What changed in this filing

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Item 1A. Risk Factors

2021-05-06 compared with 2020-11-10 · 117 added, 171 removed, 16 unchanged (95% of the section changed)

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, 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,

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, 2020 filed with the SEC on March 11, 2021, 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, 2020 filed with the SEC on March 11,

Risks Relating to Our Business and Industry

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

around the world could adversely impact our business and operating results.

In December 2019, a novel strain of coronavirus,

SARS-CoV-2, was reported to have surfaced in Wuhan, China.

Since then, SARS-CoV-2, and the resulting disease COVID-19, has spread

to multiple countries, including the United States and all of the primary markets where we conduct business.

On March 10, 2020,

the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S.

government imposed travel restrictions on

travel between the United States and Europe for a 30-day period.

Further, on March 13, 2020, the President of the United States

declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal

emergency disaster response.

Almost all U.S.

states and many local jurisdictions have issued, and others in the future may issue,

"shelter-in-place"

orders, quarantines, executive orders and similar government orders, restrictions and recommendations

for their residents to control the spread of COVID-19.

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

declines in stock prices, among other effects.

The duration and extent of COVID-19's impact

on our business may be difficult to assess or predict.

The widespread pandemic has resulted, and may continue to result for an

extended period, in significant disruption of global financial markets, reducing our ability to access capital, which would negatively

affect our liquidity.

Further, quarantines or government reaction or shutdowns for COVID-19 could disrupt our operations and harm

our business, financial condition and results of operations.

Our key personnel and other employees could also be affected by COVID-19,

potentially reducing their availability, and an outbreak such as COVID-19 or the procedures we take to mitigate its effect on our

workforce could reduce the efficiency of our operations or prove insufficient.

We may delay or reduce certain capital spending

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

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.

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.

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

and certain of its officers were named as defendants in a purported shareholder class action lawsuit, Solomon Abady v.

et al ., 2:19-cv-00906-PMW, filed in the United District Court for the District of Utah.

The complaint alleges that the

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

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.

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.

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.

We will need to grow our Company, and we may encounter difficulties

in managing this growth, which could disrupt our operations.

of March 31, 2021, we had 13 employees.

To manage our anticipated future growth, we must continue to implement and improve

our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.

Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial

amount of time to managing these growth activities.

Due to our limited resources, we may not be able to effectively manage the expansion

of our operations or recruit and train additional qualified personnel.

This may result in weaknesses in our infrastructure, give rise

to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.

expansion of our operations may lead to significant costs and may divert financial resources from other projects.

If our management is

unable to effectively manage our future growth, our expenses may increase more than expected, our ability to generate revenue could be

reduced and we may not be able to implement our business strategy.

Our future financial performance and our ability to commercialize our

product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Risks Related to Ownership of Our Common Stock

3 unchanged sentences

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.

In the November 2019 Offering, the Company sold

(i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of common stock and a common stock warrant to purchase

one share of common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase

one share of a common stock and one common stock warrant to purchase one share of common stock at a price of $0.50 per Class A

Unit and $0.4999 per Class B Unit.

The pre-funded warrants were issued in lieu of common stock in order to ensure the purchaser

did not exceed certain beneficial ownership limitations.

The pre-funded warrants were immediately exercisable at an exercise price

of $.0001 per share, subject to adjustment.

(i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of common stock and a common stock warrant

to purchase one share of common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded

warrant to purchase one share of a common stock and one common stock warrant to purchase one share of common stock at a price of $0.50

per Class A Unit and $0.4999 per Class B Unit.

The pre-funded warrants were issued in lieu of common stock in order to ensure

the purchaser did not exceed certain beneficial ownership limitations.

The pre-funded warrants were immediately exercisable at an exercise

price of $.0001 per share, subject to adjustment.

Additionally, the common stock warrants were immediately exercisable at an exercise

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

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.

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 March 31, 2021, the aggregate fair value of the warrant

liability included in the Company’s consolidated balance sheet was $1.3 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.

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 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

thinly traded in the future, and our stockholders may be unable to sell at or near asking prices or at all if they need to sell

their shares.

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

characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more

volatile than a seasoned issuer for the indefinite future.

As noted above, our common stock may be sporadically and/or thinly traded.

As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately

influence the price of those shares in either direction.

The price for our shares could, for example, decline significantly in

the event that a large number of shares of our common stock are sold on the market without commensurate demand, as compared to

a seasoned issuer that could better absorb those sales without adverse impact on its share price.

As of March 31, 2021, our executive officers

and directors beneficially owned approximately 4.9% 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.

The market price of our common stock has been volatile over the

past year and may continue to be volatile.

market price and trading volume of our common stock has been volatile over the past year and it may continue to be volatile.

past year, our common stock has traded as low as $ 1.38 and as high as $2.28 per share.

We cannot predict the price at which our

common stock will trade in the future and it may decline.

The price at which our common stock trades may fluctuate significantly and may

be influenced by many factors, including our financial results;

developments generally affecting our industry;

general economic, industry

and market conditions;

the depth and liquidity of the market for our common stock;

investor perceptions of our business;

reports by industry

announcements by other market participants, including, among others, investors, our competitors, and our customers;

action affecting our business;

and the impact of other “Risk Factors”

discussed in our Annual Report.

In addition, changes

in the trading price of our common stock may be inconsistent with our operating results and outlook.

The volatility of the market price

of our common stock may adversely affect investors’

ability to purchase or sell shares of our common stock.

Risks Relating to Our Financial

Position and Capital Requirements

We have incurred significant operating losses in most years since

our inception and anticipate that we will incur continued losses for the foreseeable future.

We have focused a significant portion of our efforts

on developing TLANDO and more recently on LPCN 1144.

We have funded our operations to date through sales of our equity securities, debt

and payments received under our license and collaboration arrangements.

We have incurred losses in most years since our inception.

of March 31, 2021, we had an accumulated deficit of $175.4 million.

Substantially all of our operating losses resulted from costs

incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’

and working capital.

We expect our research and development expenses to significantly increase in connection with clinical trials associated

with LPCN 1144, TLANDO XR, LPCN 1148 and LPCN 1107, if initiated.

In addition, if we eventually obtain final marketing approval for TLANDO,

we may incur significant sales, marketing and commercialization expenses.

As a result, we expect to continue to incur significant operating

losses for the foreseeable future as we evaluate our options with TLANDO and further clinical development of LPCN 1144, TLANDO XR, LPCN

1148, LPCN 1107 and our other programs and continued research efforts.

Because of the numerous risks and uncertainties associated with

developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at

We have limited shares available for issuance to raise capital

to fund our operations and grant stock-based incentive awards to employees, directors, and consultants.

If we are unable to increase the

number of shares of common stock available for issuance, our business will be adversely affected.

we have 100,000,000 authorized shares of common stock.

As of March 31, 2021, we had 88,290,650 shares of common stock outstanding.

After taking into account the 3,849,790 shares reserved for issuance upon the exercise of outstanding options as of March 31, 2021,

and exercise of outstanding warrants, we have a limited number of shares available for issuance.

If we are not able to increase the number

of shares of common stock available for issuance, including, for example, through an amendment to our certificate of incorporation or

a reverse stock split, we will have limited shares available for issuance to raise capital to fund our operations, make grants of stock-based

incentive awards, or take such other actions requiring available capital stock needed to operate our business.

Further delays in securing,

or the failure to secure, shareholder approval such actions, if needed, may prevent us from executing a capital raising transaction, which

may have a material adverse effect on our business and financial condition.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

2 unchanged sentences

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