Lipocine Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2023 2022 Current assets: Cash and cash equivalents $ 4,072,706 $ 3,148,496 Marketable investment securities 19,775,290 29,381,410 Accrued interest income 41,061 80,427 Contract asset - current portion 130,505 579,428 Prepaid and other current assets 594,097 945,319 Total current assets 24,613,659 34,135,080 Contract asset - non-current portion - 3,252,500 Property and equipment, net of accumulated depreciation of $ 1,174,189 and $ 1,153,530 respectively 114,931 131,589 Other assets 23,753 23,753 Total assets $ 24,752,343 $ 37,542,922 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,101,068 $ 600,388 Accrued expenses 1,140,313 1,077,738 Total current liabilities 2,241,381 1,678,126 Warrant liability 29,440 229,856 Total liabilities 2,270,821 1,907,982 Commitments and contingencies (notes 6, 8, 9 and 11) - - Stockholders’ equity: Common stock, par value $ 0.0001 per share, 200,000,000 shares authorized; 5,316,166 and 5,235,166 issued and 5,315,830 and 5,234,830 outstanding 8,860 8,852 Additional paid-in capital 220,022,838 219,112,164 Treasury stock at cost, 336 shares ( 40,712 ) ( 40,712 ) Accumulated other comprehensive loss ( 14,503 ) ( 20,321 ) Accumulated deficit ( 197,494,961 ) ( 183,425,043 ) Total stockholders’ equity 22,481,522 35,634,940 Total liabilities and stockholders’ equity $ 24,752,343 $ 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 2023 2022 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues: License revenue $ - $ - $ 54,990 $ 500,000 Minimum guaranteed royalties revenue (reversal of variable consideration) ( 3,121,996 ) - ( 3,121,996 ) - Total revenues (reversal of variable consideration), net ( 3,121,996 ) - ( 3,067,006 ) 500,000 Operating expenses: Research and development 2,878,798 2,100,432 8,500,319 6,886,398 General and administrative 1,042,572 798,939 3,770,281 3,172,144 Total operating expenses 3,921,370 2,899,371 12,270,600 10,058,542 Operating loss ( 7,043,366 ) ( 2,899,371 ) ( 15,337,606 ) ( 9,558,542 ) Other income (expense): Interest and investment income 317,569 163,966 1,067,561 275,420 Interest expense - - - ( 27,098 ) Unrealized gain on warrant liability 74,827 326,240 200,416 531,697 Gain on litigation settlement liability - - - 250,000 Total other income, net 392,396 490,206 1,267,977 1,030,019 Loss before income tax expense ( 6,650,970 ) ( 2,409,165 ) ( 14,069,629 ) ( 8,528,523 ) Income tax expense - - ( 200 ) ( 200 ) Net loss ( 6,650,970 ) ( 2,409,165 ) ( 14,069,829 ) ( 8,528,723 ) Issuance of Series B preferred stock dividend - - ( 89 ) - Net loss attributable to common shareholders $ ( 6,650,970 ) $ ( 2,409,165 ) $ ( 14,069,918 ) $ ( 8,528,723 ) Basic loss per share attributable to common stock $ ( 1.26 ) $ ( 0.46 ) $ ( 2.68 ) $ ( 1.63 ) Weighted average common shares outstanding, basic 5,292,058 5,234,576 5,254,116 5,230,619 Diluted loss per share attributable to common stock $ ( 1.27 ) $ ( 0.52 ) $ ( 2.72 ) $ ( 1.72 ) Weighted average common shares outstanding, diluted 5,292,058 5,250,179 5,254,116 5,260,530 Comprehensive loss: Net loss $ ( 6,650,970 ) $ ( 2,409,165 ) $ ( 14,069,829 ) $ ( 8,528,723 ) Net unrealized gain (loss) on available-for-sale securities 1,309 7,972 5,818 ( 58,919 ) Comprehensive loss $ ( 6,649,661 ) $ ( 2,401,193 ) $ ( 14,064,011 ) $ ( 8,587,642 ) 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 and Nine Months Ended September 30, 2023 and 2022 (Unaudited) Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Additional Accumulated Total Number of Shares Amount Number of Shares Amount Number of Shares Amount Paid-In Capital Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity Balances at June 30, 2022 - $ - 5,234,144 $ 8,850 336 $ ( 40,712 ) $ 218,792,479 $ ( 84,907 ) $ ( 178,785,965 ) $ 39,889,745 Net loss - - - - - - - - ( 2,409,165 ) ( 2,409,165 ) Unrealized net gain on marketable investment securities - - - - - - - 7,972 - 7,972 Stock-based compensation - - - - - - 160,227 - - 160,227 Option exercises - - 686 1 - - 5,343 - - 5,344 Costs associated with ATM Offering - - - - - - ( 5,300 ) - - ( 5,300 ) Balances at September 30, 2022 - $ - 5,234,830 $ 8,851 336 $ ( 40,712 ) $ 218,952,749 $ ( 76,935 ) $ ( 181,195,130 ) $ 37,648,823 Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Additional Accumulated Total Number of Shares Amount Number of Shares Amount Number of Shares Amount Paid-In Capital Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity Balances at December 31, 2021 - $ - 5,221,883 $ 8,829 336 $ ( 40,712 ) $ 218,286,324 $ ( 18,016 ) $ ( 172,666,407 ) $ 45,570,018 Net loss - - - - - - - - ( 8,528,723 ) ( 8,528,723 ) Unrealized net loss on marketable investment securities - - - - - - - ( 58,919 ) - ( 58,919 ) Stock-based compensation - - - - - - 470,824 - - 470,824 Option exercises - - 12,947 22 - - 211,401 - - 211,423 Costs associated with ATM Offering - - - - - - ( 15,800 ) - - ( 15,800 ) Balances at September 30, 20 22 - $ - 5,234,830 $ 8,851 336 $ ( 40,712 ) $ 218,952,749 $ ( 76,935 ) $ ( 181,195,130 ) $ 37,648,823 5 Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Additional Accumulated Total Number of Shares Amount Number of Shares Amount Number of Shares Amount Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Stockholders’ Equity Balances at June 30, 2023 - - 5,234,830 8,852 336 ( 40,712 ) 219,443,674 ( 15,812 ) ( 190,843,991 ) 28,552,011 Net loss - - - - - - - - ( 6,650,970 ) ( 6,650,970 ) Unrealized net gain on marketable investment securities - - - - - - - 1,309 - 1,309 Stock-based compensation - - - - - - 158,090 - - 158,090 Common stock sold through ATM offering - - 81,000 8 - - 421,074 - - 421,082 Balances at September 30, 2023 - $ - 5,315,830 $ 8,860 336 $ ( 40,712 ) $ 220,022,838 $ ( 14,503 ) $ ( 197,494,961 ) $ 22,481,522 Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Additional Accumulated Total Number of Shares Amount Number of Shares Amount Number of Shares Amount Paid-In Capital Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity Balances at December 31, 2022 - $ - 5,234,830 $ 8,852 336 $ ( 40,712 ) $ 219,112,164 $ ( 20,321 ) $ ( 183,425,043 ) $ 35,634,940 Balances - $ - 5,234,830 $ 8,852 336 $ ( 40,712 ) $ 219,112,164 $ ( 20,321 ) $ ( 183,425,043 ) $ 35,634,940 Net loss - - - - - - - - ( 14,069,829 ) ( 14,069,829 ) Unrealized net gain on marketable investment securities - - - - - - - 5,818 - 5,818 Stock-based compensation - - - - - - 500,727 - - 500,727 Issuance of Series B preferred stock dividend 88,511 9 - - - - 80 - ( 89 ) ( 9 ) Redemption of Series B preferred stock ( 88,511 ) ( 9 ) - - - - 9 - - 9 Common stock sold through ATM offering - - 81,000 8 - - 409,858 - - 409,866 Balances at September 30, 2023 - $ - 5,315,830 $ 8,860 336 $ ( 40,712 ) $ 220,022,838 $ ( 14,503 ) $ ( 197,494,961 ) $ 22,481,522 Balances - $ - 5,315,830 $ 8,860 336 $ ( 40,712 ) $ 220,022,838 $ ( 14,503 ) $ ( 197,494,961 ) $ 22,481,522 See accompanying notes to unaudited condensed consolidated financial statements 6 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) 2023 2022 Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net loss $ ( 14,069,829 ) $ ( 8,528,723 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation expense 20,658 6,875 Stock-based compensation expense 500,727 470,824 Non-cash interest expense - 5,842 Non-cash gain on change in fair value of warrant liability ( 200,416 ) ( 531,697 ) Amortization of premium (discounts) on marketable investment securities ( 750,092 ) 36,988 Write off of contract asset due to variable consideration revenue reversal 3,121,995 - Changes in operating assets and liabilities: Accrued interest income 39,366 206,479 Contract asset 579,428 218,072 Prepaid and other current assets 351,222 279,929 Accounts payable 500,680 ( 658,886 ) Accrued expenses 62,575 ( 135,608 ) Litigation settlement liability - ( 1,250,000 ) Gain on extinguishment of litigation settlement liability - ( 250,000 ) Cash used in operating activities ( 9,843,686 ) ( 10,129,905 ) Cash flows from investing activities: Purchase of property and equipment ( 4,000 ) ( 37,099 ) Purchases of marketable investment securities ( 13,537,970 ) ( 33,567,544 ) Maturities of marketable investment securities 23,900,000 45,302,000 Cash provided by investing activities 10,358,030 11,697,357 Cash flows from financing activities: Debt repayments - ( 1,666,667 ) End of loan payment - ( 650,000 ) Net proceeds from sale of common stock through ATM 409,866 ( 15,800 ) Proceeds from stock option exercises - 211,423 Cash provided by (used in) financing activities 409,866 ( 2,121,044 ) Net increase (decrease) in cash and cash equivalents 924,210 ( 553,592 ) Cash and cash equivalents at beginning of period 3,148,496 2,950,552 Cash and cash equivalents at end of period $ 4,072,706 $ 2,396,960 Supplemental disclosure of cash flow information: Interest paid $ - $ 21,256 Income taxes paid $ 656 200 Supplemental disclosure of non-cash investing and financing activity: Net unrealized gain (loss) on available-for-sale securities $ 5,818 $ ( 58,919 ) Accrued final payment charge on debt $ - $ 5,842 Issuance of Series B preferred stock $ 89 $ - See accompanying notes to unaudited condensed consolidated financial statements 7 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 and nine months ended September 30, 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 November 8, 2024 which includes an on-going clinical study for LPCN 1148 in the management of decompensated cirrhosis, a confirmatory pivotal pharmacokinetic (“PK”) 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 November 8, 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. On May 10, 2023, at the 2023 annual meeting of the stockholders, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split at a ratio not less than 1-for-5 and not more than 1-for-20, with the exact ratio to be set within that range at the discretion of the Company’s board of directors (the “Board”) without further approval or authorization from our stockholders in order to achieve a minimum bid price of $1.00 per share for a minimum of 10 consecutive trading days , as required for continuous listing of the common stock on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). On May 10, 2023, the Company’s Board approved a reverse stock split ratio of 1-for-17. The Company filed an Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware on May 10, 2023, and the Amendment became effective at 5:00 p.m. Eastern Time on Thursday, May 11, 2023. The Company’s shares began trading on a split-adjusted basis on the Nasdaq Capital Market commencing upon market open on May 12, 2023. The accompanying consolidated financial statements and notes to consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. The reverse stock split did not change the number of authorized shares of common stock or its par value. 8 (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 (“License Agreement”) with Antares Pharma, Inc. (“Antares”). See Note 12 for a description of the agreement with Spriaso, a related party. 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. On October 2, 2023, the Company received notice from Antares of Antares’ termination of the License Agreement which stated that the License Agreement will terminate effective January 31, 2024. The Company received approximately $ 772,000 from Antares during the third quarter of 2023 under the terms of our license agreement, of which approximately $ 580,000 was applied to the contract asset and $ 192,000 was applied to imputed interest receivable. Based on the termination notice, the Company has recorded a non-cash revenue reversal of variable consideration relating to the minimum guaranteed royalties recorded as part of the License Agreement of approximately $ 3.1 million for the balance of the contract asset that is not expected to be received, thus the remaining contract asset balance equals the expected fourth quarter royalty payment, based on net sales in the third quarter of 2023. Revenue Concentration A major partner is considered to be one that comprises more than 10 % of the Company’s total revenues. The Company recognized a reversal of revenue relating to variable consideration of the Antares License Agreement of $ 3.1 million and $ 0 for the three months ended September 30, 2023, and 2022, respectively, due to the termination of the License Agreement. The Company recognized a net reversal of revenue relating to the variable consideration of the Antares License Agreement of approximately $ 3.1 million and revenue of $ 500,000 for the nine months ended September 30, 2023, and 2022, respectively. License revenue recognized in 2023 of $ 55,000 , was 100 % from a related-party, Spriaso. License revenue recognized in 2022 was 100 % from one major customer, Antares. (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. 9 The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock for the three and nine months ended September 30, 2023 and 2022: Schedule of Computation of Basic and Diluted Earnings (loss) Per Share of Common Stock Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Basic loss per share attributable to common stock: Numerator Net loss $ ( 6,650,970 ) $ ( 2,409,165 ) $ ( 14,069,829 ) $ ( 8,528,723 ) Denominator Weighted avg. common shares outstanding 5,292,058 5,234,576 5,254,116 5,230,619 Basic loss per share attributable to common stock $ ( 1.26 ) $ ( 0.46 ) $ ( 2.68 ) $ ( 1.63 ) Diluted loss per share attributable to common stock: Numerator Net loss $ ( 6,650,970 ) $ ( 2,409,165 ) $ ( 14,069,829 ) $ ( 8,528,723 ) Effect of dilutive securities on net loss: Common stock warrants 74,827 326,240 200,416 531,697 Total net loss for purpose of calculating diluted net loss per common share $ ( 6,725,797 ) $ ( 2,735,405 ) $ ( 14,270,245 ) $ ( 9,060,420 ) Denominator Weighted avg. common shares outstanding 5,292,058 5,234,576 5,254,116 5,230,619 Weighted average effect of dilutive securities: Common stock warrants - 15,603 - 29,911 Total shares for purpose of calculating diluted net loss per common share 5,292,058 5,250,179 5,254,116 5,260,530 Diluted loss per share attributable to common stock $ ( 1.27 ) $ ( 0.52 ) $ ( 2.72 ) $ ( 1.72 ) The computation of diluted loss per share for the three and nine months ended September 30, 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 September 30, 2023 2022 Stock options 264,069 234,826 Warrants 49,433 49,433 10 (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 September 30, 2023, and December 31, 2022, were as follows: Schedule of Available for Sale Securities September 30, 2023 Amortized Cost Gross unrealized holding gains Gross unrealized holding losses Aggregate fair value Government treasury bills $ 7,181,893 $ - $ ( 4,846 ) $ 7,177,047 Corporate bonds, notes and commercial paper 3,782,865 - ( 2,908 ) 3,779,957 U.S. government agency securities 8,825,035 - ( 6,749 ) 8,818,286 $ 19,789,793 $ - $ ( 14,503 ) $ 19,775,290 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 September 30, 2023, are as follows: Schedule of Maturities of Debt Securities Classified as Available-for-sale Securities September 30, 2023 Amortized Cost Aggregate fair value Due within one year $ 19,789,793 $ 19,775,290 $ 19,789,793 $ 19,775,290 There were no sales of marketable investment securities during the three and nine months ended September 30, 2023, and 2022 and therefore no realized gains or losses. Additionally, during the three months ended September 30, 2023, and 2022, $ 6.0 million and $ 11.5 million of marketable investment securities matured, and during the nine months ended September 30, 2023 and 2022, $ 23.9 million and $ 45.3 million of marketable investment securities matured, respectively. The Company determined there were no other-than-temporary impairments for the three and nine months ended September 30, 2023, and 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. 11 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 September 30, 2023 and December 31, 2022: Schedule of Fair Value, Assets Measured on Recurring Basis Fair value measurements at reporting date using September 30, 2023 Level 1 inputs Level 2 inputs Level 3 inputs Assets: Cash equivalents - money market funds $ 4,197,655 $ 4,197,655 $ - $ - Government treasury bills 7,177,047 7,177,047 - - Commercial paper 1,395,619 - 1,395,619 - Corporate bonds and notes 2,384,338 - 2,384,338 - US. Government agency securities 8,818,286 - 8,818,286 - $ 23,972,945 $ 11,374,702 $ 12,598,243 $ - Liabilities: Warrant liability $ 29,440 $ - $ - $ 29,440 $ 24,002,385 $ 11,374,702 $ 12,598,243 $ 29,440 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. 12 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 and 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 September 30, 2023, include (i) volatility of 100 %, (ii) risk free interest rate of 5.45 %, (iii) strike price of $ 8.50 , (iv) fair value of common stock of $ 2.98 , and (v) expected life of 1.1 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 $ 8.50 , (iv) fair value of common stock of $ 6.77 , 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 changes in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2, or Level 3 for the three and nine months ended September 30, 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 September 30, 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 $ 9,000 and $ 0 during the three months ended September 30, 2023 and 2022, respectively, and royalty expense of approximately $ 22,000 and $ 17,000 during the nine months ended September 30, 2023 and 2022, respectively. 13 (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. On October 2, 2023, the Company received notice from Antares of Antares’ termination of the License Agreement. In accordance with the terms of the License Agreement, the License Agreement will terminate effective January 31, 2024. Upon termination of the License Agreement, all rights and licenses granted by the Company to Antares under the License Agreement will terminate and all rights in TLANDO will revert to the Company. While the Company plans to seek a commercialization partner for TLANDO, there can be no guarantee that the Company will be able to enter into such a transaction on terms favorable to the Company or at all. The Company retained 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 product from the Company. Finally, pursuant to the terms of the Antares License Agreement, Antares was 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 recognized a revenue reversal of variable consideration for minimum guaranteed royalties of approximately $ 3.1 million under the Antares License Agreement during the three and nine months ended September 30, 2023. The Company recognized revenue of $ 0 and $ 500,000 for the three and nine months ended September 30, 2022. The revenue recognized in 2022 related to the non-refundable cash fee for extending Antares’ option to license TLANDO XR to June 30, 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 million and $ 1.4 million, respectively, for the three months ended September 30, 2023 and 2022 and $ 5.9 million and $ 4.6 million, respectively, for the nine months ended September 30, 2023 and 2022 under these agreements and has recorded these expenses in research and development expenses. 14 (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. Future minimum lease payments under the non-cancelable operating lease as of September 30, 2023 are: Schedule of Future Minimum Lease Payments for Operating Leases Operating leases Year ending December 31: 2023 $ 89,339 2024 59,559 Total minimum lease payments $ 148,898 The Company’s rent expense was $ 89,000 and $ 86,000 for the three months ended September 30, 2023 and 2022, respectively. The Company’s rent expense was approximately $ 266,000 and $ 256,000 for the nine months ended September 30, 2023 and 2022, respectively. (10) Stockholders’ Equity On May 10, 2023, at the 2023 annual meeting of the stockholders, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split at a ratio not less than 1-for-5 and not more than 1-for-20, with the exact ratio to be set within that range at the discretion of the Board without further approval or authorization from our stockholders. On May 10, 2023, the Company’s Board approved a reverse stock split ratio of 1-for-17. The Company filed the Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware on May 10, 2023, and the Amendment became effective at 5:00 p.m. Eastern Time on Thursday, May 11, 2023. The Company’s shares began trading on a split-adjusted basis on the Nasdaq Capital Market commencing upon market open on May 12, 2023. All common stock share data and per share price data of the Company reflect the reverse stock split effective May 11, 2023. 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. 15 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 September 30, 2023, the Company had sold an aggregate of 964,711 shares at a weighted-average sales price of $ 34.52 per share under the At the Market Offering ( the “ATM Offering”) for aggregate gross proceeds of $ 33.3 million and net proceeds of $ 32.1 million, after deducting sales agent commission and discounts and our other offering costs. During the three and nine months ended September 30, 2023, the Company sold 81,000 shares of its common stock pursuant to the ATM Offering at a weighted-average sales price of $ 5.36 per share, resulting in net proceeds of approximately $ 410,000 under the Sales Agreement which is net of approximately $ 24,000 in expenses. During the three and nine months ended September 30, 2022, the Company did not sell any shares of its common stock pursuant to the ATM Offering. As of September 30, 2023, the Company had $ 40.8 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 the Company’s common stock pursuant to the Sales Agreement having an aggregate offering price of up to $ 15.7 million. (b) Series B Preferred Stock On March 7, 2023, 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 entitled the holder thereof to 1,000,000 votes per share, and each fraction of a share of Series B Preferred Stock had a ratable number of votes. Thus, each one-thousandth of a share of Series B Preferred Stock was entitled to 1,000 votes. The outstanding shares of Series B Preferred Stock were 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 2023 annual meeting of stockholders. All shares of Series B Preferred Stock that were not present in person or by proxy at the 2023 annual meeting as of immediately prior to the opening of the polls (the “Initial Redemption Time”) were automatically redeemed 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”). The remaining shares of Series B Preferred Stock that were not redeemed pursuant to the Initial Redemption were redeemed automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing the Reverse Stock Split (the “Subsequent Redemption”). As of June 30, 2023, all shares of Series B Preferred Stock had been redeemed by the Company. Each “beneficial owner” (as such terms are defined in the Certificate of Designation with respect to the Series B Preferred Stock) of shares of Series B Preferred Stock redeemed in the redemptions described above has the right to receive an amount equal to $0.01 in cash for each ten whole shares of Series B Preferred Stock that were “beneficially owned” by the beneficial owner 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 beneficial owner to the corporate secretary of the Company following the applicable redemption time. 16 The Series B Preferred Stock was 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 had no stated maturity and was not subject to any sinking fund. The Series B Preferred Stock was 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 was not solely in control of the redemption of the shares of Series B Preferred Stock prior to the annual meeting of stockholders since the holders had the option of deciding whether to vote in respect of the above-described Reverse Stock Split, which determined whether a given holder’s shares of Series B Preferred Stock was redeemed in the Initial Redemption or the Subsequent Redemption. Since the redemption of the Series B Preferred Stock was not solely in the control of the Company, the shares of Series B Preferred Stock were classified within the mezzanine equity in the Company’s unaudited consolidated statement of stockholder’s equity. Upon issuance, the shares of Series B Preferred Stock were measured at redemption value. As of June 30, 2023, all shares of Series B Preferred Stock had been redeemed by the Company. 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. (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. 17 (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. 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 $ 158,000 and $ 160,000 , respectively, for the three months ended September 30, 2023 and 2022, and approximately $ 501,000 and $ 471,000 , for the nine months ended September 30, 2023 and 2022, respectively, and is allocated as follows: Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs 2023 2022 2023 2022 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Research and development $ 92,034 $ 83,504 $ 270,776 $ 251,427 General and administrative 66,056 76,723 229,951 219,397 Total $ 158,090 $ 160,227 $ 500,727 $ 470,824 The Company issued 0 and 26,467 stock options, respectively, during the three and nine months ended September 30, 2023, and issued 1,587 and 31,230 stock options during the three and nine months ended September 30, 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. 18 For options granted during the nine months ended September 30, 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 5.73 years 5.78 years Risk-free interest rate 3.73 % 1.98 % Expected dividend yield — — Expected volatility 98.97 % 101.50 % 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 September 30, 2023, there was approximately $ 608,000 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 1.5 years and will be adjusted for subsequent changes in estimated forfeitures. (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 58,823 shares were authorized for issuance under the 2014 Plan. Additionally, 15,994 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 74,817 to 145,405 . 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 145,405 to 189,522 . 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 189,522 to 336,582 . 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 336,582 shares of common stock are authorized for issuance under the 2014 Plan, with 46,600 shares remaining available for grant as of September 30, 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 277,225 $ 38.44 Options granted 26,467 6.19 Options exercised - - Options forfeited ( 7,352 ) 6.91 Options cancelled ( 32,271 ) 47.93 Balance at September 30, 2023 264,069 34.93 Options exercisable at September 30, 2023 175,719 47.24 19 The following table summarizes information about stock options outstanding and exercisable at September 30, 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 264,069 6.81 $ 34.93 $ - 175,719 5.73 $ 47.24 $ - The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were 0 and 686 stock options exercised during the three months ended September 30, 2023 and 2022, respectively. There were 0 and 12,947 stock options exercised during the nine months ended September 30, 2023 and 2022, respectively. (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 September 30, 2023, the Company had 64,362 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 September 30, 2023 and on December 31, 2022 was determined using the Black-Scholes option pricing model with the following Level 3 inputs (as defined in the November 2019 Offering): September 30, 2023 December 31, 2022 Expected life in years 1.14 1.88 Risk-free interest rate 5.45 % 4.41 % Dividend yield — — Volatility 100.00 % 100.00 % Stock price $ 2.98 $ 6.77 20 During the three and nine months ended September 30, 2023, the Company recorded non-cash gains of approximately $ 75,000 and 200,000 , respectively, from the change in fair value of the November 2019 Offering warrants. During the three and nine months ended September 30, 2022, the Company recorded a non-cash gain of approximately $ 326,000 and $ 532,000 , respectively, from the change in fair value on 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 ( 200,416 ) Balance at September 30, 2023 $ 29,440 Additionally, in the February 2020 Offering, the Company issued 296,593 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 September 30, 2023, and 2022, there were 49,433 warrants outstanding that were issued in the February 2020 Offering. 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 113,795 $ 8.72 Issued - - Exercised - - Expired - - Cancelled - - Forfeited - - Balance at September 30, 2023 113,795 $ 8.72 There were no common stock warrants exercised during either the three or nine months ended September 30, 2023 and 2022. The following table summarizes information about common stock warrants outstanding at September 30, 2023: Schedule of Common Stock Warrants Outstanding Warrants outstanding Number exercisable Weighted average remaining contractual life (Years) Weighted average exercise price Aggregate intrinsic value 113,795 1.25 $ 8.72 $ - (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. 21 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 (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 (the “Amendment to 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. 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 and nine months ended September 30, 2023, the Company received licensing revenue from Spriaso of approximately $ 0 and $ 55,000 , respectively. During each of the three and nine months ended September 30, 2022, the Company received licensing revenue of $ 0 . 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 On October 2, 2023, the Company received notice from Antares of Antares’ termination of the License Agreement. In accordance with the terms of the License Agreement, the License Agreement will terminate effective January 31, 2024. Upon termination of the License Agreement, all rights and licenses granted by the Company to Antares under the License Agreement will terminate and all rights in TLANDO will revert to the Company. While the Company plans to seek a commercialization partner for TLANDO, there can be no guarantee that the Company will be able to enter into such a transaction on terms favorable to the Company or at all. 22 I TEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the management’s discussion and analysis included in our Form 10-K, filed with the SEC on March 10, 2023, our first quarter Form 10-Q filed with the SEC on May 11, 2023, our second quarter Form 10-Q filed with the SEC on August 10, 2023, as well as the financial statements and related notes contained therein. As used in the discussion below, “we,” “our,” and “us” refers to Lipocine. Forward-Looking Statements This section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements may refer to such matters as products, product benefits, pre-clinical and clinical development timelines, clinical and regulatory expectations and plans, expected responses to regulatory actions, anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance, expected research and development and other expenses, future expectations for liquidity and capital resources needs and similar matters. Such words as “may”, “will”, “expect”, “continue”, “estimate”, “project”, and “intend” and similar terms and expressions are intended to identify forward looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A (Risk Factors) of this Form 10-Q, or in Part II, Item 1A (Risk Factors) of our Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 10, 2023, Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 11, 2023, or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 10, 2023. Except as required by applicable law, we assume no obligation to revise or update any forward-looking statements for any reason. Overview of Our Business We are a biopharmaceutical company focused on leveraging our proprietary Lip’ral platform to develop differentiated products through the oral delivery of previously difficult to deliver molecules, focused on treating Central Nervous System (“CNS”) disorders. Our proprietary delivery technologies are designed to improve patient compliance and safety through orally available treatment options. Our primary development programs are based on oral delivery solutions for poorly bioavailable drugs. We have a portfolio of differentiated innovative product candidates that target high unmet needs for neurological and psychiatric CNS disorders, liver diseases, and hormone supplementation for men and women. On October 14, 2021, we entered into a license agreement (the “Antares License Agreement”) with Antares Pharma, Inc. (“Antares” or our “Licensee”) for the development and commercialization of our product candidate, TLANDO®, an oral testosterone replacement therapy (“TRT”) comprised of testosterone undecanoate (“TU”), pursuant to which we granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize the TLANDO product for TRT in the U.S. TLANDO is a registered trademark assigned to Antares. On October 2, 2023, the Company received notice from Antares of Antares’ termination of the License Agreement, effective January 31, 2024. All rights and licenses granted by the Company to Antares will terminate and all rights in TLANDO will revert to us. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that the Company will be able to enter into such a transaction on terms favorable to us or at all. Any FDA required post-marketing studies which were the responsibility of our Licensee will revert to us or a new licensee after the termination of the License Agreement. On March 28, 2022, Antares received approval from the FDA for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. On May 24, 2022, Halozyme Therapeutics completed an acquisition of Antares Pharma Inc. through a 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. On June 7, 2022, Halozyme announced the commercial launch of TLANDO, an oral treatment indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone (primary or hypogonadotropic hypogonadism). 23 Additional clinical development pipeline candidates include: LPCN 1154 for postpartum depression (“PPD”); LPCN 2101 for epilepsy; and LPCN 1148 comprising a novel prodrug of testosterone, testosterone laurate (“TL”), for the management of decompensated cirrhosis. In addition to our CNS product candidates, we have assets for which we expect to seek partnerships to enable further development including LPCN 1144, an oral prodrug of androgen receptor modulator for the treatment of non-cirrhotic non-alcoholic steatohepatitis (“NASH”) which has completed Phase 2 testing; LPCN 1111, a next generation oral TRT product comprised of testosterone tridecanoate (“TT”) with the potential for once daily dosing which has completed Phase 2 testing; and LPCN 1107, potentially the first oral hydroxy progesterone caproate (“HPC”) product indicated for the prevention of recurrent preterm birth (“PTB”), which has completed a dose finding clinical study in pregnant women and has been granted orphan drug designation by the FDA. The following charts summarize the status of our product candidate development and partnering programs: 24 Corporate Strategy Our goal is to become a leading biopharmaceutical company focused on leveraging our proprietary Lip’ral drug delivery technology platform to develop differentiated products through oral delivery of previously difficult to deliver molecules for CNS disorders. The key components of our strategy are to: Advance LPCN 1154 and other CNS product candidates. We intend to focus on the development of endogenous neuroactive steroids (“NAS”) which have broad applicability in treating various CNS conditions where we can leverage our technology platform to develop highly differentiated oral therapeutics. Our priority is on the development of LPCN 1154, a fast-acting oral antidepressant for postpartum depression (“PPD”) with potential for outpatient use. Develop partnership(s) to continue the advancement of non-core pipeline assets . We continuously strive to prioritize our resources in seeking partnerships for our pipeline assets. In addition to seeking a U.S. commercialization partner for TLANDO, we are currently exploring partnering (i) LPCN 1144, our candidate for treatment of non-cirrhotic NASH, (ii) LPCN 1148, for the management of decompensated cirrhosis, (iii) LPCN 1111, a once-a-day therapy candidate for TRT, and (iv) LPCN 1107, our candidate for prevention of pre-term birth. We are also exploring the possibility of licensing LPCN 1021 (known as TLANDO in the United States) to third parties outside the United States, although no licensing agreement has been entered into by the Company. Our Development Pipeline Product Candidates Our pipeline of clinical development candidates includes LPCN 1154 for PPD, LPCN 2101 for epilepsy, and LPCN 1148, an androgen therapy for the management of cirrhosis. We will continue to explore other product development candidates targeting CNS indications with a significant unmet need. We will also continue efforts to enter into partnership arrangements for the continued development and/or marketing of LPCN 1144, LPCN 1148, LPCN 1111, LPCN 1107 and TLANDO outside of the United States. Our products are based on our proprietary Lip’ral drug delivery technology platform. The FDA approved Lip’ral-based TLANDO in March 2022. Lip’ral technology is a patented technology based on lipidic compositions which form an optimal dispersed phase in the gastrointestinal environment for improved absorption of insoluble drugs. The drug loaded dispersed phase presents the solubilized drug efficiently at the absorption site (gastrointestinal tract membrane) thus improving the absorption process and making the drug less dependent on physiological variables such as dilution, gastro-intestinal pH and food effects for absorption. Lip’ral-based formulation enables improved solubilization and higher drug-loading capacity, which can lead to improved bioavailability, reduced dose, faster and more consistent absorption, reduced variability, reduced sensitivity to food effects, improved patient compliance, and targeted lymphatic delivery where appropriate. Oral Programs for CNS Disorders Some preferred endogenous or naturally occurring NAS present in central nervous system act as positive allosteric modulators (“PAM”) of the GABA A receptor, the major biological target of the inhibitory neurotransmitter γ-aminobutyric acid (“GABA A” ). To improve oral delivery of these modulators, several synthetic NAS derivatives of endogenous GABA A receptor PAMs have been developed for therapeutic use in the past few decades. We believe through utilization of our proprietary technology we may have the ability to enable effective oral delivery of endogenous GABA A receptor PAMs which historically had been deemed to be not orally bioavailable. As a novel drug class, NAS have received considerable attention because of their potential to treat various neuropsychiatric conditions including depression, movement disorders, epilepsy, anxiety, and neurodegenerative diseases. We have conducted Phase 1 pharmacokinetic (“PK”) studies for each of our two lead NAS candidates which have demonstrated promising PK results, safety, and tolerability and we are evaluating additional undisclosed CNS-focused candidates. 25 LPCN 1154: Product Candidate for PPD Our most advanced NAS candidate is LPCN 1154, a rapid onset, oral formulation of the neuroactive steroid brexanolone which we are developing for the treatment of PPD. The FDA recently agreed with our proposal for establishing the efficacy of LPCN 1154 through a pivotal PK bridge to an approved IV infusion brexanolone via a 505(b)(2) NDA filing. Based on feedback from the FDA, the company conducted a pilot PK bridge study of LPCN 1154, a prelude to a pivotal study required for NDA filing, and released positive topline results from the pilot PK bridge study in May of 2023. Results from the pilot PK study will enable identification of the dosing regimen to be used in a single confirmatory pivotal PK study to establish efficacy for PPD and support NDA submission. On October 18, 2023, we met with the FDA and the FDA agreed with our proposal for a 505(b)(2) NDA filing based on a single pivotal PK study comparing exposure of LPCN 1154 with the approved IV infusion of brexanolone. We anticipate initiating the pivotal PK study in the first quarter of 2024 and expect to have top line results in the second quarter of 2024. We have previously completed an oral PK study and a food effect study with LPCN 1154. PPD PPD, a type of major depressive disorder with onset either during pregnancy or within four weeks of delivery, refers to depression persisting up to 12 months after childbirth. PPD can be clinically segmented by the severity of symptoms and presence of a comorbidity, including epilepsy. Approximately 1 in 8 mothers suffers from PPD in the United States alone; this equates to approximately 500,000 women being affected by PPD annually. Disease Overview - PPD ● PPD is distinct from the “baby blues,” a condition that up to 70% of all new mother’s experience; “baby blues” tend to be short-lived emotional conditions that do not interfere with daily activities. ● Symptoms of PPD include hallmarks of major depression, including, but not limited to, sadness, depressed mood, loss of interest, change in appetite, insomnia, sleeping too much, fatigue, difficulty thinking/concentrating, excessive crying, fear of harming the baby/oneself, and/or thoughts of death or suicide. ● During pregnancy, levels of endogenous NAS increase considerably along with levels of progesterone; however, they drop sharply postpartum. It has been hypothesized that the rapid perinatal decrease in circulating levels of endogenous NASs may be involved in the development of PPD. The first approved treatment option for PPD is an injectable containing endogenous NAS. ● Depression may persist long after child delivery. Additionally, approximately 40% of women relapse in subsequent pregnancies or on other occasions. ● Psychiatric comorbidities are common in patients with epilepsy. Patients with epilepsy are at high risk for major depressive disorders and PPD. Reported PPD rates are higher among women with epilepsy than the general population. Associated Risk Factors ● Genetic: family history and/or previous experience of depression or other mood disorders ● Physiological: rapid changes in sex hormones, stress hormones, and thyroid hormone levels during and after delivery ● Environmental: stressful life events, changes in relationships at home and at work, and/or lack of familial support Unmet Medical Need We believe there is considerable unmet need within women with PPD due to lack of convenient and fast-acting oral therapies. Selective Serotonin Reuptake Inhibitors (“SSRIs”) have been the traditional first-line therapy choice for women with severe PPD and require weeks for onset of efficacy; therefore, a need for an oral treatment option with a faster onset of action remains a significant unmet need in treating PPD, especially in women with epilepsy risk wherein psychiatric comorbidity is common and PPD rates are higher than the general population. Injectable brexanolone (Zulresso™, Sage Therapeutics) became the first FDA-approved treatment for postpartum depression. However, numerous factors limit the utilization of injectable brexanolone such as method of administration, cost, and safety concerns. Administration of injectable brexanolone requires a 60-hour continuous infusion in a supervised medical setting, a demanding ask for a mother with a newborn. Besides associated privacy concerns and social stigma, inpatient treatment may also require separation of the mother and child for a few days, which may be difficult to the already strained mother-infant bond and may present breast feeding challenges. Moreover, the pharmacotherapy costs coupled with inpatient treatment/childcare costs limits its accessibility and affordability to women most in need of the therapy. Finally, due to concerns about the safety of injectable Zulresso including excessive sedation or loss of consciousness, Zulresso has a Black Box Warning in its label and is only available through a restricted distribution program (“REMS”), and sites need significant time to become treatment ready. Additionally, on August 4, 2023, Sage Therapeutics, Inc. and Biogen, Inc. announced FDA approval of Zurzuvae™ (zuranolone), as an oral treatment for women with postpartum depression and stated that Zurzuvae is expected to launch and be commercially available in the fourth quarter of 2023 following scheduling as a controlled substance by the U.S. Drug Enforcement Administration which they expect within 90 days of FDA approval. We believe LPCN 1154 targets the current unmet need for a convenient oral treatment candidate with faster onset of action and rapid relief. 26 LPCN 2101: NAS for Epilepsy We are currently evaluating an additional NAS candidate, LPCN 2101, for women with epilepsy (“WWE”). We have completed pre-clinical and Phase 1 studies for LPCN 2101 which demonstrated promising PK results, safety and tolerability. In July 2022 our IND was accepted by the FDA for LPCN 2101 for adults with epilepsy and we plan to initiate a Phase 2 IND opening proof-of-concept study to evaluate the safety, tolerability, and efficacy of LPCN 2101, subject to the availability of additional resources. Disease Overview – Epilepsy Epilepsy is defined by the 1) occurrence of at least two unprovoked seizures more than 24 hours apart, 2) occurrence of one unprovoked seizure and a probability of further seizures occurring over the next 10 years, and/or 3) diagnosis of an epilepsy syndrome. Patients with epilepsy are more likely to be comorbid with other conditions, including depression and anxiety. Patients with epilepsy have increased risk of mortality due to direct effects of seizures (e.g., status epilepticus, car accidents) and indirect effects of seizures (e.g., suicide, cardiovascular effects.) Epilepsy is a disorder of the brain that causes seizures, affecting the physical, mental, and social well-being of persons, and is associated with a 2 to 3 times greater mortality rate compared with the general population. About 60-65% of epilepsy is idiopathic and about 30% of patients are refractory (i.e., epilepsy not well managed with currently available Anti-Seizure Medications (“ASMs”). Epilepsy is the most common neurological disorder during pregnancy. It is estimated that approximately 900,000 childbearing (“CB”) age women suffer from active epilepsy in the U.S. Women of CB age with epilepsy face many additional challenges due to hormonal influences on seizure activity and endocrine function throughout the different phases of their reproductive cycles. Elevated estrogen or decreased progesterone levels can exacerbate seizure frequency. Often, these women experience hormonal and endogenous NAS imbalances, coupled with fluctuations in the blood levels of ASMs that impact control of seizures, efficacy of oral contraceptives, any coexisting anxiety and/or depression and any associated sleep impairment. Epileptic patients are 5-20 times more likely to develop depression. Clinical segmentation can be categorized by epilepsy type, comorbidities and patient subgroups. Categorization of focal epilepsy, generalized epilepsy, combined focal and generalized epilepsy, and unknown epilepsy can guide the choice of ASM. Special patient subgroups, including WWE of CB age and elderly patients, require special care and management of epilepsy. Comorbidities such as depression and anxiety may be co-treated with therapies that do not aggravate seizures and have no drug interaction with the ASM used for epilepsy. While lowest effective dose and monotherapy are preferred, management of patients with epilepsy is focused on controlling seizures, avoiding adverse events, and maintaining quality of life. Despite a wide range of ASMs available, about 30% of all people with epilepsy still fail to respond to treatment effectively. Women with epilepsy face specific challenges throughout their lifespan because of seizures, ASMs, and hormonal fluctuations. Women with epilepsy were once counseled to avoid pregnancy, but epilepsy is no longer considered a contraindication to pregnancy. Caregivers for WWE in the preconception phase either intending to start a family (planning pregnancy) or using contraception to prevent an unplanned pregnancy face significant challenges to balance seizure control efficacy with the selection and dosage of ASMs and ASM-related risks such as, among other risks, fetal-neonatal toxicity, contraception failure, and psychiatric side effects. Several ASMs are known to have teratogenic effects on the developing fetus (converging evidence from registry studies indicates that teratogenic risks are highest with valproate, followed by carbamazepine and topiramate). Other commonly prescribed ASMs, including older generation agents, such as phenobarbital and phenytoin, have been associated with higher risks as compared with lamotrigine, levetiracetam, clonazepam and gabapentin (Vajda et al., 2014; Voinescu and Pennell, 2015). Moreover, risks associated with ASMs are considerable early in pregnancy; therefore, it is necessary that WWE of CB age undergo counseling, monitoring, and adjustment to the most appropriate ASM prior to becoming pregnant. It is preferable that WWE of CB age discuss seizure control with their doctor for at least 6 months before conception and, if possible, cease ASM therapy or use the lowest effective dose of a single anticonvulsant according to the type of epilepsy and the fetal toxicity of the ASM. Anxiety, depression, lack of adherence to ASM, and/or contraception failure may be experienced by women who are worried about unplanned pregnancy or are late in confirming pregnancy, planned or unplanned. ASMs can reduce the efficacy of oral contraceptives, compounding this problem. Complex, multidirectional interactions between female hormones, seizures, and ASMs exist. Most hormones act as NAS and can thus modulate brain excitability. Any changes in endogenous or exogenous hormone levels can affect the occurrence of seizures, either directly or via PK interactions that modify the plasma levels of ASMs (Harden, 2008). The PK interactions between oral contraceptives and ASMs are bidirectional (Johnston and Crawford, 2014). The efficacy of hormonal contraception may be diminished for women taking CYP-P450 enzyme inducing ASMs. Epilepsy is not a medical condition in which contraceptives are contraindicated. Contraceptive failure, possibly related to ASMs, may be responsible for up to 1 in 4 unplanned pregnancies in WWE (~12.5% of all WWE pregnancies), versus a rate of 1% in healthy women. 27 Unmet need to treat WWE in CB age It is estimated that approximately 900,000 CB age women suffer from active epilepsy in the U.S. Women of CB age with epilepsy face many additional challenges such as hormonal influences on seizure activity and endocrine function throughout the different phases of their reproductive cycles, and approximately 30% of patients with epilepsy cannot be efficiently controlled with available ASMs making consideration of newer pharmacological treatment development options important. Managing uncontrolled seizures in WWE of CB age is the primary aim during preconception, pregnancy, and postpartum phases. Therefore, uncompromised ASM efficacy with acceptable variability and less or no drug-drug interactions achieved with lowest possible monotherapy dose to address fetal toxicity concerns remain highly unmet needs. Moreover, control of seizures including prevention of breakthrough seizures is critical when planning for pregnancy and also during pregnancy, as it can also lead to undesired falls or auto-accidents and compromise freedom to drive. Select ASMs have the potential to induce contraception failures, reproductive hormone imbalance, anxiety, and depression. There remains an unmet need for an ASM without the aforementioned downsides, with no to low fetal-neonatal toxicity and without any breast-feeding concerns as well as potential to treat associated comorbidities. While over 30 molecules have been approved for the treatment of epilepsy in the U.S., no epilepsy drug has been specifically approved for WWE of CB age. We believe our endogenous NASs as GABA A PAMs, while targeting the goal of seizure control, also have the potential for additional benefits in psychiatric disorders comorbidities (e.g., anxiety and/or depression) and sleep impairment. Moreover, these oral endogenous NAS could potentially address some of the fetal toxicity concerns related to unplanned or planned pregnancy in WWE. (1) (1) Ref: S.Bangar et al. Functional Neurology 2016; 31(3): 127-134; Reimers et al. Seizure. 2015 May; 28: 66-70. LPCN 1148: Oral Product Candidate for the Management of Decompensated Cirrhosis We are currently evaluating LPCN 1148 comprising testosterone laurate (“TL”) for the management of decompensated cirrhosis. We believe LPCN 1148 targets unmet needs for cirrhosis subjects including improvement in the quality of life of patients while on the liver transplant waiting list, prevention or reduction in the occurrence of new decompensation events such as hepatic encephalopathy (“HE”), and improvement in post liver transplant survival, including outcomes and costs. We are currently conducting a Phase 2 proof of concept (“POC”) study (NCT04874350) in male subjects with cirrhosis to evaluate the therapeutic potential of LPCN 1148 for the management of sarcopenia. The ongoing Phase 2 POC study is a prospective, multi-center, randomized, placebo-controlled study in male sarcopenic patients with cirrhosis. Subjects were initially randomized 1:1 to one of two arms. The treatment arm is an oral dose of LPCN 1148, and the second arm is a matching placebo. The primary endpoint is change in skeletal muscle index at week 24 with key secondary endpoints including change in liver frailty index, rates of breakthrough HE, and number of waitlist events, including all-cause mortality. The 24-week placebo-controlled treatment period of the study is currently in the 28-week open-label extension (OLE) phase of the study where all subjects receive LPCN 1148 for the duration of the study through week 52. In July 2023 we announced that the Phase 2 study met the study primary endpoint, increased skeletal muscle index (L3-SMI) relative to placebo (P<.01), in patients with cirrhosis. The study also demonstrated improvements in clinical outcomes such as prevention of new decompensation events including HE, rates of hospitalizations, and patient reported outcomes (“PROs”). LPCN 1148 was well-tolerated, with adverse event (AE) rates and severities similar to placebo and no mortality was noted in the LPCN 1148 treatment group, nor were there any cases of drug-induced liver injury. Disease Overview – Cirrhosis There are over 2 million cases of cirrhosis worldwide, with over 500,000 people living with decompensated cirrhosis in the U.S. and nonalcoholic fatty liver disease is the most rapidly increasing indication for liver transplant. 62% of those on the liver transplant (“LT”) waitlist are male and the economic burden (approximately $812,500/transplant) is high and continues to increase. Each year about half of the approximately 17,000 people in U.S. on the LT waitlist undergo transplant, while nearly 3,000 patients either die or are removed from the list because they were “too sick to transplant.” Liver cirrhosis is defined as the histological development of regenerative nodules surrounded by fibrous bands. Patients with cirrhosis typically have a years-long silent, asymptomatic phase (compensated cirrhosis) until decreasing liver function and increasing portal pressure move the patient into the symptomatic phase (decompensated cirrhosis). Transition to decompensated cirrhosis is marked by clinical events including ascites, encephalopathy, jaundice, and/or variceal hemorrhage. Decompensated subjects survive on average less than 2 years. Common causes of liver cirrhosis include alcoholic liver disease, nonalcoholic fatty liver disease (“NAFLD”), chronic hepatitis B and C, primary biliary cirrhosis (“PBC”), and primary sclerosing cholangitis (“PSC”) and some patients have liver disease of unknown cause (cryptogenic). 28 Common complications in patients with cirrhosis may include: compromised liver function, portal hypertension, varices in GI tract with internal bleeding, edema, ascites, hepatic encephalopathy, compromised immunity with post-transplant acute rejection risk, high sodium levels, increased bilirubin, low albumin level, insulin resistance with impaired peripheral uptake of glucose, depression, accelerated muscle disorder in the form of sarcopenia, myosteatosis, and frailty with compromised energetics, bone diseases (e.g., osteoporosis), high alkaline phosphatase (“ALP”), cachexia, malnutrition, weight loss (>5%), symptoms of hypogonadism such as abnormal hair distribution, anemia, sexual dysfunction, testicular atrophy, muscle wasting, fatigue, osteoporosis, gynecomastia, inflammation with elevated cytokines, and infection risk leading to hospital admissions and possibly death. HE, a significant decompensation event in patients with cirrhosis, is a brain dysfunction caused by liver insufficiency and/or portal systemic shunting. Because the damaged liver cannot function normally (as in cirrhosis), neurotoxins such as ammonia are inadequately removed from systemic circulation and travel to the brain, where they affect neurotransmission. This can cause episodes of HE, which may present as alterations in consciousness, cognition, and behavior that range from minimal to severe. Overt HE occurs in 30% to 40% of patients with cirrhosis at some point during the clinical course of their disease. As the burden of chronic liver disease and cirrhosis is increasing, the frequency of HE is also increasing. Our Partnership Pipeline Product Candidates We continue to pursue opportunities for partnering arrangements for the continued development and/or marketing of LPCN 1144, LPCN 1148, LPCN 1111, LPCN 1107 and TLANDO outside of the U.S. We do not currently anticipate conducting any further significant development activities with respect to these products and product candidates without the participation of a partner. There can be no guarantee that we will be able to identify or enter into partnering arrangements on terms that are beneficial to us or at all. Even if we do enter into partnering arrangements, such arrangements may not be sufficient to successfully develop and commercialize these products. TLANDO: An Oral Product for Testosterone Replacement Therapy As previously described, under the Antares License Agreement, we granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize TLANDO, our product for TRT in the U.S. TLANDO received FDA approval on March 28, 2022. On May 24, 2022, Halozyme Therapeutics completed an acquisition of Antares Pharma Inc. through a 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. On October 2, 2023, we received notice from Antares of Antares’ termination of the License Agreement. In accordance with the terms of the License Agreement, the License Agreement will terminate effective January 31, 2024. Upon termination of the License Agreement, all rights and licenses granted by us to Antares under the License Agreement will terminate and all rights in TLANDO will revert back to us. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. Proof-of-concept for TLANDO was initially established in 2006, and subsequently TLANDO was licensed in 2009 to Solvay Pharmaceuticals, Inc., which was then acquired by Abbott Products, Inc. (“Abbott”). Following a portfolio review associated with the spin-off of AbbVie Inc. by Abbott in 2011, the rights to TLANDO were reacquired by us. All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales of TLANDO. Such royalties are limited to $1 million in the first 2 calendar years following product launch, after which period there is no 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. During the three and nine months ended September 30, 2023, we incurred royalty expense of approximately $9,000 and $22,000, respectively. During the three and nine months ended September 30, 2022 we incurred royalty expense of approximately $0 and 17,000, respectively. Under the Pediatric Research Equity Act (“PREA”), the PREA requirement to assess the safety and effectiveness of TLANDO in pediatric patients will need to be addressed. The FDA may also require certain post-marketing studies to be conducted. Any FDA requirement to conduct certain post-marketing studies will be our responsibility or the responsibility of a potential commercialization partner. Upon execution of the Antares License Agreement, Antares paid us an initial payment of $11.0 million. Antares will also make additional payments of $5.0 million to us on each of January 1, 2025, and January 1, 2026, provided that certain conditions are satisfied. We are 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 products licensed by Antares under the Antares License Agreement. In addition, we 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. Further, on October 14, 2021, we assigned our Manufacturing Agreement, dated August 27, 2013, by and between the Company and Encap Drug Delivery (the “Manufacturing Agreement”) to Antares as part of the Antares License Agreement. In addition to seeking a U.S. commercialization partner for TLANDO, we are exploring the possibility of licensing LPCN 1021 (known as TLANDO in the United States) to third parties outside the United States, although no licensing agreement has been entered into by the Company. If and when an agreement is made with a partner, such arrangement would likely be contingent upon obtaining acceptable cost of goods in addition to obtaining local regulatory approval. No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. 29 LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH We are exploring the possibility of partnering LPCN 1144 to a third party, although no partnering agreement has been entered into by the Company. No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. Disease Overview – NASH NASH is a more advanced state of non-alcoholic fatty liver disease (“NAFLD”) and can progress to a cirrhotic liver or liver failure, require liver transplant, and can result in hepatocellular carcinoma/ liver cancer, and death. Progression of NASH to end stage liver disease will soon surpass all other causes of liver failure requiring liver transplantation. Importantly, beyond these critical conditions, NASH and NAFLD patients additionally suffer heightened cardiovascular risk and, in fact, die more frequently from cardiovascular events than from liver disease. NAFLD/NASH is becoming more common due to its strong correlation with obesity and metabolic syndrome, including components of metabolic syndrome such as diabetes, cardiovascular disease and high blood pressure. In the U.S., 20% to 30% of the population is estimated to suffer from NAFLD and 15% to 20% of this group progress to NASH, which is a substantially large population that lacks an effective therapy. NASH is a silent killer that affects millions in the U.S. Diagnoses have been on the rise and are expected to increase dramatically in the next decade. Approximately 50% of NASH patients are adult males. In men, especially with comorbidities associated with NAFLD/NASH, testosterone deficiency has been associated with an increased accumulation of visceral adipose tissue and insulin resistance, which could be factors contributing to NAFLD/NASH. There is currently no approved therapy for the treatment of NASH although there are several drug candidates currently under development with many having clinical failures to date. The critical pathophysiologic mechanisms underlying the development and progression of NASH include reduced ability to handle lipids, increased insulin resistance, injury to hepatocytes and liver fibrosis in response to hepatocyte injury. NASH patients have an excessive accumulation of fat in the liver resulting primarily from a caloric intake above and beyond energy needs. A healthy liver contains less than 5% fat, but a liver in someone with NASH can contain more than 20% fat. This abnormal liver fat contributes to the progression to NASH, a liver necro-inflammatory state that can lead to scarring, also known as fibrosis, and, for some, can progress to cirrhosis and liver failure. Current Status We have completed the LiFT Phase 2 clinical study in biopsy-confirmed non-cirrhotic NASH subjects. The LiFT clinical study was a prospective, multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal and eugonadal male NASH subjects with grade F1-F3 fibrosis and a target NAFLD Activity Score ≥ 4 with a 36-week treatment period. The LiFT clinical study enrolled 56 biopsy confirmed NASH male subjects. Subjects were randomized 1:1:1 to one of three arms (Treatment A was a twice daily oral dose of 142 mg testosterone equivalent, Treatment B was a twice daily oral dose of 142 mg testosterone equivalent formulated with 217 mg of d-alpha tocopherol equivalent, and the third arm was a twice daily matching placebo). The primary endpoint of the LiFT clinical study was change in hepatic fat fraction via MRI-PDFF and exploratory liver fat/marker end points post 12 weeks of treatment. Additionally, key secondary endpoints post 36 weeks of treatment included assessment of histological change for NASH resolution and/or fibrosis improvement (biopsy) as well as liver fat data (MRI-PDFF). The LiFT clinical study was not powered to assess statistical significance of any of the secondary endpoints. Other important endpoints included the following: change in liver injury markers, anthropomorphic measurements, lipids, insulin resistance and inflammatory/fibrosis markers; as well as patient reported outcomes. Treatments with LPCN 1144 post 12 weeks of treatment in the LiFT study resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver injury markers with no observed tolerability issues. Liver biopsies were performed at baseline (“BL”) and after 36 weeks of treatment (“EOS”). Prespecified biopsy analyses included NASH Clinical Research Network (“CRN”) scoring as well as a continuous paired (“Paired Technique”) and digital technique (“Digital Technique-Fibronest”). All biopsy analyses were performed on the same slides and the reads for the three techniques were done independently. Analysis sets included the NASH Resolution Set (all subjects that have BL and EOS biopsy with NASH at BL [NAS ≥4 with lobular inflammation score ≥ 1 and hepatocyte ballooning score ≥1 at BL] (n=37)), the Biopsy Set (all subjects with baseline and EOS biopsies (n=44)), and the Safety Set (all randomized subjects (n=56)). Both LPCN 1144 treatment arms met with statistical significance the pre-specified accelerated approval regulatory endpoint of NASH resolution with no worsening of fibrosis based on NASH CRN scoring. Additionally, both treatment arms showed substantial improvement of the observed NASH activity in steatosis, inflammation, and ballooning. 30 During the 36 weeks of treatment, LPCN 1144 was well tolerated with an overall safety profile comparable to placebo. Additionally, subjects were given the option to have access to LPCN 1144 through an open label extension (“OLE”) study. The extension study enabled the collection of additional data on LPCN 1144 for up to a total of 72 weeks of therapy, as well as data for 36 weeks of therapy for those subjects on placebo in the LiFT study. Key results from the OLE study are as follows: ● LPCN 1144 was well tolerated over 72-week exposure with no observed safety signals; ● Liver injury markers were reduced and maintained with extended LPCN 1144 treatment; and ● Observed liver histology improvements support further development. In November 2021, the FDA granted Fast Track Designation to LPCN 1144 as a treatment for non-cirrhotic NASH. The Fast Track program is designed to accelerate the development and expedite the review of products, such as LPCN 1144, which are intended to treat serious diseases and for which there is an unmet medical need. We had a written only response from the FDA for a LPCN 1144 Type C meeting with the FDA in January 2022 to discuss the development path forward with LPCN 1144. The FDA acknowledged that the NDA submission of LPCN 1144 would be via 505(b)2 regulatory pathway and agreed that no additional non-clinical studies are needed to support an NDA submission. The FDA acknowledged that in the LiFT study subjects achieved improvements in key components associated with NASH histopathology after 36-weeks of treatment with LPCN 1144 in adult males and agreed that the proposed multicomponent primary surrogate endpoint is acceptable for seeking approval under the accelerated approval pathway. The FDA agreed that the proposed primary multicomponent surrogate endpoint, NASH resolution with no worsening of fibrosis, is acceptable for seeking approval under the accelerated approval pathway and the FDA recommended a Phase 3 trial with a study duration of 72 weeks. In July 2022, Lipocine held an End of Phase 2 meeting with FDA for LPCN 1144 in NASH. The FDA recommended a Phase 2 dose ranging study be conducted to identify the optimal dose prior to conducting a pivotal study. The FDA agreed to the proposed unique testosterone ester, testosterone laurate, for future clinical studies. LPCN 1111: A Next-Generation Long-Acting Oral Product Candidate for TRT We have commenced the process of scaling up the manufacturing process and generation of supplies of LPCN 1111 to enable potential partners to conduct pivotal studies for registration. We are exploring the possibility of partnering LPCN 1111 with a third party, although no partnering agreement has been entered into by the Company. No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. LPCN 1111 is a next-generation, novel ester prodrug of testosterone comprised of testosterone tridecanoate (“TT”) which uses our proprietary delivery technology to enhance solubility and improve systemic absorption. We completed a Phase 2b dose finding study in hypogonadal men in the third quarter of 2016. The primary objectives of the Phase 2b clinical study were to determine the starting Phase 3 dose of LPCN 1111 along with safety and tolerability of LPCN 1111 and its metabolites following oral administration of single and multiple doses in hypogonadal men. Good dose-response relationship was observed over the tested dose range in the Phase 2b study. Additionally, the target Phase 3 dose met primary and secondary end points. Overall, LPCN 1111 was well tolerated with no drug-related severe or serious adverse events reported in the Phase 2b study. In February 2018 we had a meeting with the FDA to discuss these pre-clinical results and to discuss the Phase 3 clinical study and path forward for LPCN 1111. Based on the results of the FDA meeting and additional pre-clinical studies conducted after the FDA meeting, we have proposed a Phase 3 protocol for LPCN 1111 and have solicited FDA feedback. Based on initial FDA feedback, we expect the Phase 3 clinical trial design to follow the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) guidelines and we expect the trial will include at least a 3-month efficacy treatment period and a 1-year safety component for approximately 100 subjects. We are currently seeking further clarification from FDA with respect to the total subject LPCN 1111 exposure information needed for an NDA filing. We continue to refine the Phase 3 protocol and plan to request FDA approval of the protocol once it is finalized. Additionally, the FDA previously requested that a food effect and a phlebotomy study be completed, and that ambulatory blood pressure monitoring (“ABPM”) be included as part of the Phase 3 clinical study. We are currently transferring the manufacturing of LPCN 1111 to a third-party contract manufacturer and scaling up the formulation after which we anticipate the next steps for a partner developing LPCN 1111 may be to conduct a food effect/phlebotomy study with LPCN 1111. Under the terms of the Antares License Agreement, Antares had been granted an option to license LPCN 1111, exercisable on or before March 31, 2022, for further development and, should LPCN 1111 receive FDA approval, commercialization. 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 LPCN 1111 to June 30, 2022. As consideration for the Company’s agreement to the Amendment, Antares paid the Company a non-refundable cash fee of $500,000 in April 2022. On June 30, 2022, Antares’ option to license LPCN 1111 expired and was not exercised. 31 LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth We are exploring the possibility of partnering LPCN 1107 to a third party, although no partnering agreement has been entered into by the Company. No assurance can be given that any partnership agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. We believe LPCN 1107 has the potential to become the first oral hydroxyprogesterone caproate (“HPC”) product indicated for the reduction of risk of PTB (delivery less than 37 weeks) in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet need as approximately 11% of all U.S. pregnancies result in PTB, a leading cause of neonatal mortality and morbidity. Current Status We have completed a multi-dose PK dose selection study in pregnant women. The objective of the multi-dose PK selection study was to assess HPC blood levels in order to identify the appropriate LPCN 1107 Phase 3 dose. The multi-dose PK dose selection study was an open-label, 4-period, 4-treatment, randomized, single and multiple dose PK study in pregnant women with 3 dose levels of LPCN 1107 and the IM HPC (Makena®). The study enrolled 12 healthy pregnant women (average age of 27 years) with a gestational age of approximately 16 to 19 weeks. Subjects received three dose levels of LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a randomized, crossover manner during the first 3 treatment periods and then received 5 weekly injections of HPC during the fourth treatment period. During each of the LPCN 1107 treatment periods, subjects received a single dose of LPCN 1107 on Day 1 followed by twice daily administration from Day 2 to Day 8. Following completion of the 3 LPCN 1107 treatment periods and a washout period, all subjects received 5 weekly injections of HPC. Results from this study demonstrated that average steady state HPC levels (Cavg0-24) were comparable or higher for all 3 LPCN 1107 doses than for injectable HPC. Additionally, HPC levels as a function of daily dose were linear for the 3 LPCN 1107 doses. Also, unlike the injectable HPC, steady state exposure was achieved for all 3 LPCN 1107 doses within 7 days. A traditional PK/PD based Phase 2 clinical study in the intended patient population is not expected to be required prior to entering into Phase 3. Therefore, based on the results of our multi-dose PK study we had an End-of-Phase 2 meeting and subsequent guidance meetings with the FDA to define a pivotal Phase 2b/3 development plan for LPCN 1107. However, these discussions may be updated based on recent developments with Covis’ Makena® as described below. We have completed a food effect study to characterize the dosing regimen for the pivotal study and we have submitted a pivotal clinical study protocol to the FDA. The FDA has granted orphan drug designation to LPCN 1107 based on a major contribution to patient care. Orphan designation qualifies Lipocine for various development incentives, including tax credits for qualified clinical testing, and a waiver of the prescription drug user fee when we file our NDA. Recent Competition Update On October 5, 2020, the FDA’s Center for Drug Evaluation and Research (“CDER”) proposed that Makena be withdrawn from the market because the PROLONG trial failed to verify the clinical benefit of Makena and concluded that the available evidence does not show Makena is effective for its approved use. The CDER issued AMAG Pharmaceuticals, the NDA holder at the time, a Notice of Opportunity for Hearing (“NOOH”) to withdraw approval of Makena, for which AMAG Pharmaceuticals responded by requesting a hearing and providing detail on the company’s position, recognizing clinicians’ decade-long use of treatment with Makena and the public health implications of withdrawing approval. The FDA Commissioner held a public hearing with Covis from October 17 through 19, 2022, which resulted in a 14-1 vote recommending removal of the product from the market. On October 31, 2022, Covis approached the CDER and outlined a plan of orderly withdrawal which would set a withdrawal timeframe sufficient for current patients to complete their courses of treatment. The CDER declined this proposal. On March 6, 2023, Covis announced its plan to voluntarily withdraw Makena from the market and submitted a request to the CDER for a minimum 21-week wind-down. On April 6, 2023, the FDA withdrew its approval of Makena and ordered the immediate withdrawal of Makena and several approved generic versions of the drug, making it unlawful for the drug to be distributed in the US. The FDA stated that in light of the unmet need for a treatment for preventing preterm birth and improving neonatal outcomes, it is imperative that the medical and scientific communities increase their efforts to find effective treatments and stated their hope that the decision to withdraw Makena will help galvanize further research. The FDA further stated their commitment to working together with patients, researchers, and drug developers to advance the development of safe and effective therapies that are urgently needed as a treatment for the prevention of preterm birth. 32 Financial Operations Overview Revenue To date, we have not generated any revenues from product sales and do not expect to generate revenue other than TLANDO royalties and licensing fees until one of our product candidates receives approval from the FDA. Revenues to date have been generated substantially from license fees, royalty and milestone payments and research support from our licensees. Since our inception through September 30, 2023, we have generated $41.7 million in revenue under our various license and collaboration arrangements and from government grants. Based on the terms of the Antares License Agreement, in the fourth quarter of 2021 we recorded $4.1 million in revenue and an associated contract asset for future contractual minimum royalties. We reduced our contract asset by $218,000 in 2022 due to a royalty payment received from Antares under the terms of our license agreement, based on net sales of TLANDO in 2022. We received a payment of approximately $772,000 in the third quarter of 2023 in accordance with the terms of the license agreement, of which approximately $580,000 was applied to the contract asset and $192,000 was applied to imputed interest receivable. On October 2, 2023, we received notice from Antares of Antares’ termination of the License Agreement effective January 31, 2024. Based on the termination notice, we recorded a non-cash reduction of revenue related to the reversal of variable consideration revenue for minimum guaranteed royalties of $3.1 million for the balance of the contract asset, which is the contract asset balance which would have remained after the anticipated fourth quarter royalty payment of approximately $131,000, based on net sales in the third quarter of 2023. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares after January 31, 2024. We may never generate revenues from any of our clinical or pre-clinical development programs other than TLANDO, and we may never succeed in obtaining regulatory approval or commercializing any of these product candidates. Research and Development Expenses Research and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to external service providers such as contract research organizations and contract manufacturing organizations, contractual obligations for clinical development, clinical sites, manufacturing and scale-up for late stage clinical trials, formulation of clinical drug supplies, and expenses associated with regulatory submissions. Research and development expenses also include an allocation of indirect costs, such as those for facilities, office expense, and depreciation of equipment based on the ratio of direct labor hours for research and development personnel to total direct labor hours for all personnel. We expense research and development expenses as incurred. Since our inception, we have spent approximately $145.6 million in research and development expenses through September 30, 2023. We expect to continue to incur significant costs as we develop our other product candidates, including our CNS product candidates and the ongoing Phase 2 POC study in male subjects with cirrhosis with LPCN 1148, as well as the development of any future pipeline product candidates. In general, the cost of clinical trials may vary significantly over the life of a project as a result of uncertainties in clinical development, including, among others: ● the number of sites included in the trials; ● the length of time required to enroll suitable subjects; ● the duration of subject follow-ups; ● the length of time required to collect, analyze and report trial results; ● the cost, timing and outcome of regulatory review; and ● potential changes by the FDA in clinical trial and NDA filing requirements. Future research and development expenditures are subject to numerous uncertainties regarding timing and cost to completion, including, among others: ● the timing and outcome of regulatory filings and FDA reviews and actions for product candidates; ● our dependence on third-party manufacturers for the production of satisfactory finished product for registration and launch should regulatory approval be obtained on any of our product candidates; ● the potential for future license or co-promote arrangements for our product candidates, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our future plans and capital requirements; and ● the effect on our product development activities of actions taken by the FDA or other regulatory authorities. 33 A change of outcome for any of these variables with respect to the development of our product development candidates could mean a substantial change in the costs and timing associated with these efforts, could require us to raise additional capital, and may require us to reduce operations. Given the stage of clinical development and the significant risks and uncertainties inherent in the clinical development, manufacturing, and regulatory approval process, we are unable to estimate with any certainty the time or cost to complete the development of LPCN 1154, LPCN 2101, LPCN 1148, LPCN 1144, LPCN 1111, LPCN 1107 and other product candidates. Clinical development timelines, the probability of success and development costs can differ materially from expectations and results from our clinical trials may not be favorable. If we are successful in progressing LPCN 1154, LPCN 2101, or other future product candidates into later stage development, we will require additional capital. The amount and timing of our future research and development expenses for these product candidates will depend on the pre-clinical and clinical success of both our current development activities and potential development of new product candidates, as well as ongoing assessments of the commercial potential of such activities. We will continue efforts to enter into partnership arrangements for the continued development and/or marketing of LPCN 1144, LPCN 1148, LPCN 1111, LPCN 1107 and TLANDO outside of the U.S. We will continue to incur significant research and development expenses as we are conducting on-going clinical studies, including the studies for our CNS product candidates and the Phase 2 POC study in male subjects with cirrhosis with LPCN 1148, and as we conduct future clinical studies, including when and if we conduct Phase 2 clinical studies with our development product candidates and when and if we conduct Phase 3 clinical studies with LPCN 1144, LPCN 1148, LPCN 1111 and LPCN 1107. We are exploring the possibility of licensing LPCN 1144, LPCN 1148, LPCN 1111 and LPCN 1107, although we have not entered into a licensing agreement and no assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. If we are unable to raise additional capital or obtain non-dilutive financing, we may need to reduce research and development expenses in order to extend our ability to continue as a going concern. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation related to our executive, finance, and administrative support functions. Other general and administrative expenses include rent and utilities, travel expenses, and professional fees for auditing, tax, legal, business development and various other services. General and administrative expenses also include expenses for the cost of preparing, filling and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims. We expect that general and administrative expenses will increase in the future as we continue as a public company including legal and consulting fees, accounting and audit fees, director fees, directors’ and officers’ insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation costs, professional fees and other costs. However, if we are unable to raise additional capital, we may need to reduce general and administrative expenses in order to extend our ability to continue as a going concern. Other Income and Expense Other income and expense consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities, imputed interest on minimum royalties under the Antares Licensing Agreement, interest expense incurred on our Loan and Security Agreement, losses (gains) on our warrant liability and gains on our litigation liability. 34 Results of Operations Comparison of the Three Months Ended September 30, 2023 and 2022 The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022: Three Months Ended September 30, 2023 2022 Variance Revenue $ (3,121,996 ) $ - $ (3,121,996 ) Research and development expenses 2,878,798 2,100,432 778,366 General and administrative expenses 1,042,572 798,939 243,633 Interest and investment income 317,569 163,966 153,603 Interest expense - - - Gain on warrant liability 74,827 326,240 (251,413 ) Revenue We recognized a non-cash revenue reversal of variable consideration for minimum guaranteed royalties of $3.1 million relating to the termination of the Antares License Agreement during the three months ended September 30, 2023, and $0 during the three months ended September 30, 2022, respectively. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares after January 31, 2024. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. Research and Development Expenses The increase in research and development expenses during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022 consists of a $694,000 increase in costs related to our LPCN 1154 clinical studies, a $639,000 increase in TLANDO manufacturing related costs, and a $128,000 increase in personnel related costs, offset by a $245,000 decrease in LPCN 1111 scale up costs in 2022, a $234,000 decrease in contract research organization expense related to the LPCN 1148 Phase 2 POC study in male subjects with cirrhosis, a $148,000 decrease in contract research organization expense and outside consulting costs related to the completion of our LPCN 1144 LiFT study in 2022, and a $56,000 decrease in LPCN 1107 PK and food effect studies and other research and development costs in 2022. General and Administrative Expenses The increase in general and administrative expenses during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 consists of a $105,000 increase in business development expenses, a $77,000 increase in personnel salaries and benefits, a $48,000 increase in estimated franchise taxes resulting from our increase in authorized shares and reverse stock split, a $36,000 increase in director fees, a $24,000 increase in various other professional fees and a $21,000 increase in professional services and legal fees. These increases were offset by a $67,000 decrease in corporate insurance expense. Interest and Investment Income The increase in interest and investment income during the three months ended September 30, 2023 compared to interest and investment income during the three months ended September 30, 2022 was due to higher interest rates despite declining cash and marketable investment securities balances, in addition to imputed interest on the Antares License Agreement contract asset in 2023. Interest Expense Our Loan and Security Agreement with SVB was paid in full in June of 2022, thus the Company did not recognize any interest expense during the three months ended September 30, 2023 or September 30, 2022. 35 Gain on Warrant Liability We recorded a gain of approximately $75,000 and $326,000 on warrant liability during the three months ended September 30, 2023, and 2022, respectively, related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The gain in 2023 resulted from a decrease in the fair value of warrants outstanding as of September 30, 2023 as compared to June 30, 2023, primarily due to the decrease in our stock price at the end of the third quarter of 2023 compared to the stock price at the end of the second quarter of 2023 in addition to higher interest rates. The gain in 2022 resulted from the decrease in the fair value of the warrants outstanding as of September 30, 2022 compared to June 30, 2022 due to the lower stock price at the end of the third quarter of 2022 as compared to the stock price at the end of the second quarter of 2022. No common stock warrants from the November 2019 Offering were exercised during either the three months ended September 30, 2023 or the three months ended September 30, 2022. The warrants are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding. Comparison of the Nine Months Ended September 30, 2023 and 2022 The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022: Nine months ended September 30, 2023 2022 Variance Revenue $ (3,067,006 ) $ 500,000 $ (3,567,006 ) Research and development expenses 8,500,319 6,886,398 1,613,921 General and administrative expenses 3,770,281 3,172,144 598,137 Interest and investment income 1,067,561 275,420 792,141 Interest expense - (27,098 ) 27,098 Gain on warrant liability 200,416 531,697 (331,281 ) Gain on litigation settlement - 250,000 (250,000 ) Income tax expense (200 ) (200 ) - Revenue We recognized a non-cash revenue reversal of variable consideration for minimum guaranteed royalties of $3.1 million relating to the termination of the Antares License Agreement during the nine months ended September 30, 2023. The reversal of variable consideration revenue is offset by license revenue of approximately $55,000 for payments received from Spriaso, a related party, under a licensing agreement in the cough and cold field during the nine months ended September 30, 2023. We recognized revenue related to a non-refundable cash fee of $500,000 received from Antares for consideration of a 90-day extension for Antares to exercise its option to license LPCN 1111 during the nine months ended September 30, 2022. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares after January 31, 2024. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. Research and Development Expenses The increase in research and development expenses during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022 consisted of a $978,000 increase in costs related to our LPCN 1154 clinical studies, a $738,000 increase in TLANDO manufacturing related costs, a $559,000 increase in contract research organization expense related to the LPCN 1148 Phase 2 POC study in male subjects with cirrhosis, and a $395,000 increase in personnel salaries and benefits resulting primarily from the hiring of additional personnel during 2022. These increases were offset by a $448,000 decrease related to LPCN 1111 scale up costs in 2022, a $365,000 decrease in contract research organization expense and outside consulting costs related to the completion of our LPCN 1144 LiFT study in 2022, a $141,000 decrease related to the completion of our LPCN 1107 PK and food effect studies in 2022 and a $102,000 decrease in other research and development activities. 36 General and Administrative Expenses The increase in general and administrative expenses during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 consists of a $238,000 increase in business development expenses, a $178,000 increase in professional and legal fees related to our reverse stock split and other general and administrative expenses, a $140,000 increase in estimated franchise taxes, a $126,000 increase in personnel salaries and benefit costs, a $104,000 increase in director fees, an $85,000 increase in market research activities and a $45,000 increase in other general and administrative expenses. These increases were offset by a $140,000 decrease resulting from professional fees incurred in our recruitment of two additional directors in 2022, a $140,000 decrease in corporate insurance expense and a $38,000 decrease in other various consulting fees. Interest and Investment Income The increase in interest and investment income during the nine months ended September 30, 2023 compared to interest and investment income during the nine months ended September 30, 2022 was due to higher interest rates despite declining cash and marketable investment securities balances, in addition to imputed interest on the Antares License Agreement contract asset in 2023. Interest Expense Our Loan and Security Agreement with SVB was paid in full in June of 2022, thus the Company did not recognize any interest expense during the nine months ended September 30, 2023. Interest expense for the nine months ended September 30, 2022 was entirely related to that Loan and Security Agreement. (Gain) on Warrant Liability We recorded a gain of approximately $200,000 and $532,000 on warrant liability during the nine months ended September 30, 2023, and 2022, respectively, related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The gain in 2023 resulted from a decrease in the fair value of warrants outstanding as of September 30, 2023 as compared to December 31, 2022, primarily due to the lower stock price at the end of the third quarter compared to the stock price at the end of 2022 and the gain in 2022 resulted from the decrease in the fair value of the warrants outstanding as of September 30, 2022 compared to December 31, 2021 due to the lower stock price at the end of the third quarter of 2022 compared to the stock price at the end of 2021. No common stock warrants from the November 2019 Offering were exercised during either of the nine months ended September 30, 2023, or 2022. The warrants are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding. Litigation Settlement During the nine months ended September 30, 2022, we recorded a gain on the settlement of litigation liability of $250,000 as a result of the April 2022 Amendment to the Global Agreement with Clarus (the “Amended Settlement Agreement”). Under the terms of the original Global Agreement, we had agreed to pay Clarus $4.0 million payable as follows: $2.5 million which was paid in July 2021, $1.0 million which was to be paid on July 13, 2022, and $500,000 to be paid on July 13, 2023. The Amended Settlement Agreement settled the payments due in July 2022 and 2023 for $1,250,000 rather than the $1,500,000 total future payments due under the terms of the original Global Agreement agreed to in 2021. No future royalties are owing from either party under the Amendment to the Global Agreement. Liquidity and Capital Resources Since our inception, our operations have been primarily financed through sales of our equity securities, debt and payments received under our license and collaboration arrangements. We have devoted our resources to funding research and development programs, including discovery research, pre-clinical and clinical development activities. We have incurred operating losses in most years since our inception and we expect to continue to incur operating losses into the foreseeable future as we advance the clinical development of LPCN 1154, LPCN 2101, LPCN 1148, and any other future product candidate, including continued research efforts. As of September 30, 2023, we had $23.8 million of unrestricted cash, cash equivalents and marketable investment securities compared to $32.5 million at December 31, 2022. 37 On October 14, 2021, we entered into the Antares License Agreement with Antares, pursuant to which we granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize, upon final approval of TLANDO from the FDA, our TLANDO product with respect to TRT in the U.S. Upon execution of the Antares License Agreement, Antares paid to us an initial payment of $11.0 million. Antares has also agreed to make certain minimum royalty payments in the future and, since these future minimum royalties are variable consideration deemed to be probable, approximately $4.0 million in revenue was recognized in 2021 for the minimum royalties to be received in the future and a contract asset was recorded. However, on October 2, 2023, we received notice from Antares of Antares’ termination of the License Agreement effective January 31, 2024. Based on the termination notice, we recorded approximately a non-cash $3.1 million reversal of revenue related to the Antares License Agreement variable consideration for minimum guaranteed royalties for the balance of the contract asset that is not expected to be received. The balance of the contract asset as of September 30, 2023 is approximately $131,000 and will be received in the fourth quarter of 2023. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue or payments from Antares after January 31, 2024. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that the Company will be able to enter into such a transaction on terms favorable to us or at all. On January 5, 2018, we entered into the Loan and Security Agreement with SVB pursuant to which SVB agreed to lend us $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 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, we entered into a Deferral Agreement with SVB. Under the Deferral Agreement, principal repayments were deferred by six months, and we were only required to make monthly interest payments during the deferral period. The Loan matured and was paid in full on June 1, 2022. Additionally, we 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. On March 6, 2017, we entered into a sales agreement (“Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to the amount we have registered on an effective registration statement pursuant to which the offering is being made. We currently have registered up to $50.0 million for sale under the Sales Agreement, pursuant to our Registration Statement on Form S-3 (File No. 333-250072) (the “Form S-3”), through Cantor as our sales agent. Cantor may sell our 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 of 1933, as amended, 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. We pay Cantor 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. We have also provided Cantor with customary indemnification rights. The shares of our common stock sold under the Sales Agreement are sold and issued pursuant to our Registration Statement on Form S-3, which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. We are not obligated to make any sales of our common stock under the Sales Agreement. The offering of our common stock pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement as permitted therein. We and Cantor may each terminate the Sales Agreement at any time upon ten days’ prior notice. During the three and nine months ended September 30, 2023, we sold 81,000 shares of our common stock under the Sales Agreement. As of September 30, 2023, we had sold 964,711 shares of our common stock for $9,237,000 pursuant to the Sales Agreement and had approximately $40.8 million available for sale under the Sales Agreement. However, as of April 3, 2023, we are 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, we have 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. 38 We believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements through at least the next twelve months which include on-going clinical studies for LPCN 1154, an on-going study for LPCN 1148, and research and development activities and compliance with regulatory requirements. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect if additional activities are performed by us including new clinical studies for LPCN 1144, LPCN 1111, and LPCN 1107. While we believe we have sufficient liquidity and capital resources to fund our projected operating requirements through at least the next twelve months, we will need to raise additional capital at some point through the equity or debt markets or through additional out-licensing activities to support our operations. If we are unsuccessful in raising additional capital as necessary, our ability to continue as a going concern will be limited. Further, our operating plan may change, and we 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, our capital resources may be consumed more rapidly if we pursue additional clinical studies for LPCN 1154, LPCN 2101, LPCN 1148, LPCN 1144, LPCN 1111, and/or LPCN 1107. Conversely, our capital resources could last longer if we reduce expenses, reduce the number of activities currently contemplated under our operating plan or if we terminate, modify or suspend on-going clinical studies. We can raise capital pursuant to the Sales Agreement but may choose not to issue common stock if our market price is too low to justify such sales in our discretion. There are numerous risks and uncertainties associated with the development and, subject to approval by the FDA, commercialization of our product candidates. There are numerous risks and uncertainties impacting our ability to enter into collaborations with third parties to participate in the development and potential commercialization of our product candidates. We are unable to precisely estimate the amounts of increased capital outlays and operating expenditures associated with our anticipated or unanticipated clinical studies and ongoing development efforts. All of these factors affect our need for additional capital resources. To fund future operations, we will need to ultimately raise additional capital and our requirements will depend on many factors, including the following: ● the scope, rate of progress, results and cost of our clinical studies, pre-clinical testing and other related activities for all of our product candidates, including LPCN 1154 and LPCN 2101, LPCN 1148, LPCN 1111, LPCN 1144, LPCN 1107 and; ● the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop; ● the cost and timing of establishing sales, marketing and distribution capabilities, if any; ● the terms and timing of any collaborative, licensing, settlement and other arrangements that we may establish; ● the number and characteristics of product candidates that we pursue; ● the cost, timing and outcomes of regulatory approvals; ● the timing, receipt and amount of sales, profit sharing, milestones or royalties, if any, from our potential products; ● the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; ● the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions; and ● the extent to which we grow significantly in the number of employees or the scope of our operations. Funding may not be available to us on favorable terms, or at all. Also, market conditions may prevent us from accessing the debt and equity capital markets, including sales of our common stock through the Sales Agreement. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical studies, research and development programs or, if any of our product candidates receive approval from the FDA, commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, including the Sales Agreement, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. These arrangements may not be available to us or available on terms favorable to us. To the extent that we raise additional capital through marketing and distribution arrangements, other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences, warrants or other terms that adversely affect our stockholders’ rights or further complicate raising additional capital in the future. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable, for any reason, to raise needed capital, we will have to reduce costs, delay research and development programs, liquidate assets, dispose of rights, commercialize products or product candidates earlier than planned or on less favorable terms than desired or reduce or cease operations. 39 Sources and Uses of Cash The following table provides a summary of our cash flows for the nine months ended September 30, 2023, and 2022: Nine Months Ended September 30, 2023 2022 Cash used in operating activities $ (9,843,686 ) $ (10,129,905 ) Cash provided by investing activities 10,358,030 11,697,357 Cash provided by (used in) financing activities 409,866 (2,121,044 ) Net Cash from Operating Activities During the nine months ended September 30, 2023 and 2022, net cash used in operating activities was $9.8 million and $10.1 million, respectively. Net cash used in operating activities during the nine months ended September 30, 2023, and 2022, was primarily attributable to cash outlays to support ongoing operations, including research and development expenses and general and administrative expenses. During 2023, we performed activities primarily related to our LPCN 1154 clinical studies, our LPCN 1148 Phase 2 POC study in male subjects with cirrhosis, and TLANDO manufacturing capabilities. During 2022, we performed activities related mainly to the Phase 2 POC study in male subjects with cirrhosis with LPCN 1148, PK and food effect studies with LPCN 1154 and LPCN 1107, and manufacturing scale up with LPCN 1111. Net Cash from Investing Activities During the nine months ended September 30, 2023 and 2022, net cash provided by investing activities was $10.4 million and $11.7 million, respectively. Net cash provided by investing activities during the nine months ended September 30, 2023, and 2022, was primarily the result of the maturity of marketable investment securities, net of $10.3 million and $11.7 million, respectively. There were approximately $4,000 and $37,000 in capital expenditures during the nine months ended September 30, 2023, and 2022, respectively. Net Cash from Financing Activities During the nine months ended September 30, 2023 and 2022, net cash provided by in financing activities was approximately $410,000 and net cash used in financing activities was $2.1 million, respectively. Net cash provided by financing activities during the nine months ended September 30, 2023 was related to the sale of 81,000 shares of our common stock under our ATM registered offering, less associated costs. Net cash used in financing activities during the nine months ended September 30, 2022, was due to loan repayments of $1.7 million and payment of the Final Payment Charge of $650,000 related to the SVB Loan and Security Agreement, offset by $211,000 in cash provided by proceeds from stock option exercises. Contractual Commitments and Contingencies Long-Term Debt Obligations and Interest on Debt On January 5, 2018, we entered into a Loan and Security Agreement with SVB pursuant to which SVB agreed to lend us $10.0 million. The principal borrowed under the Loan and Security Agreement bore interest at a rate equal to the Prime Rate plus one percent per annum, which interest was payable monthly. The loan matured on June 1, 2022 and the outstanding principal, interest and Final Payment Charge were paid in full. Purchase Obligations We enter into contracts and issue purchase orders in the normal course of business with clinical research organizations for clinical trials and clinical and commercial supply manufacturing and with vendors for pre-clinical research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice and are cancellable obligations. Operating Leases In August 2004, we entered into an agreement to lease our facility in Salt Lake City, Utah consisting of office and laboratory space which serves as our corporate headquarters. On January 16, 2023, we modified and extended the lease through February 28, 2024. 40 Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant and material changes in our critical accounting policies during the nine months ended September 30, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates” in our Form 10-K filed March 10, 2023.