent to which we grow significantly in the number of employees or the scope of our operations.

Funding may not be available to us on favorable

terms, or at all.

Also, market conditions may prevent us from accessing the debt and equity capital markets, including sales of

our common stock through the ATM Offering.

If we are unable to obtain adequate financing when needed, we may have to delay, reduce

the scope of or suspend one or more of our clinical studies, research and development programs or, if any of our product candidates

receive approval from the FDA, commercialization efforts.

We may seek to raise any necessary additional capital through a combination

of public or private equity offerings, including the ATM Offering, debt financings, collaborations, strategic alliances, licensing

arrangements and other marketing and distribution arrangements.

These arrangements may not be available to us or available on terms

favorable to us.

To the extent that we raise additional capital through marketing and distribution arrangements, other collaborations,

strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates,

future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders

will be diluted, and the terms of these securities may include liquidation or other preferences, warrants or other terms that adversely

affect our stockholders’

may not be available to us on favorable terms, or at all.

Also, market conditions may prevent us from accessing the debt and equity

capital markets, including sales of our common stock through the ATM.

If we are unable to obtain adequate financing when needed,

we may have to delay, reduce the scope of or suspend one or more of our clinical studies, research and development programs or,

if any of our product candidates receive approval from the FDA, commercialization efforts.

We may seek to raise any necessary additional

capital through a combination of public or private equity offerings, including the ATM, debt financings, collaborations, strategic

alliances, licensing arrangements and other marketing and distribution arrangements.

These arrangements may not be available to

us or available on terms favorable to us.

To the extent that we raise additional capital through marketing and distribution arrangements,

other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights

to our product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that may

not be favorable to us.

If we do raise additional capital through public or private equity offerings, the ownership interest of

our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences, warrants

or other terms that adversely affect our stockholders’

rights or further complicate raising additional capital in the future.

If we raise additional capital

through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring

additional debt, making capital expenditures or declaring dividends.

If we are unable, for any reason, to raise needed capital,

we will have to reduce costs, delay research and development programs, liquidate assets, dispose of rights, commercialize products

or product candidates earlier than planned or on less favorable terms than desired or reduce or cease operations.

If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take

specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we are unable, for

any reason, to raise needed capital, we will have to reduce costs, delay research and development programs, liquidate assets,

dispose of rights, commercialize products or product candidates earlier than planned or on less favorable terms than desired or

reduce or cease operations.

Sources and Uses of Cash

The following table provides a summary

of our cash flows for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31,

of our cash flows for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

Cash used in operating activities

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$ (5,560,807 )

Cash provided by (used in) investing

Cash used in investing activities

Cash provided by financing activities

Net Cash Used in Operating Activities

During the three months ended March 31,

During the six months ended June 30, 2020

and 2019, net cash used in operating activities was $7.5 million and $5.6 million, respectively.

Net cash used in operating activities

during the three months March 31, 2020 and 2019 was primarily attributable to cash outlays to support ongoing operations, including

during the six months June 30, 2020 and 2019 was primarily attributable to cash outlays to support ongoing operations, including

research and development expenses and general and administrative expenses.

During 2020, we were performing activities related to

the LiFT Phase 2 paired biopsy clinical study for LPCN 1144 and the submission of the TLANDO NDA.

the LPCN 1144 LiFT Phase 2 paired biopsy clinical study and the submission of the TLANDO NDA.

During 2019, we were performing

activities related to the ABPM study for TLANDO and the POC liver imaging study for LPCN 1144.

Net Cash Provided by Investing Activities

During the three months ended March 31,

2020 net cash provided by investing activities was $3.9 million compared to net cash used in investing activities of $2.1 million

during the three months ended March 31, 2019.

Net cash provided by investing activities

during the three months ended March 31, 2020 was primarily the result of utilizing marketable investment securities, net, of $3.9

million to fund operations.

Net cash used in investing activities during the three months ended March 31, 2019 was primarily the

result of purchasing $2.1 million in marketable investment securities, net.

There were no capital expenditures for the three months

ended March 31, 2020 and 2019.

Net Cash Used in

Investing Activities

During the six months ended June 30, 2020

and 2019, net cash used in investing activities was $117,000 compared to $3.5 million, respectively.

Net cash used in investing activities

during the six months ended June 30, 2020 was primarily the result of purchasing marketable investment securities, net, of $117,000.

Net cash used in investing activities during the six months ended June 30, 2019 was primarily the result of

purchasing marketable investment securities, net, of $3.5 million.

There were no capital expenditures for the six months

ended June 30, 2020 and 2019.

Net Cash Provided by Financing Activities

During the three months ended March 31,

During the six months ended June 30, 2020

and 2019 net cash provided by financing activities was $11.7 million and $4.7 million, respectively.

Net cash provided by financing activities

during the three months ended March 31, 2020 was primarily attributable to the net proceeds from the sale of 10,084,034 shares

of common stock pursuant to February 2020 Offering resulting in net proceeds of $5.7 million offset by $833,000 in debt principal

repayments under the SVB Loan and Security Agreement.

during the six months ended June 30, 2020 was attributable to the net proceeds from the sale of 10,084,034 shares of common stock

pursuant to February 2020 Offering resulting in net proceeds of $5.7 million, to $6.9 million in proceeds from the exercise of

warrants and to $234,000 in loan proceeds under the Payment Protection Program offset by $1.1 million in debt principal repayments

under the SVB Loan and Security Agreement.

Net cash provided by financing activities

during the three months ended March 31, 2019 was attributable to net proceeds from the sale of 2,843,467 shares of common stock

pursuant to the ATM Offering resulting in net proceeds of $6.1 million offset by $833,000 in debt principal repayments under the

during the six months ended June 30, 2019 was primarily attributable to the net proceeds from the sale of 2,992,504 shares of common

stock pursuant to the ATM resulting in net proceeds of $6.3 million offset by $1.7 million in debt principal repayments under the

SVB Loan and Security Agreement.

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Long-Term Debt Obligations and Interest on Debt

On January 5, 2018, the Company entered

into a Loan and Security Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”)

pursuant to which SVB agreed to lend the Company $10.0 million.

The principal borrowed under the Loan and Security Agreement bears

interest at a rate equal to the Prime Rate plus one percent per annum, which interest is payable monthly.

The loan matures on June

1, 2022 and the Company is required to make equal monthly payments of principal and interest for the remaining term of the loan

beginning in November 1, 2020.

The Company will also be required to pay an additional final payment equal to $650,000 (the “Final

Payment Charge”) at maturity.

January 5, 2018, we entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Silicon

Valley Bank (“SVB”) pursuant to which SVB agreed to lend us $10.0 million.

The principal borrowed under the Loan and

Security Agreement bears interest at a rate equal to the Prime Rate plus one percent per annum, which interest is payable monthly.

The loan matures on June 1, 2022 and we are required to make equal monthly payments of principal and interest for the remaining

term of the loan beginning in November 1, 2020 although there was a principal deferment period of six months beginning on April

1, 2020 due to COVID-19.

We will also be required to pay an additional final payment equal to $650,000 (the “Final Payment

Charge”) at maturity.

On April 21, 2020, we were

granted a loan from SVB in the aggregate amount of $234,000, pursuant to the Paycheck Protection Program (the “PPP”)

under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP loan, which was in the form of a Note dated

April 21, 2020 issued by us, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing

on November 21, 2020.

The PPP loan may be prepaid by us at any time prior to maturity with no prepayment penalties.

the PPP loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities,

and interest on other debt obligations incurred before February 15, 2020.

We intend to use the entire loan amount for qualifying

Under the terms of the PPP, certain amounts of the PPP loan may be forgiven if they are used for qualifying expenses

as described in the CARES Act.

Purchase Obligations

We enter into contracts and issue purchase

orders in the normal course of business with clinical research organizations for clinical trials and clinical and commercial supply

manufacturing and with vendors for preclinical research studies, research supplies and other services and products for operating

These contracts generally provide for termination on notice and are cancellable obligations.

enter into contracts and issue purchase orders in the normal course of business with clinical research organizations for clinical

trials and clinical and commercial supply manufacturing and with vendors for preclinical research studies, research supplies and

other services and products for operating purposes.

These contracts generally provide for termination on notice and are

cancellable obligations.

Operating Leases

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Critical Accounting Policies and Significant Judgments and

Our management’s discussion and analysis

of our financial condition and results of operations is based on our financial statements which we have prepared in accordance

management’s discussion and analysis of our financial condition and results of operations is based on our financial statements

which we have prepared in accordance with U.S.

generally accepted accounting principles.

In preparing our financial statements, we are required to make estimates and

assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at

the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Our estimates

are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent

from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

There have been no

significant and material changes in our critical accounting policies during the three months ended March 31, 2020, as compared

to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical

Accounting Policies and Significant Judgments and Estimates”

In preparing our financial statements,

we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable

under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities

that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or

There have been no significant and material changes in our critical accounting policies during the six months

ended June 30, 2020, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition

and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates”

in our Form 10-K filed March

New Accounting Standards

Refer to Note 12, in “Notes to Unaudited

Condensed Consolidated Financial Statements”

for a discussion of accounting standards not yet adopted.

to Note 12, in “Notes to Unaudited Condensed Consolidated Financial Statements”

for a discussion of accounting

standards not yet adopted.

Off-Balance Sheet Arrangements

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements