What changed in this filing

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Item 1A. Risk Factors

2021-08-05 compared with 2021-05-06 · 213 added, 109 removed, 24 unchanged (93% 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, 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

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

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, risk

factors discussed in Item 1A of the Form 10-Q for the quarter ended March 31, 2021 filed with the SEC on May 6, 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.

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.

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, 2021 and from our risk factors included in our Form 10-Q for the quarter ended March 31, 2021

filed with the SEC on May 6, 2021:

Relating to Our Business and Industry

research and development programs and processes are at an early stage of development, which makes it difficult to evaluate our business

and prospects, or predict if or when we will successfully commercialize our product candidates.

operations to date have primarily been limited to conducting research and development activities under license and collaboration agreements.

Our current portfolio consists of our most advanced product candidate TLANDO as well as five additional earlier stage clinical candidates,

LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107.

We have never marketed or commercialized a drug product.

Consequently, any

predictions about our future performance may not be as accurate as they could be if we were further along our commercialization path.

In addition, as a pre-commercial stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other

unknown factors.

clinical product candidates are at an early stage of development and will require significant further investment and regulatory approvals

prior to marketing and commercialization.

As such, our product development processes for TLANDO, LPCN 1144, TLANDO XR, LPCN 1148, LPCN

1154 and LPCN 1107 are very risky and uncertain, and our product candidates may fail to advance beyond the current study.

obtain required financing, we cannot ensure successful product development or that we will obtain regulatory approval or successfully

commercialize any of our product candidates and generate product revenues.

will need to grow our Company, and we may encounter difficulties in managing this growth, which could disrupt our operations.

of June 30, 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.

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.

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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

The value of our warrants outstanding

from the November 2019 Offering is subject to potentially material increases and decreases based on fluctuations in the price of

our common stock.

In November 2019,

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

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.

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 lawsuits 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

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

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.

November 14, 2019, the Company and certain of its officers were named as defendants in a purported shareholder class action lawsuit,

Solomon Abady v.

Lipocine Inc.

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.

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 issued U.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.

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

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

The Court held a scheduling conference on August

15, 2019, a claim construction hearing on February 11, 2020 and a summary judgment hearing on January 15, 2021.

In May 2021, the Court

granted Clarus’ motion for Summary Judgment, finding the asserted claims of Lipocine’s U.S.

patents 9,034,858;

and 9,757,390 invalid for failure to satisfy the written description requirement of 35 U.S.C.

Clarus still had

remaining claims before the Court.

On July 13, 2021, we entered into a Global Agreement with Clarus which resolved all outstanding claims

of this litigation.

Under the terms of the settlement, we agreed to pay Clarus $4.0 million payable as follows:

$2.5 million immediately,

$1.0 million on July 13, 2022 and $500,000 on July 13, 2023.

The payment of this and other settlement payments diverts capital resources

away from our operations, which may adversely affect our business.

Related to Ownership of Our Common Stock

value of our warrants outstanding from the November 2019 Offering is subject to potentially material increases and decreases based on

fluctuations in the price of our common stock.

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.

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

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 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.

Our management and directors will be able to exert influence

over our affairs.

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.

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

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,

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, 2021, the aggregate fair value

of the warrant liability included in the Company’s consolidated balance sheet was $1.1 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.

management and directors will be able to exert influence over our affairs.

of June 30, 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.

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 $1.17 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;

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;

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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.

and the impact of other “Risk Factors” discussed herein and in our Annual Report.

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.

Relating to Our Intellectual Property

may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights,

and we may be unable to protect our rights to our products and technology.

we or our collaborators choose to go to court to stop a third party from using the inventions claimed in our owned or licensed patents,

that third party may ask a court to rule that the patents are invalid and should not be enforced against that third party.

These lawsuits

are expensive and would consume time and other resources, including financial resources, even if we were successful in stopping the infringement

of these patents.

In addition, there is a risk that a court will decide that these patents are not valid or not enforceable and that

we do not have the right to stop others from using the inventions.

is also the risk that, even if the validity of these patents is not challenged or is upheld, the court will refuse to stop the third

party on the ground that such third-party’s activities do not infringe on our owned or licensed patents.

In addition, the U.S.

Supreme Court has changed some standards relating to the granting of patents and assessing the validity of patents.

As a consequence,

issued patents may be found to contain invalid claims according to the newly revised standards.

Some of our owned or licensed patents

may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a reexamination or other proceeding

before the USPTO, or during litigation, under the revised criteria which make it more difficult to obtain or maintain patents.

our in-licensed patents and applications are not currently used in our product candidates, should we develop other product candidates

that are covered by this intellectual property, we will rely on our licensor to file and prosecute patent applications and maintain patents

and otherwise protect the intellectual property we license from them.

Our licensor has retained the first right, but not the obligation

to initiate an infringement proceeding against a third-party infringer of the intellectual property licensed to us, and enforcement of

our in-licensed patents or defense of any claims asserting the invalidity or unenforceability of these patents would also be subject

to the control or cooperation of our licensor.

It is possible that our licensor’s defense activities may be less vigorous than

had we conducted the defense ourselves.

also license our patent portfolio, including U.S.

and foreign patents and patent applications that cover our TLANDO and our other product

candidates, to third parties for their respective products and product candidates.

Under our agreements with our licensees, we have the

right, but not the obligation, to enforce our current and future licensed patents against infringers of our licensees.

In certain cases,

our licensees may have primary enforcement rights and we have the obligation to cooperate.

In the event of an enforcement action against

infringers of our licensees, our licensees might not have the interest or resources to successfully preserve the patents, the infringers

may countersue, and as a result our patents may be found invalid or unenforceable or of a narrower scope of coverage and leave us with

no patent protection for TLANDO and our other product candidates.

may be subject to a third-party pre-issuance submission of prior art to the PTO, or become involved in opposition, derivation, reexamination,

inter partes review, post-grant review or interference proceedings challenging our owned or licensed patent rights or the patent rights

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our owned

or licensed patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment

to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights.

if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from

collaborating with us to license, develop or commercialize current or future product candidates and impair our ability to raise needed

we are required to defend patent infringement actions brought by other third parties, or if we sue to protect our own patent rights or

otherwise to protect our proprietary information and to prevent its disclosure, 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.

Relating to Our Financial Position and Capital Requirements

have incurred significant operating losses in most years since our inception and anticipate that we will incur continued losses for the

foreseeable future.

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.

incurred losses in most years since our inception.

As of June 30, 2021, we had an accumulated deficit of $182.2 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’ equity 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,

LPCN 1154 and LPCN 1107, if initiated.

In addition, if we eventually obtain final marketing approval for TLANDO and its not

out-licensed, 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 1154, 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 all.

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.

As of June 30, 2021, we had 88,290,650 shares of common stock outstanding.

taking into account the 3,915,790 shares reserved for issuance upon the exercise of outstanding options and 1,934,366 reserved for issuance

upon the exercise of outstanding warrants, as of June 30, 2021, we have a limited number of shares available for issuance.

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 of 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

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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