What changed in this filing

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Item 1A. Risk Factors

2020-11-10 compared with 2020-08-06 · 104 added, 146 removed, 83 unchanged (75% of the section changed)

In addition to the other information set

forth in this Report, consider the risk factors discussed in Part 1, "Item 1A.

Risk Factors"

in the Company's Annual

Report filed on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 13, 2020, risk factors discussed

in Item 1A of the Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 7, 2020 and the risk factors discussed

in Item 1A of this Form 10-Q, which could materially affect our business, financial condition or future results.

The risks described

in the aforementioned report are not the only risks facing the Company.

Additional risks and uncertainties not currently known

to the Company or that it currently deems to be not material also may materially adversely affect the Company's business, financial

condition and or operating results.

addition to the other information set forth in this Report, consider the risk factors discussed in Part 1, "Item 1A.

Factors"

in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2019 filed with the SEC on

March 13, 2020, risk factors discussed in Item 1A of the Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May

7, 2020, risk factors discussed in Item 1A of the Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 6,

2020 and the risk factors discussed in Item 1A of this Form 10-Q, which could materially affect our business, financial condition

or future results.

The risks described in the aforementioned report are not the only risks facing the Company.

Additional risks

and uncertainties not currently known to the Company or that it currently deems to be not material also may materially adversely

affect the Company's business, financial condition and or operating results.

The following are the risk factors that

have materially changed from our risk factors included in our Form 10-K for the year ended December 31, 2019 filed with the SEC

on March 13, 2020 and from our risk factors included in our Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on

on March 13, 2020, from our risk factors included in our Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May

7, 2020 and from our risk factors included in our Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 6,

Risks Relating to Our Business and Industry

if we obtain FDA approval for TLANDO, our ability to commercialize TLANDO may be limited.

ability to commercialize TLANDO, should it receive approval, is uncertain.

Our ability to commercially launch 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.

If we are unable to launch TLANDO commercially at scale, our business and operations will be adversely affected.

As an alternative

to launching TLANDO directly, we are exploring the possibility of licensing TLANDO to a third party, 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

We rely on a single supplier for our supply of TU, the

active pharmaceutical ingredient of TLANDO, and the loss of this supplier could harm our business.

rely on a single third-party supplier for our supply of TU, the active pharmaceutical ingredient of TLANDO and LPCN 1144.

purchased sufficient quantities of TU for early commercial launch supplies should TLANDO get approved by the FDA.

We plan on using

this same supplier for our commercialization needs if TLANDO is approved.

Since there are only a limited number of TU suppliers

in the world, if this supplier ceases to provide us with TU, we may be unable to procure TU on commercially favorable terms, may

not be able to obtain it in a timely manner, or may not be able to qualify a new supplier timely post FDA approval, if that occurs.

Furthermore, the limited number of suppliers of TU may provide such companies with greater opportunity to raise their prices.

we are unable to obtain TU in a timely manner and/or in sufficient quantities, our ability to commercially launch TLANDO will be

adversely affected.

In addition, any increase in price for TU will likely reduce our gross margins.

We rely on limited suppliers for our supply of inactive

ingredients and the loss of these suppliers could harm our business.

rely on limited qualified third-party raw material suppliers for our supply of inactive ingredients of TLANDO and our other product

We do not have supply agreements in place with these suppliers.

We purchased sufficient quantities of some of

these inactives for early commercial launch of TLANDO if it is approved.

We plan on using these same suppliers for our commercialization

needs if TLANDO is approved.

We may be unable to procure inactives on commercially favorable terms, or may not be able to obtain

them in a timely manner, which would adversely affect our ability to commercially launch TLANDO.

In addition, any increase in price

for inactives will likely reduce our gross margins, which could further limit our ability to commercially launch TLANDO.

Even if we obtain FDA approval for TLANDO, our ability

to commercialize TLANDO may be limited.

Our ability to commercialize TLANDO, should

it receive approval, is uncertain.

Our ability to commercially launch 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.

If we are unable to launch TLANDO commercially

at scale, our business and operations will be adversely affected.

As an alternative to launching TLANDO directly, we are exploring

the possibility of licensing TLANDO to a third party, 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.

The ongoing outbreak of coronavirus

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Such orders, restrictions and recommendations, and the perception that additional

orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,”

work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, as well as record

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and certain projects until the travel and logistical impacts of COVID-19 are lifted, which will delay the completion of such projects.

addition, the conduct of clinical trials and studies required to obtain regulatory approvals for our products have been and we

expect may continue to be affected by the COVID-19 pandemic.

As hospital resources are prioritized for the COVID-19 outbreak and

quarantines impede patient movement or interrupt healthcare services, clinical studies may continue to be disrupted.

unable to successfully complete our clinical studies, our business and operating results will be harmed.

Further, we are

uncertain as to the actual number of subjects that will be enrolled in our clinical studies 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.

Interruptions

caused by COVID-19 may also limit our ability to collect data from clinical studies.

If we are unable to complete or effectively

collect data from clinical studies, our business and operating results will be harmed.

The global outbreak of COVID-19 continues

to rapidly evolve.

In addition, the conduct of clinical trials

and studies required to obtain regulatory approvals for our products have been and we expect may continue to be affected by the

COVID-19 pandemic.

As hospital resources are prioritized for the COVID-19 outbreak and quarantines impede patient movement or interrupt

healthcare services, clinical studies may continue to be disrupted.

If we are unable to successfully complete our clinical studies,

our business and operating results will be harmed.

Further, 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.

Interruptions caused by COVID-19 may also limit

our ability to collect data from clinical studies.

If we are unable to complete or effectively collect data from clinical studies,

our business and operating results will be harmed.

The global outbreak of COVID-19

continues to rapidly evolve.

The ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change.

We do not yet know the

full extent of potential delays or impacts on our business or the global economy as a whole.

However, these effects have harmed

our business, financial condition and results of operations in the near term and could have a continuing material impact on our

operations, sales and ability to continue as a going concern.

not yet know the full extent of potential delays or impacts on our business or the global economy as a whole.

However, these

effects have harmed our business, financial condition and results of operations in the near term and could have a continuing

material impact on our operations, sales and ability to continue as a going concern.

We may have to dedicate resources to the defense and resolution

of litigation.

legislation in the United States makes it relatively easy for stockholders to sue.

This can lead to frivolous law suits which take

substantial time, money, resources and attention or force us to settle such claims rather than seek adequate judicial remedy or

dismissal of such claims.

Historically, securities class action litigation has often been brought against a company following a

decline in the market price of its securities.

Biotechnology and pharmaceutical companies, including the Company, have experienced

significant stock price volatility in recent years, increasing the risk of such litigation.

As we defend the class action lawsuits

or future patent infringement actions should they be filed, or if we are required to defend additional actions brought by other

shareholders, we may be required to pay substantial litigation costs and managerial attention and financial resources may be diverted

from business operations even if the outcome is in our favor.

In addition, while our insurance carrier may cover the costs

of settling claims, the Company’s capital resources are critical to its continued operations, and the payment of litigation

settlements and associated legal fees diverts these capital resources away from our operations, even if such amounts do not have

a material impact on our financial statements.

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 our 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 our dissemination of purportedly false and misleading statements relating

to the filing of the NDA for TLANDO.

The relief sought in the complaint includes unspecified damages, changes to our corporate

governance procedures, equitable and/or injunctive relief, restitution, and attorneys’

On August 16, 2019, defendants

filed a motion to dismiss the complaint.

In response, 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.

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.

Securities legislation

in the United States makes it relatively easy for stockholders to sue.

This can lead to frivolous law suits which take substantial

time, money, resources and attention or force us to settle such claims rather than seek adequate judicial remedy or dismissal

of such claims.

Historically, securities class action litigation has often been brought against a company following a decline

in the market price of its securities.

Biotechnology and pharmaceutical companies, including the Company, have experienced significant

stock price volatility in recent years, increasing the risk of such litigation.

As we defend the class action lawsuits or future

patent infringement actions should they be filed, or if we are required to defend additional actions brought by other shareholders,

we may be required to pay substantial litigation costs and managerial attention and financial resources may be diverted from business

operations even if the outcome is in our favor.

In addition, while our insurance carrier may cover the costs of settling claims,

the Company’s capital resources are critical to its continued operations, and the payment of litigation settlements and

associated legal fees diverts these capital resources away from our operations, even if such amounts do not have a material impact

on our financial statements.

On November 14, 2019, the Company

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defendants made false and/or misleading statements and/or failed to disclose that our filing of the NDA for TLANDO to the FDA contained

deficiencies and as a result the defendants’

statements about our business and operations were false and misleading and/or

deficiencies and as a result the defendants’ statements about our business and operations were false and misleading and/or

lacked a reasonable basis in violation of federal securities laws.

The lawsuit seeks certification as a class action (for a purported

class of purchasers of the Company’s securities from March 27, 2019 through November 8, 2019), compensatory damages in an

unspecified amount, and unspecified equitable or injunctive relief.

We have insurance that covers claims of this nature.

intend to vigorously defend themselves against these allegations , but doing so may result in substantial litigation costs

and managerial attention and financial resources may be diverted from business operations even if outcome is in favor of our current

and former officers and directors and the Company.

April 2, 2019, we filed a lawsuit against Clarus in the United States District Court in Delaware alleging that Clarus’s

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

intend to vigorously defend themselves against these allegations, but doing so may result in substantial litigation costs and managerial

attention and financial resources may be diverted from business operations even if outcome is in favor of our current and former

officers and directors and the Company.

On April 2, 2019, we filed a lawsuit against

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

product infringes six of Lipocine’s

and 6,923,988.

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

Clarus’s counterclaims on April 29, 2019.

The Court held a scheduling conference on August 15, 2019 and a claim construction

hearing on February 11, 2020 and scheduled a five-day jury trial beginning on February 8, 2021.

On February 11, 2020, we also 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.

We answered Clarus’s counterclaims on April 29, 2019.

Court held a scheduling conference on August 15, 2019 and a claim construction hearing on February 11, 2020 and scheduled a five-day

jury trial beginning on February 8, 2021.

On February 11, 2020, we also 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.

parties are currently engaged in the fact discovery and expert witness phase of the lawsuit.

Risks Related to Ownership of Our Common Stock

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In November 2019,

we completed a public offering of common stock and warrants to purchase common stock (the “November 2019 Offering”).

Gross proceeds from the November 2019 Offering were approximately $6.0 million.

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price of $0.50 per share and expire on November 17, 2024.

We account for

the common stock warrants as a derivative instrument, and changes in the fair value of the warrants are included under other income

(expense) in the Company’s statements of operations for each reporting period.

At June 30, 2020, the aggregate fair value

of the warrant liability included in the Company’s consolidated balance sheet was $2.2 million.

We use the Black-Scholes

option pricing model to determine the fair value of the warrants.

As a result, the option-pricing model requires the input of several

assumptions, including the stock price volatility, share price and risk-free interest rate.

Changes in these assumptions can materially

affect the fair value estimate.

While the liability may only result from a change of control at that point in time, we ultimately

may incur amounts significantly different than the carrying value.

for the common stock warrants as a derivative instrument, and changes in the fair value of the warrants are included under

other income (expense) in the Company’s statements of operations for each reporting period.

At September 30, 2020, the

aggregate fair value of the warrant liability included in the Company’s consolidated balance sheet was $1.3 million.

use the Black-Scholes option pricing model to determine the fair value of the warrants.

As a result, the option-pricing model

requires the input of several assumptions, including the stock price volatility, share price and risk-free interest rate.

Changes in these assumptions can materially affect the fair value estimate.

While the liability may only result from a change

of control at that point in time, we ultimately may incur amounts significantly different than the carrying value.

Our management and directors will be able to exert influence

over our affairs.

As of June 30, 2020, our executive officers

and directors beneficially owned approximately 5.8% of our common stock.

These stockholders, if they act together, may be able

to influence our management and affairs and all matters requiring stockholder approval, including significant corporate transactions.

This concentration of ownership may have the effect of delaying or preventing a change in control and might affect the market price

of our common stock.

As of September 30, 2020, our executive

officers and directors beneficially owned approximately 5.5% of our common stock.

These stockholders, if they act together, may

be able to influence our management and affairs and all matters requiring stockholder approval, including significant corporate

transactions.

This concentration of ownership may have the effect of delaying or preventing a change in control and might affect

the market price of our common stock.

Our common stock is thinly traded, may continue to be

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their shares.

we have a low volume of daily trades in our common stock on NASDAQ.

For example, the average daily trading volume in our common

stock on NASDAQ during the second quarter of 2020 was approximately 1.4 million shares per day.

Our stockholders may be

unable to sell their common stock at or near their asking prices or at all, which may result in substantial losses to our stockholders.

Currently, we have a low volume of daily

trades in our common stock on NASDAQ.

For example, the average daily trading volume in our common stock on NASDAQ during the third

quarter of 2020 was approximately 4.2 million shares per day.

Our stockholders may be unable to sell their common stock at or near

their asking prices or at all, which may result in substantial losses to our stockholders.

The market for our common stock may be

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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 1A. Risk Factors