Lipocine Inc. 10-Q

ITEM 1A. RISK FACTORS In addition to the other information set forth in this Report, consider the risk factors discussed in Part 1, “Item 1A. Risk Factors” in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 7, 2024 which could materially affect our business, financial condition or future results. The risks described in the aforementioned report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be not material also may materially adversely affect the Company’s business, financial condition and or operating results. The following are the risk factors that have materially changed from our risk factors included in our Form 10-K for the year ended December 31, 2023, filed with the SEC on March 7, 2024: 40 Risks Related to Ownership of Our Common Stock The value of our warrants outstanding from the November 2019 Offering is subject to potential material increases and decreases based on fluctuations in the price of our common stock, among other factors. In November 2019, we completed a public offering of common stock and warrants to purchase common stock (the “November 2019 Offering”). Gross proceeds from the November 2019 Offering were approximately $6.0 million. In the November 2019 Offering, the Company sold (i) 614,706 Class A Units, with each Class A Unit consisting of one share of common stock and a common stock warrant to purchase one share of common stock, and (ii) 91,177 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of common stock and one common stock warrant to purchase one share of common stock at a price of $8.50 per Class A Unit and $8.4998 per Class B Unit. The pre-funded warrants were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of $0.0017 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of $8.50 per share and expire on November 17, 2024. As of March 31, 2024, there were 64,362 warrants from the November 2019 offering outstanding. We account for the common stock warrants as a derivative instrument, and changes in the fair value of the warrants are included under other income (expense) in the Company’s statements of operations for each reporting period. On March 31, 2024, the aggregate fair value of the warrant liability included in the Company’s consolidated balance sheet was approximately $57,000. We use the Black-Scholes option pricing model to determine the fair value of the warrants. As a result, the option-pricing model requires the input of several assumptions, including the stock price volatility, share price and risk-free interest rate. Changes in these assumptions can materially affect the fair value estimate. While the liability may only result from a change of control at that point in time, we ultimately may incur amounts significantly different than the carrying value. Our management and directors will be able to exert influence over our affairs. As of March 31, 2024, our executive officers and directors beneficially owned approximately 6.1% of our common stock. These stockholders, if they act together, may be able to influence our management and affairs and all matters requiring stockholder approval, including significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might affect the market price of our common stock. The market price of our common stock has been volatile over the past year and may continue to be volatile. The market price and trading volume of our common stock has been volatile over the past year and it may continue to be volatile. Over the past year, our common stock has traded as low as $2.36 and as high as $5.44 per share. We cannot predict the price at which our common stock will trade in the future and it may decline. The price at which our common stock trades may fluctuate significantly and may be influenced by many factors, including our financial results; developments generally affecting our industry; general economic, industry and market conditions, and our customers; the depth and liquidity of the market for our common stock; investor perceptions of our business; reports by industry analysts; announcements by other market participants, including, among others, investors, our competitors, and our customers; regulatory action affecting our business; and the impact of other “Risk Factors” discussed herein and in our Annual Report on Form 10-K filed with the SEC on March 7, 2024. In addition, changes in the trading price of our common stock may be inconsistent with our operating results and outlook. The volatility of the market price of our common stock may be inconsistent with our operating results and outlook. The volatility of the market price of our common stock may adversely affect investors’ ability to purchase or sell shares of our common stock. Risks Relating to Our Financial Position and Capital Requirements We have incurred significant operating losses in most years since our inception and anticipate that we will incur continued losses for the foreseeable future. We have focused a significant portion of our efforts on developing TLANDO and more recently on LPCN 1154, LPCN 1148, and LPCN 1144. We have funded our operations to date through sales of our equity securities, debt and payments received under our license and collaboration arrangements. We have incurred losses in most years since our inception. As of March 31, 2024, we had an accumulated deficit of $196.3 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect to continue to incur significant research and development expenses in connection with clinical trials associated with LPCN 1154, and potentially with LPCN 2101, LPCN 2203, LPCN 2401. LPCN 1148, LPCN 1144 and LPCN 1107, if further clinical trials are initiated. As a result, we expect to continue to incur significant operating losses for the foreseeable future as we evaluate further clinical development of LPCN 1154, LPCN 2101, LPCN 2203, LPCN 2401 and possibly LPCN 1148, LPCN 1144, and LPCN 1107, in addition to our other programs and continued research efforts. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. 41 ITEM 6. EXHIBITS INDEX TO EXHIBITS Exhibit Incorporation By Reference Number Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Bylaws 8-K 333-178230 3.3 7/25/2013 3.2 Amendment to the Amended and Restated Bylaws of Lipocine Inc. 8-K 001-36357 3.1 3/10/2023 3.3 Amended and Restated Certificate of Incorporation 8-K 333-178230 3.2 7/25/2013 3.4 Certificate of Designation of Series A Junior Participating Preferred Stock. 8-K 001-36357 3.1 12/1/2015 3.5 Certificate of Increase of Series A Junior Participating Preferred Stock 8-K 001-36357 3.1 11/1/2021 3.6 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lipocine Inc. 8-K 001-36357 3.1 6/28/2022 3.7 Certificate of Designation of Series B Preferred Stock 8-K 001-36357 3.2 3/10/2023 3.8 Certificate of Amendment to the Amended and Restated Certificated of Incorporation of Lipocine Inc. 8-K 001-36357 3.1 5/11/2023 31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 * Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 * Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1) 32.2 * Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1) 101.INS * XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith ** Management contract or compensation plan or arrangement + Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been submitted separately with the Securities and Exchange Commission (1) This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. 42 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Lipocine Inc. (Registrant) Dated: May 9, 2024 /s/ Mahesh V. Patel Mahesh V. Patel, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) Dated: May 9, 2024 /s/ Krista Fogarty Krista Fogarty, Corporate Controller (Principal Accounting Officer) 43