Lipocine Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 4,769,180 $ 3,148,496 Marketable investment securities 24,100,430 29,381,410 Accrued interest income 39,060 80,427 Contract asset - current portion 579,428 579,428 Prepaid and other current assets 1,126,731 945,319 Total current assets 30,614,829 34,135,080 Contract asset - non-current portion 3,252,500 3,252,500 Property and equipment, net of accumulated depreciation of $ 1,158,349 and $ 1,153,530 respectively 130,770 131,589 Other assets 23,753 23,753 Total assets $ 34,021,852 $ 37,542,922 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 796,476 $ 600,388 Accrued expenses 1,133,626 1,077,738 Total current liabilities 1,930,102 1,678,126 Warrant liability 131,722 229,856 Total liabilities 2,061,824 1,907,982 Commitments and contingencies (notes 6, 8, 9 and 11) - - Mezzanine equity: Preferred stock, par value $ 0.0001 per share ($ 0.001 per share redemption value), 10,000,000 shares authorized; 88,511 and zero issued and outstanding at March 31, 2023 and December 31, 2022, respectively 9 - Stockholders’ equity: Common stock, par value $ 0.0001 per share, 200,000,000 shares authorized; 88,516,501 issued and 88,510,791 outstanding 8,852 8,852 Additional paid-in capital 219,284,000 219,112,164 Treasury stock at cost, 5,710 shares ( 40,712 ) ( 40,712 ) Accumulated other comprehensive loss 3,241 ( 20,321 ) Accumulated deficit ( 187,295,362 ) ( 183,425,043 ) Total stockholders’ equity 31,960,028 35,634,940 Total liabilities and stockholders’ equity $ 34,021,852 $ 37,542,922 See accompanying notes to unaudited condensed consolidated financial statements 3 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) 2023 2022 Three Months Ended March 31, 2023 2022 Revenues: $ 54,990 $ - Operating expenses: Research and development 3,106,310 1,887,953 General and administrative 1,287,313 1,243,687 Total operating expenses 4,393,623 3,131,640 Operating loss ( 4,338,633 ) ( 3,131,640 ) Other income (expense): Interest and investment income 370,469 41,576 Interest expense - ( 19,529 ) Unrealized gain (loss) on warrant liability 98,134 ( 377,988 ) Total other income (expense), net 468,603 ( 355,941 ) Loss before income tax expense ( 3,870,030 ) ( 3,487,581 ) Income tax expense ( 200 ) ( 200 ) Net loss ( 3,870,230 ) ( 3,487,781 ) Issuance of Series B preferred stock dividend ( 89 ) - Net loss attributable to common shareholders $ ( 3,870,319 ) $ ( 3,487,781 ) Basic loss per share attributable to common stock $ ( 0.04 ) $ ( 0.04 ) Weighted average common shares outstanding, basic 88,510,791 88,309,628 Diluted loss per share attributable to common stock $ ( 0.04 ) $ ( 0.04 ) Weighted average common shares outstanding, diluted 88,510,791 88,309,628 Comprehensive loss: Net loss $ ( 3,870,319 ) $ ( 3,487,781 ) Net unrealized gain (loss) on available-for-sale securities 23,562 ( 49,400 ) Comprehensive loss $ ( 3,846,757 ) $ ( 3,537,181 ) See accompanying notes to unaudited condensed consolidated financial statements 4 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity For the Three Months Ended March 31, 2023 and 2022 (Unaudited) Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balances at December 31, 2021 - $ - 88,290,650 $ 8,829 5,710 $ ( 40,712 ) $ 218,286,324 $ ( 18,016 ) $ ( 172,666,407 ) $ 45,570,018 Net loss - - - - - - - - ( 3,487,781 ) ( 3,487,781 ) Unrealized net loss on marketable investment securities - - - - - - - ( 49,400 ) - ( 49,400 ) Stock-based compensation - - - - - - 171,028 - - 171,028 Option exercises - - 208,274 21 - - 205,967 - - 205,988 Balances at March 31, 2022 - $ - 88,498,924 $ 8,850 5,710 $ ( 40,712 ) $ 218,663,319 $ ( 67,416 ) $ ( 176,154,188 ) $ 42,409,853 Balances - $ - 88,498,924 $ 8,850 5,710 $ ( 40,712 ) $ 218,663,319 $ ( 67,416 ) $ ( 176,154,188 ) $ 42,409,853 Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Balances at December 31, 2022 - $ - 88,510,791 $ 8,852 5,710 $ ( 40,712 ) $ 219,112,164 $ ( 20,321 ) $ ( 183,425,043 ) $ 35,634,940 B alance - $ - 88,510,791 $ 8,852 5,710 $ ( 40,712 ) $ 219,112,164 $ ( 20,321 ) $ ( 183,425,043 ) $ 35,634,940 Net loss - - - - - - - - ( 3,870,230 ) ( 3,870,230 ) Unrealized net gain on marketable investment - - - - - - - 23,562 - 23,562 securities Unrealized net gain loss on marketable investment securities - - - - - - - 23,562 - 23,562 Stock-based compensation - - - - - - 177,772 - - 177,772 Issuance of Series B referred stock dividend 88,511 9 - - - - 80 - ( 89 ) - Costs associated with ATM offering - - - - - - ( 6,016 ) - - ( 6,016 ) Balances at March 31, 2023 88,511 $ 9 88,510,791 $ 8,852 5,710 $ ( 40,712 ) $ 219,284,000 $ 3,241 $ ( 187,295,362 ) $ 31,960,028 Balance 88,511 $ 9 88,510,791 $ 8,852 5,710 $ ( 40,712 ) $ 219,284,000 $ 3,241 $ ( 187,295,362 ) $ 31,960,028 See accompanying notes to unaudited condensed consolidated financial statements 5 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2023 2023 2022 Cash flows from operating activities: Net loss $ ( 3,870,230 ) $ ( 3,487,781 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation expense 4,819 1,719 Stock-based compensation expense 177,772 171,028 Non-cash interest expense - 4,674 Non-cash (gain) loss on change in fair value of warrant liability ( 98,134 ) 377,989 Amortization of premium (discounts) on marketable investment securities ( 254,215 ) 51,282 Changes in operating assets and liabilities: Accrued interest income 41,367 127,159 Prepaid and other current assets ( 181,412 ) 136,540 Accounts payable 196,088 ( 819,455 ) Accrued expenses 55,888 ( 448,557 ) Cash used in operating activities ( 3,928,057 ) ( 3,885,402 ) Cash flows from investing activities: Purchase of property and equipment ( 4,000 ) ( 26,797 ) Purchases of marketable investment securities ( 6,441,243 ) ( 17,906,250 ) Maturities of marketable investment securities 12,000,000 25,228,474 Cash provided by investing activities 5,554,757 7,295,427 Cash flows from financing activities: Debt repayments - ( 833,334 ) Costs associated with At the Market Offering ( 6,016 ) - Proceeds from stock option exercises - 205,988 Cash provided used in financing activities ( 6,016 ) ( 627,346 ) Net increase in cash and cash equivalents 1,620,684 2,782,679 Cash and cash equivalents at beginning of period 3,148,496 2,950,552 Cash and cash equivalents at end of period $ 4,769,180 $ 5,733,231 Supplemental disclosure of cash flow information: Interest paid $ - $ 14,855 Income taxes paid $ 456 - Supplemental disclosure of non-cash investing and financing activity: Net unrealized gain (loss) on available-for-sale securities $ 23,562 $ ( 49,400 ) Accrued final payment charge on debt $ - $ 4,674 Issuance of Series B preferred stock dividend $ 89 $ - See accompanying notes to unaudited condensed consolidated financial statements 6 LIPOCINE INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements included herein have been prepared by Lipocine Inc. (“Lipocine” or the “Company”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements are comprised of the financial statements of Lipocine and its subsidiaries, collectively referred to as the Company. In management’s opinion, the interim financial data presented includes all adjustments (consisting solely of normal recurring items) necessary for fair presentation. All intercompany accounts and transactions have been eliminated. Certain information required by U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2023. 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, 2022. The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions relating to reporting of the assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period in conformity with U.S. GAAP. Actual results could differ from these estimates. The Company believes that its existing capital resources, together with interest thereon, will be sufficient to meet its projected operating requirements through at least May 11, 2024 which includes an on-going clinical study for LPCN 1148 in the management of decompensated cirrhosis, a pilot pharmacokinetic (“PK”) bridge study for LPCN 1154 in Postpartum Depression (“PPD”), and compliance with regulatory requirements. 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 if additional activities are performed by the Company including clinical studies for LPCN 1148, LPCN 1154, LPCN 1144 for non-cirrhotic non-alcoholic steatohepatitis (“NASH”), LPCN 1111 an oral TRT product with the potential for once daily dosing, LPCN 1107 for the prevention of recurrent preterm birth, and LPCN 2101 for epilepsy. While the Company believes it has sufficient liquidity and capital resources to fund our projected operating requirements through at least May 11, 2024, the Company will need to raise additional capital at some point through the equity or debt markets or via out-licensing activities to support its operations. If the Company is unsuccessful in raising additional capital, its ability to continue as a going concern will become a risk. Further, the Company’s operating plan may change, and the Company may need additional funds to meet operational needs and capital requirements for product development, regulatory compliance and clinical trial activities sooner than planned. In addition, the Company’s capital resources may be consumed more rapidly if it pursues additional clinical studies for LPCN 1148, LPCN 1144, LPCN 1111, LPCN 1107, LPCN 1154 and LPCN 2101. Conversely, the Company’s capital resources could last longer if the Company reduces expenses, reduces the number of activities currently contemplated under its operating plan, or terminates, modifies the design or suspends on-going clinical studies. (2) Revenue The Company generates most of its revenue from license and royalty arrangements. At inception of each contract, the Company identifies the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determines the transaction price including any variable consideration, allocates the transaction price to the distinct performance obligations and determines whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company reassesses its reserves for variable consideration at each reporting date and makes adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known. See Note 8 for a description of the license agreement with Antares Pharma, Inc. (“Antares”). See Note 12 for a description of the agreement with Spriaso, a related party. 7 License Fees . For distinct license performance obligations, upfront license fees are recognized when the Company satisfies the underlying performance obligation. Performance obligations under these licenses, which consist of the right to use the Company’s proprietary technology, are satisfied at a point in time corresponding with delivery of the underlying technology rights to the licensee, which is generally upon transfer of the licensed technology/product to the customer. In addition, license arrangements may include contingent milestone payments, which are due following achievement by our licensee of specified sales or regulatory milestones and the licensee and/or Company will fulfill its performance obligation prior to achievement of these milestones. Because of the uncertainty of the milestone achievement, and/or the dependence on sales of our licensee, variable consideration for contingent milestones is fully constrained and is not recognized as revenue until the milestone is achieved by our licensee, to the extent collectability is reasonably certain. Royalties. Royalties revenue consists of sales-based and minimum royalties earned under license agreements for our products. Sales-based royalties revenue represents variable consideration under the license agreements and is recognized in the period a customer sells products incorporating the Company’s licensed technologies/products. The Company estimates sales-based royalties revenue earned but unpaid at each reporting period using information provided by the licensee. The Company’s license arrangements may also provide for minimum royalties, which the Company recognizes upon the satisfaction of the underlying performance obligation, which generally occurs with delivery of the underlying technology rights to the licensee. Sales-based and minimum royalties are generally due within 45 days after the end of each quarter in which they are earned. Contract Assets Contract assets consist of minimum royalty revenue earned in relation to the license agreement but not yet due based on the terms of the contract. The contract asset as of March 31, 2023 is related to the Antares License Agreement. The contract asset was reduced by approximately $ 218,000 for royalty payments received during 2022. These royalties were received from Antares under the terms of our license agreement based on net sales of TLANDO. Based on the terms of the license agreement and sales estimates for the first quarter of 2023 provided by Antares, the Company estimates that it will not receive a royalty payment on estimated first quarter 2023 net sales of TLANDO under this agreement. Revenue Concentration A major partner is considered to be one that comprises more than 10 % of the Company’s total revenues. The Company recognized revenue of approximately $ 55,000 and $ 0 for the three months ended March 31, 2023, and March 31, 2022, respectively. The revenue recognized in 2023 was 100 % from one major related-party partner, Spriaso. (3) 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 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. 8 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, 2023 and 2022: Schedule of Computation of Basic and Diluted Earnings (loss) Per Share of Common Stock Three Months Ended March 31, 2023 2022 Basic loss per share attributable to common stock: Numerator Net loss $ ( 3,870,230 ) $ ( 3,487,781 ) Denominator Weighted avg. common shares outstanding 88,510,791 88,309,628 Basic loss per share attributable to common stock $ ( 0.04 ) $ ( 0.04 ) Diluted loss per share attributable to common stock: Numerator Net loss $ ( 3,870,230 ) $ ( 3,487,781 ) Effect of dilutive securities on net loss: Common stock warrants 98,134 - Total net loss for purpose of calculating diluted net loss per common share $ ( 3,968,364 ) $ ( 3,487,781 ) Denominator Weighted avg. common shares outstanding 88,510,791 88,309,628 Weighted average effect of dilutive securities: Common stock warrants - - Total shares for purpose of calculating diluted net loss per common share 88,510,791 88,309,628 Diluted loss per share attributable to common stock $ ( 0.04 ) $ ( 0.04 ) The computation of diluted loss per share for the three months ended March 31, 2023 and 2022 does not include the following stock options and warrants to purchase shares of common stock in the computation of diluted loss per share because these instruments were antidilutive: Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share March 31, 2023 2022 Stock options 4,466,431 4,229,739 Warrants 840,336 1,934,366 (4) 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’ equity until realized. 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 as of March 31, 2023, and December 31, 2022, were as follows: Schedule of Available for Sale Securities March 31, 2023 Amortized Cost Gross unrealized holding gains Gross unrealized holding losses Aggregate fair value Government treasury bills $ 1,995,817 $ - $ ( 2,747 ) $ 1,993,070 Corporate bonds, notes and commercial paper 13,470,151 - ( 8,228 ) 13,461,923 U.S. government agency securities 8,631,221 14,216 - 8,645,437 $ 24,097,189 $ 14,216 $ ( 10,975 ) $ 24,100,430 9 December 31, 2022 Amortized Cost Gross unrealized holding gains Gross unrealized holding losses Aggregate fair value Government treasury bills $ 5,973,087 $ - $ ( 14,087 ) $ 5,959,000 Commercial paper 20,052,505 - ( 10,885 ) 20,041,620 U.S. government agency securities 3,376,139 4,651 - 3,380,790 $ 29,401,731 $ 4,651 $ ( 24,972 ) $ 29,381,410 Maturities of debt securities classified as available-for-sale securities as of March 31, 2023, are as follows: Schedule of Maturities of Debt Securities Classified as Available-for-sale Securities March 31, 2023 Amortized Cost Aggregate fair value Due within one year $ 24,097,189 $ 24,100,430 $ 24,097,189 $ 24,100,430 There were no sales of marketable investment securities during the three months ended March 31, 2023, and 2022 and therefore no realized gains or losses. Additionally, $ 12.0 million and $ 25.2 million of marketable investment securities matured during the three months ended March 31, 2023 and March 31, 2022, respectively. The Company determined there were no other-than-temporary impairments for the three months ended March 31, 2023, and March 31, 2022. (5) Fair Value The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: ● Level 1 Inputs: Quoted prices for identical instruments in active markets. ● Level 2 Inputs: 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: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 10 All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For accrued interest income, prepaid and other current assets, accounts payable, and accrued expenses, the carrying amounts approximate fair value because of the short maturity of these instruments. 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 as of March 31, 2023 and December 31, 2022: Schedule of Fair Value, Assets Measured on Recurring Basis Fair value measurements at reporting date using March 31, 2023 Level 1 inputs Level 2 inputs Level 3 inputs Assets: Cash equivalents - money market funds $ 4,353,929 $ 4,353,929 $ - $ - Government treasury bills 1,993,070 1,993,070 - - Commercial paper 11,129,370 - 11,129,370 - Corporate bonds and notes 2,332,553 - 2,332,553 - US. Government agency securities 8,645,437 - 8,645,437 - $ 28,454,359 $ 6,346,999 $ 22,107,360 $ - Liabilities: Warrant liability $ 131,722 $ - $ - $ 131,722 $ 28,586,081 $ 6,346,999 $ 22,107,360 $ 131,722 Fair value measurements at reporting date using December 31, 2022 Level 1 inputs Level 2 inputs Level 3 inputs Assets: Cash equivalents - money market funds $ 2,694,434 $ 2,694,434 $ - $ - Government treasury bills 5,959,000 5,959,000 - - Commercial paper 14,586,930 - 14,586,930 - Corporate bonds and notes 5,454,690 - 5,454,690 - U.S. government agency securities 3,380,790 - 3,380,790 - $ 32,075,844 $ 8,653,434 $ 23,422,410 $ - Liabilities: Warrant liability $ 229,856 $ - $ - $ 229,856 $ 32,305,700 $ 8,653,434 $ 23,422,410 $ 229,856 The following methods and assumptions were used to determine the fair value of each class of assets and liabilities recorded at fair value in the balance sheets: Cash equivalents: Cash equivalents primarily consist of highly-rated money market funds and treasury bills with original maturities to the Company of three months or less and are purchased daily at par value with specified yield rates. Cash equivalents related to money market funds and treasury bills are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices or broker or dealer quotations for similar assets. 11 Government treasury bills: The Company uses a third-party pricing service to value these investments. United States treasury bills are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets for identical assets and reportable trades. Corporate bonds, notes, commercial paper and U.S. government agency securities: The Company uses a third-party pricing service to value these investments. Corporate bonds, notes commercial paper and U.S. government agency securities are classified within Level 2 of the fair value hierarchy because they are valued using broker/dealer quotes, bids and offers, benchmark yields and credit spreads and other observable inputs. Warrant liability: The warrant liability (which relates to warrants to purchase shares of common stock) is marked-to-market each reporting period with the change in fair value recorded to other income (expense) in the accompanying statements of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity. The fair value of the warrant liability is estimated using a Black-Scholes option-pricing model. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of March 31, 2023, include (i) volatility of 100 %, (ii) risk free interest rate of 4.34 %, (iii) strike price of $ 0.50 , (iv) fair value of common stock of $ 0.32 , and (v) expected life of 1.6 years. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of December 31, 2022, include (i) volatility of 100 %, (ii) risk free interest rate of 4.41 %, (iii) strike price of $ 0.50 , (iv) fair value of common stock of $ 0.40 , and (v) expected life of 1.9 years. The Company’s accounting policy is to recognize 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, Level 2, or Level 3 for the three months ended March 31, 2023. (6) Loan and Security Agreements Silicon Valley Bank Loan 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 bore interest 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, which interest was payable monthly. Additionally on April 1, 2020, the Company entered into a Deferral Agreement with SVB. Under the Deferral Agreement, principal repayments were deferred by six months and the Company was only required to make monthly interest payments. The loan matured and was paid in full on June 1, 2022 . The Company made a final payment at maturity equal to $ 650,000 (the “Final Payment Charge”). The expense of the final payment charge had been recognized over the term of the facility using the effective interest method. (7) Income Taxes The tax provision for interim periods is determined using an estimate of the Company’s effective tax rate for the full year adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company makes a cumulative adjustment. At March 31, 2023 and December 31, 2022, 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. (8) 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 amount. If generic versions of any such product are introduced, then royalties are reduced by 50 %. TLANDO was commercially launched on June 7, 2022. The Company incurred royalty expense of approximately $ 4,000 and $ 0 during the three months ended March 31, 2023, and 2022, respectively. 12 (b) Antares Pharma, Inc. On October 14, 2021, the Company entered into a license agreement (“License Agreement”) with Antares Pharma, Inc. (“Antares”) pursuant to which the Company granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize, upon final approval of TLANDO® from the U.S. Food and Drug Administration (“FDA”), the Company’s TLANDO product with respect to testosterone replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone, as indicated in New Drug Application (“NDA”) No. 208088, treatment of Klinefelter syndrome, and pediatric indications relating to testosterone replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone (the “Field”), in each case within the United States. TLANDO received FDA approval on March 29, 2022. Upon execution of the Antares License Agreement, Antares paid the Company an initial payment of $ 11.0 million. Antares will also make additional payments of $ 5.0 million to the Company on each of January 1, 2025, and January 1, 2026, provided that certain conditions are satisfied. The Company is also eligible to receive milestone payments of up to $ 160.0 million in the aggregate, depending on the achievement of certain sales milestones in a single calendar year with respect to TLANDO, as licensed by Antares under the Antares License Agreement. In addition, the Company will receive tiered royalty payments at rates ranging from percentages in the mid-teens to up to 20 % of net sales of TLANDO in the United States, subject to certain minimum royalty obligations. The Company retains development and commercialization rights in the rest of the world, and with respect to applications outside of the Field inside or outside the United States. Antares also purchased certain existing inventory of licensed products from the Company. Finally, pursuant to the terms of the Antares License Agreement, Antares is generally responsible for expenses relating to the development (including the conduct of any clinical trials) and commercialization of TLANDO in the Field in the United States, while the Company is generally responsible for expenses relating to development activities outside of the Field and/or the United States. The Antares License Agreement also provided Antares with an option, exercisable on or before March 31, 2022, to license TLANDO XR (LPCN 1111), the Company’s potential once-daily oral product candidate for testosterone replacement therapy. On April 1, 2022, the Company entered into the First Amendment to the License Agreement (the “Amendment”), pursuant to which the License Agreement was amended to extend the deadline by which Antares was to exercise its option to license TLANDO XR to June 30, 2022. As consideration for the Company agreeing to enter into the Amendment, in April 2022 Antares paid the Company a non-refundable cash fee of $ 500,000 . On June 30, 2022, Antares’ option to license TLANDO XR expired and was not exercised. Lipocine retains all development and commercialization rights to TLANDO XR. On May 24, 2022, Halozyme Therapeutics completed an acquisition of Antares Pharma Inc. through the merger of a wholly owned subsidiary of Halozyme with and into Antares, with Antares continuing as the surviving corporation and becoming a wholly owned subsidiary of Halozyme. The Company did not recognize any revenue under the Antares Licensing Agreement during either the three months ended March 31, 2023, or March 31, 2022. (c) Contract Research and Development The Company has entered into agreements with various contract organizations that conduct pre-clinical, 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 $ 2.1 and $ 1.0 million, respectively, for the three months ended March 31, 2023 and 2022 under these agreements and has recorded these expenses in research and development expenses. (9) Leases The Company has a non-cancelable operating lease for office space and laboratory facilities in Salt Lake City, Utah. The term of the lease has been extended through February 28, 2024. 13 Future minimum lease payments under the non-cancelable operating lease as of March 31, 2023 are: Schedule of Future Minimum Rental Payments for Operating Leases Operating leases Year ending December 31: 2023 $ 268,017 2024 59,559 Total minimum lease payments $ 327,576 The Company’s rent expense was $ 87,000 and $ 84,000 for each of the three months ended March 31, 2023 and 2022, respectively. (10) Stockholders’ Equity On June 8, 2022, at the 2022 annual meeting of the stockholders, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $ 0.0001 , from 100,000,000 shares to 200,000,000 shares. The Company filed the amendment to the Restated Certificate with the Secretary of State of the State of Delaware on June 28, 2022. The amendment to the Restated Certificate became effective upon filing with the Secretary of State of the State of Delaware. (a) Issuance of Common Stock On March 6, 2017, the Company entered into the Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to the amount the Company registered on an effective registration statement pursuant to which the offering is being made. The Company currently has registered up to $ 50.0 million for sale under the Sales Agreement, pursuant to the Registration Statement on Form S-3 (File No. 333-250072) through Cantor as the Company’s sales agent. Cantor may sell the Company’s common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Capital Market or any other existing trade market for our common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. Cantor uses its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell these shares. The Company pays Cantor 3.0 % of the aggregate gross proceeds from each sale of shares under the Sales Agreement. In addition, the Company has also provided Cantor with customary indemnification rights. The shares of the Company’s common stock sold under the Sales Agreement are sold and issued pursuant to the Registration Statement on Form S-3 (File No. 333-250072) (the “Form S-3”), which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. The Company is not obligated to make any sales of its common stock under the Sales Agreement. The offering of common stock pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement as permitted therein. The Company and Cantor may each terminate the Sales Agreement at any time upon ten days’ prior notice. As of March 31, 2023, the Company had sold an aggregate of 15,023,073 shares at a weighted-average sales price of $ 2.19 per share under the ATM for aggregate gross proceeds of $ 32.9 million and net proceeds of $ 31.7 million, after deducting sales agent commission and discounts and our other offering costs. During the three months ended March 31, 2023 and 2022, the Company did not sell any shares of its common stock pursuant to the Sales Agreement. As of March 31, 2023, the Company had $ 41.2 million available for sale under the Sales Agreement. However, as of April 3, 2023, the Company is now subject to General Instruction I.B.6 of Form S-3 which limits the amounts that we may sell under the registration statement. As a result of such limitations, the Company has currently registered the offer and sale of shares of our common stock pursuant to the Sales Agreement having an aggregate offering price of up to $ 15.7 million. 14 (b) Series B Preferred Stock On March 7, 2023, the board of directors (the “Board”) of the Company declared a dividend of one one-thousandth (1/1,000 th ) of a share of Series B Preferred Stock, par value $ 0.0001 per share (“Series B Preferred Stock”), for each outstanding share of common stock of the Company, to stockholders of record on March 24, 2023. The Certificate of Designation of Series B Preferred Stock (the “Certificate of Designation”) was filed with the Delaware Secretary of State and became effective on March 10, 2023. The dividend was based on the number of shares of outstanding common stock on March 24, 2023, and resulted in 88,511 Series B Preferred shares being issued. Each whole share of Series B Preferred Stock entitles the holder thereof to 1,000,000 votes per share, and each fraction of a share of Series B Preferred Stock has a ratable number of votes. Thus, each one-thousandth of a share of Series B Preferred Stock is entitled to 1,000 votes. The outstanding shares of Series B Preferred Stock are entitled to vote together with the outstanding shares of common stock as a single class exclusively with respect to any proposal to adopt an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect a reverse stock split of the outstanding shares of Common Stock at a ratio determined in accordance with the terms of such amendment (the “Reverse Stock Split”), and (ii) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split (the “Adjournment Proposal”) in conjunction with the Company’s Annual Shareholder Meeting (the “Meeting”). All shares of Series B Preferred Stock that are not present in person or by proxy at the Meeting as of immediately prior to the opening of the polls (the “Initial Redemption Time”) w ill automatically be redeemed in whole, but not in part, by the Company without further action on the part of the Company or the holder of shares of Series B Preferred Stock (the “Initial Redemption”). Any outstanding shares of Series B Preferred Stock that have not been redeemed pursuant to an Initial Redemption will be redeemed in whole, but not in part, (i) if such redemption is ordered by the Board in its sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing the Reverse Stock Split (the “Subsequent Redemption”). Each share of Series B Preferred Stock redeemed in any redemption described above will be redeemed in consideration for the right to receive an amount equal to $0.01 in cash for each ten whole shares of Series B Preferred Stock that are “beneficially owned” by the “beneficial owner” (as such terms are defined in the Certificate of Designation with respect to the Series B Preferred Stock) thereof as of immediately prior to the applicable redemption time and redeemed pursuant to such redemption, payable upon receipt by the Company of a written request submitted by the applicable holder to the corporate secretary of the Company following the applicable redemption time. The Series B Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Series B Preferred Stock has no stated maturity and is not subject to any sinking fund. The Series B Preferred Stock is not subject to any restriction on the redemption or repurchase of shares by the Company while there is any arrearage in the payment of dividends or sinking fund installments. The Company is not solely in control of the redemption of the shares of Series B Preferred Stock since the holders have the option of deciding whether to vote in respect of the above described Reverse Stock Split, which determines whether a given holder’s shares of Series B Preferred Stock are redeemed in the Initial Redemption or the Subsequent Redemption. Since the redemption of the Series B Preferred Stock is not solely in the control of the Company, the shares of Series B Preferred Stock are classified within the mezzanine equity in the Company’s audited consolidated statement of stockholder’s equity. The shares of Series B Preferred Stock will be measured at redemption value. See Note 14. Subsequent Events, Redemption and Elimination of Series B Preferred Stock. The foregoing description of the Series B Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designation, which is filed as Exhibit 3.2 to the Form 8-K filed with the SEC on March 10, 2023. 15 (c) Rights Agreement On November 13, 2015, the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent, entered into a Rights Agreement. Also on November 12, 2015, the Board of the Company authorized and the Company declared a dividend of one preferred stock purchase right (each a “Right” and collectively, the “Rights”) for each outstanding share of common stock of the Company. The dividend was payable to stockholders of record as of the close of business on November 30, 2015 and entitles the registered holder to purchase from the Company one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock of the Company at a price of $ 63.96 per one-thousandth share (the “Purchase Price”). The Rights will generally become exercisable upon the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as defined below) or (ii) 10 business days (or such later date as may be determined by action of the Board prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding common stock of the Company. Except in certain situations, a person or group of affiliated or associated persons becomes an “Acquiring Person” upon 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. The Company will be entitled to redeem the Rights at $ 0.001 per Right at any time prior to the time an Acquiring Person becomes such. The terms of the Rights are set forth in the Rights Agreement, which is summarized in the Company’s Current Report on Form 8-K dated November 13, 2015. The rights plan was originally set to expire on November 12, 2018; however, on November 5, 2018 our Board approved an Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 5, 2021, and again on November 2, 2021, the Company adopted a Second Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 1, 2024, unless the rights are earlier redeemed or exchanged by the Company. (d) Share-Based Payments 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, nonemployees and nonemployee members of the Company’s Board 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 has granted performance-based stock option awards and restricted stock units, which vest based upon the Company satisfying certain performance conditions. Potential compensation cost, measured on the grant date, related to these performance options will be recognized only if, and when, the Company estimates that these options or units will vest, which is based on whether the Company considers the performance conditions to be probable of attainment. The Company’s estimates of the number of performance-based options or units that will vest will be revised, if necessary, in subsequent periods. 16 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 approximately $ 178,000 and $ 171,000 , respectively, for the three months ended March 31, 2023 and 2022 and is allocated as follows: Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs Three Months Ended March 31, 2023 2022 Research and development $ 95,513 $ 79,652 General and administrative 82,259 91,376 $ 177,772 $ 171,028 The Company issued 300,000 and 332,500 stock options, respectively, during the three months ended March 31, 2023 and 2022. Key assumptions used in the determination of the fair value of stock options granted are as follows: Expected Term : The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term was estimated using the simplified method in accordance with the provisions of Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment for awards with stated or implied service periods. The simplified method defines the expected term as the average of the contractual term and the vesting period of the stock option. For awards with performance conditions, 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. The Company does not anticipate declaring dividends in the foreseeable future. Expected Volatility : The volatility factor is based solely on the Company’s trading history. For options granted during the three months ended March 31, 2023 and 2022, the Company calculated the fair value of each option grant on the respective dates of grant using the following weighted average assumptions: Schedule of Key Assumption of Fair Value of Stock Options Granted 2023 2022 Expected term 5.85 years 5.85 years Risk-free interest rate 3.91 % 1.41 % Expected dividend yield — — Expected volatility 97.61 % 102.43 % 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, 2023, there was $ 940,000 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 1.8 years and will be adjusted for subsequent changes in estimated forfeitures. 17 (e) Stock Option Plan In April 2014, the Board adopted the 2014 Stock and Incentive Plan (“2014 Plan”) subject to shareholder approval which was received in June 2014. The 2014 Plan provides for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units, restricted stock and dividend equivalents. An aggregate of 1,000,000 shares were authorized for issuance under the 2014 Plan. Additionally, 271,906 remaining authorized shares under the 2011 Equity Incentive Plan (“2011 Plan”) were issuable under the 2014 Plan at the time of the 2014 Plan adoption. Upon receiving shareholder approval in June 2016, the 2014 Plan was 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 1,271,906 to 2,471,906 . Additionally, upon receiving shareholder approval in June 2018, 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 2,471,906 to 3,221,906 . 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, 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. 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 of common stock are authorized for issuance under the 2014 Plan, with 814,092 shares remaining available for grant as of March 31, 2023. A summary of stock option activity is as follows: Schedule of Stock Option Activity Outstanding stock options Number of shares Weighted average exercise price Balance at December 31, 2022 4,713,862 $ 2.29 Options granted 300,000 0.41 Options exercised - - Options forfeited ( 547,431 ) 2.81 Options cancelled - - Balance at March 31, 2023 4,466,431 2.10 Options exercisable at March 31, 2023 2,599,610 3.08 The following table summarizes information about stock options outstanding and exercisable at March 31, 2023: Schedule of Share-based Compensation of Stock Options Outstanding and Exercisable Options outstanding Options exercisable Number outstanding Weighted average remaining contractual life (Years) Weighted average exercise price Aggregate intrinsic value Number exerciseable Weighted average remaining contractual life (Years) Weighted average exercise price Aggregate intrinsic value 4,466,431 7.28 $ 2.10 $ - 2,599,610 5.88 $ 3.08 $ - The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were 0 and 208,274 stock options exercised during the three months ended March 31, 2023 and March 31, 2022, respectively. 18 (f) Common Stock Warrants The Company accounts for its common stock warrants under ASC 480, Distinguishing Liabilities from Equity , which requires any financial instrument, other than an outstanding share, that, at inception, embodies an obligation to repurchase the issuer’s equity shares, or is indexed to such an obligation, and requires or may require the issuer to settle the obligation by transferring assets, to be classified as a liability. In accordance with ASC 480, the Company’s outstanding warrants from the November 2019 Offering are classified as a liability. The liability is adjusted to fair value at each reporting period, with the changes in fair value recognized as gain (loss) on change in fair value of warrant liability in the Company’s consolidated statements of operations. The warrants issued in the November 2019 Offering allow the warrant holder, if certain change in control events occur, the option 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 fundamental transaction. As of March 31, 2023, the Company had 1,094,030 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 March 31, 2023 and on March 31, 2022 was determined using the Black-Scholes option pricing model with the following Level 3 inputs (as defined in the November 2019 Offering): March 31, 2023 March 31, 2022 Expected life in years 1.64 2.63 Risk-free interest rate 4.34 % 2.64 % Dividend yield — — Volatility 100.00 % 100.00 % Stock price $ 0.32 $ 1.38 During the three months ended March 31, 2023, and March 31, 2022, the Company recorded a non-cash gain of approximately $ 98,000 and a non-cash loss of $ 378,000 , 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: Schedule of Reconciliation of Warrant Liability Warrant Liability Balance at December 31, 2022 $ 229,856 Settlement of liability on warrant exercise - Change in fair value of common stock warrants ( 98,134 ) Balance at March 31, 2023 $ 131,722 Additionally, in the February 2020 Offering, the Company issued 5,042,017 common stock warrants, however, because these warrants do not provide the warrant holder the option to put the warrant back to the Company, the warrants are classified as equity. As of March 31, 2023, and March 31, 2022, there were 840,336 warrants outstanding that were issued in conjunction with the February 2020 Offering. 19 The following table summarizes the number of common stock warrants outstanding and the weighted average exercise price: Schedule of Number of Warrants Outstanding and the Weighted Average Exercise Price Warrants Weighted Average Exercise Price Outstanding at December 31, 2022 1,934,366 $ 0.51 Issued - - Exercised - - Expired - - Cancelled - - Forfeited - - Balance at March 31, 2023 1,934,366 $ 0.51 There were no common stock warrants exercised during the three months ended March 31, 2023, or the three months ended March 31, 2022. The following table summarizes information about common stock warrants outstanding at March 31, 2023: Schedule of Common Stock Warrants Outstanding Warrants outstanding Number exercisable Weighted average remaining contractual life (Years) Weighted average exercise price Aggregate intrinsic value 1,934,366 1.76 $ 0.51 $ - (11) Commitments and Contingencies Litigation The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business. The Company records a liability when a particular contingency is probable and estimable. 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. patents: 9,034,858; 9,205,057; 9,480,690; 9,757,390; 6,569,463; and 6,923,988. However, on February 11, 2020, the Company voluntarily dismissed allegations of patent infringement for expired U.S. Patent Nos. 6,569,463 and 6,923,988 in an effort to streamline the issues and associated costs for dispute. Clarus 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 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; 9,205,057; 9,480,690; and 9,757,390 invalid for failure to satisfy the written description requirement of 35 U.S.C. § 112. Clarus still had remaining claims before the Court. On July 13, 2021, the Company entered into the Global Agreement with Clarus which resolved all outstanding claims of this litigation as well as the on-going United States Patent and Trademark Office (“USPTO”) Interference No. 106,128 between the parties. Under the terms of the Global Agreement, the Company 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. On April 29, 2022, the Company agreed to an amendment to Section 3.1 of the Global Agreement, pursuant to which the Company agreed to pay Clarus $ 1,250,000 in May 2022, with no additional payments required thereafter. No future royalties are owing from either party. 20 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. 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 the Company’s 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 sought 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. The Company has insurance that covers claims of this nature. The retention amount payable by the Company under its policy is $ 1.25 million. The Company filed a motion to dismiss the class action lawsuit on July 24, 2020. In response, the plaintiffs filed their response to the motion to dismiss the class action lawsuit on September 22, 2020 and the Company filed its reply to its motion to dismiss on October 22, 2020. A hearing on the motion to dismiss occurred on January 12, 2022. On April 14, 2023, a judgment was issued ordering the case dismissed with prejudice and closure of the action. 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 In the ordinary course of business, the Company enters into agreements, such as lease agreements, licensing agreements, clinical trial agreements, and certain services agreements, containing standard guarantee and / or indemnification provisions. Additionally, the Company has indemnified its directors and officers to the maximum extent permitted under the laws of the State of Delaware. (12) Agreement with Spriaso, LLC The Company has a 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 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. The Company also agreed to continue providing up to 10 percent of the services of certain employees to Spriaso for a period of time. The agreement to provide services expired in 2021 ; however, it may be extended upon written agreement of Spriaso and the Company. Additionally, during the three months ended March 31, 2023 and 2022, the Company received licensing revenue from Spriaso of $ 55,000 and $ 0 , 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. (13) Subsequent Events Initial Redemption of Series B Preferred Stock All shares of Series B Preferred Stock that were not present in person or by proxy at the Annual Shareholder Meeting as of immediately prior to the opening of the polls on May 10, 2023 were automatically redeemed in whole, but not in part, by the Company at the Initial Redemption Time. Any outstanding shares of Series B Preferred Stock that have not been redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if such redemption is ordered by the Board in its sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing the Reverse Stock Split. 21