Lipocine Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 5,553,371 $ 4,771,758 Marketable investment securities 16,995,424 17,263,788 Accrued interest income 63,636 52,254 Prepaid and other current assets 297,051 773,424 Total current assets 22,909,482 22,861,224 Property and equipment, net of accumulated depreciation of $ 1,199,215 and $ 1,182,191 respectively 99,071 116,095 Other assets 23,753 23,753 Total assets $ 23,032,306 $ 23,001,072 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 448,798 $ 1,395,977 Accrued expenses 1,233,477 1,218,486 Warrant liability 141,668 17,166 Total current liabilities 1,823,943 2,631,629 Total liabilities 1,823,943 2,631,629 Commitments and contingencies (notes 7, 8, 9 and 10) - - Stockholders’ equity: Common stock, par value $ 0.0001 per share, 200,000,000 shares authorized; 5,348,276 and 5,316,166 issued, and 5,347,940 and 5,315,830 outstanding, respectively outstanding 8,863 8,860 Additional paid-in capital 220,582,158 220,171,250 Treasury stock at cost, 336 shares ( 40,712 ) ( 40,712 ) Accumulated other comprehensive gain (loss) ( 9,719 ) 7,259 Accumulated deficit ( 199,332,227 ) ( 199,777,214 ) Total stockholders’ equity 21,208,363 20,369,443 Total liabilities and stockholders’ equity $ 23,032,306 $ 23,001,072 See accompanying notes to condensed consolidated financial statements 3 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: License revenue $ - $ - $ 7,500,000 $ 54,990 Royalty revenue 89,565 - 206,738 - Total revenues 89,565 - 7,706,738 54,990 Operating expenses: Research and development 1,874,721 2,515,211 4,693,646 5,621,521 General and administrative 1,507,412 1,440,394 3,083,131 2,727,708 Total operating expenses 3,382,133 3,955,605 7,776,777 8,349,229 Operating loss ( 3,292,568 ) ( 3,955,605 ) ( 70,039 ) ( 8,294,239 ) Other income (expense): Interest and investment income 308,845 379,521 640,209 749,991 Unrealized gain (loss) on warrant liability ( 84,430 ) 27,455 ( 124,502 ) 125,589 Total other income, net 224,415 406,976 515,707 875,580 Income (loss) before income tax expense ( 3,068,153 ) ( 3,548,629 ) 445,668 ( 7,418,659 ) Income tax expense ( 481 ) - ( 681 ) ( 200 ) Net income (loss) ( 3,068,634 ) ( 3,548,629 ) 444,987 ( 7,418,859 ) Issuance of Series B preferred stock dividend - - - ( 89 ) Net income (loss) attributable to common shareholders $ ( 3,068,634 ) $ ( 3,548,629 ) $ 444,987 $ ( 7,418,948 ) Basic earnings (loss) per share attributable to common stock $ ( 0.57 ) $ ( 0.68 ) $ 0.08 $ ( 1.42 ) Weighted average common shares outstanding, basic 5,343,922 5,234,830 5,329,876 5,234,830 Diluted earnings (loss) per share attributable to common stock $ ( 0.56 ) $ ( 0.68 ) $ 0.10 $ ( 1.44 ) Weighted average common shares outstanding, diluted 5,343,922 5,234,830 5,459,204 5,234,830 Comprehensive income (loss): Net income (loss) $ ( 3,068,634 ) $ ( 3,548,629 ) $ 444,987 $ ( 7,418,859 ) Net unrealized gain (loss) on marketable investment securities 885 ( 19,053 ) ( 16,978 ) 4,509 Comprehensive income (loss) $ ( 3,067,749 ) $ ( 3,567,682 ) $ 428,009 $ ( 7,414,350 ) See accompanying notes to condensed consolidated financial statements 4 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity For the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Balances at March 31, 2023 88,511 9 5,234,830 8,852 336 ( 40,712 ) 219,284,000 3,241 ( 187,295,362 ) 31,960,028 Net loss - - - - - - - - ( 3,548,629 ) ( 3,548,629 ) Unrealized net loss on marketable investment securities - - - - - - - ( 19,053 ) - ( 19,053 ) Stock-based compensation - - - - - - 164,865 - - 164,865 Redemption of Series B preferred stock ( 88,511 ) ( 9 ) - - - - 9 - - - Costs associated with ATM Offering - - - - - - ( 5,200 ) - - ( 5,200 ) Balances at June 30, 2023 - $ - 5,234,830 $ 8,852 336 $ ( 40,712 ) $ 219,443,674 $ ( 15,812 ) $ ( 190,843,991 ) $ 28,552,011 Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Balances at December 31, 2022 - $ - 5,234,830 $ 8,852 336 $ ( 40,712 ) $ 219,112,164 $ ( 20,321 ) $ ( 183,425,043 ) $ 35,634,940 Net loss - - - - - - - - ( 7,418,859 ) ( 7,418,859 ) Unrealized net gain on marketable investment securities - - - - - - - 4,509 - 4,509 Stock-based compensation - - - - - - 342,637 - - 342,637 Issuance of Series B preferred stock 88,511 9 - - - - 80 - ( 89 ) - Redemption of Series B preferred stock ( 88,511 ) ( 9 ) - - - - 9 - - - Common stock sold through ATM offering - - - - - - ( 11,216 ) - - ( 11,216 ) Balances at June 30, 2023 - $ - 5,234,830 $ 8,852 336 $ ( 40,712 ) $ 219,443,674 $ ( 15,812 ) $ ( 190,843,991 ) $ 28,552,011 Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Balances at March 31, 2024 - - 5,315,830 8,860 336 ( 40,712 ) 220,262,456 ( 10,604 ) ( 196,263,593 ) 23,956,407 Net loss - - - - - - - - ( 3,068,634 ) ( 3,068,634 ) Unrealized net gain on marketable investment securities - - - - - - - 885 - 885 Stock-based compensation - - - - - - 102,265 - - 102,265 Common stock sold through ATM Offering - - 32,110 3 - - 217,437 - - 217,440 Balances at June 30, 2024 - $ - 5,347,940 $ 8,863 336 $ ( 40,712 ) $ 220,582,158 $ ( 9,719 ) $ ( 199,332,227 ) $ 21,208,363 Mezzanine Equity Stockholder’s Equity Series B Preferred Stock Common Stock Treasury Stock Accumulated Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Balances at December 31, 2023 - $ - 5,315,830 $ 8,860 336 $ ( 40,712 ) $ 220,171,250 $ 7,259 $ ( 199,777,214 ) $ 20,369,443 Balance - $ - 5,315,830 $ 8,860 336 $ ( 40,712 ) $ 220,171,250 $ 7,259 $ ( 199,777,214 ) $ 20,369,443 Net income - - - - - - - - 444,987 444,987 Net income (loss) - - - - - - - - 444,987 444,987 Unrealized net loss on marketable investment securities - - - - - - - ( 16,978 ) - ( 16,978 ) Stock-based compensation - - - - - - 201,571 - - 201,571 Common stock sold through ATM offering - - 32,110 3 - - 209,337 - - 209,340 Balances at June 30, 2024 - $ - 5,347,940 $ 8,863 336 $ ( 40,712 ) $ 220,582,158 $ ( 9,719 ) $ ( 199,332,227 ) $ 21,208,363 Balance - $ - 5,347,940 $ 8,863 336 $ ( 40,712 ) $ 220,582,158 $ ( 9,719 ) $ ( 199,332,227 ) $ 21,208,363 See accompanying notes to condensed consolidated financial statements 5 LIPOCINE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net income (loss) $ 444,987 $ ( 7,418,859 ) Adjustments to reconcile net income (loss) to cash used in operating activities: Depreciation expense 17,024 12,910 Stock-based compensation expense 201,571 342,637 Non-cash loss (gain) on change in fair value of warrant liability 124,502 ( 125,589 ) Amortization of discounts on marketable investment securities ( 411,145 ) ( 508,425 ) Changes in operating assets and liabilities: Accrued interest income ( 11,382 ) 56,197 Prepaid and other current assets 476,373 254,419 Accounts payable ( 947,179 ) ( 82,801 ) Accrued expenses 14,991 231,857 Cash used in operating activities ( 90,258 ) ( 7,237,654 ) Cash flows from investing activities: Purchase of property and equipment - ( 4,000 ) Purchases of marketable investment securities ( 17,537,469 ) ( 8,780,931 ) Maturities of marketable investment securities 18,200,000 17,900,000 Net cash provided by investing activities 662,531 9,115,069 Cash flows from financing activities: Net proceeds from sale of common stock through ATM 209,340 ( 11,216 ) Cash provided by (used in) financing activities 209,340 ( 11,216 ) Net increase in cash and cash equivalents 781,613 1,866,199 Cash and cash equivalents at beginning of period 4,771,758 3,148,496 Cash and cash equivalents at end of period $ 5,553,371 $ 5,014,695 Supplemental disclosure of cash flow information: Income taxes paid $ 681 656 Supplemental disclosure of non-cash investing and financing activities: Net unrealized gain (loss) on available-for-sale securities $ ( 16,978 ) $ 4,509 Issuance of Series B preferred stock $ - $ 89 See accompanying notes to condensed consolidated financial statements 6 LIPOCINE INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements included herein have been prepared by Lipocine Inc. (“Lipocine” or the “Company”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements are comprised of the financial statements of Lipocine and its subsidiaries, collectively referred to as the Company. In management’s opinion, the interim financial data presented includes all adjustments (consisting solely of normal recurring items) necessary for fair presentation. All intercompany accounts and transactions have been eliminated. Certain information required by U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2024. 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, 2023. 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 August 8, 2025. 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. While the Company believes it has sufficient liquidity and capital resources to fund our projected operating requirements through at least August 8, 2025, the Company will need to raise additional capital 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 1154, LPCN 2101, LPCN 2203, LPCN 2401, LPCN 1148, LPCN 1144, and or LPCN 1107. 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 of or suspends on-going clinical studies. On January 12, 2024, the Company entered into a License Agreement (the “Verity License Agreement”) with Gordon Silver Limited (“GSL”) and Verity Pharmaceuticals, Inc. (“Verity Pharma”), pursuant to which the Company granted to GSL (an affiliate of Verity Pharma) an exclusive, royalty-bearing, sublicensable right and license to commercialize 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 a 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 and Canada. The Verity License Agreement also provides GSL with a license to develop and commercialize TLANDO XR, the Company’s potential once-daily oral product candidate for testosterone replacement therapy. The Company retains development and commercialization rights for TLANDO and TLANDO XR (LPCN 1111) outside of the United States and Canada, and with respect to applications outside of the Field inside or outside the United States and Canada. Upon execution of the Verity License Agreement, GSL agreed to pay the Company a license fee of $ 11.0 million with an initial payment of $ 2.5 million which was received on signing of the Verity License Agreement, $ 5.0 million which was received on February 1, 2024, $ 2.5 million to be paid no later than January 1, 2025, and $ 1.0 million to be paid no later than January 1, 2026. The Company is also eligible to receive development and sales milestone payments of up to $ 259 million in the aggregate, depending primarily on the achievement of certain sales milestones in a single calendar year with respect to all products licensed by GSL under the Verity License Agreement. In addition, the Company is eligible to receive tiered royalty payments at rates ranging from 12 % up to 18 % of net sales of licensed products in the United States and Canada. 7 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. (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 7 for a description of the Verity License Agreement. See Note 11 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 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. Revenue Concentration A major partner is considered to be one that comprises more than 10 % of the Company’s total revenues. For the three months ended June 30, 2024, the Company recognized royalty revenue of approximately $ 90,000 relating to the Verity License Agreement. For the six months ended June 30, 2024, the Company recognized licensing revenue of $ 7.5 million and royalty revenue of approximately $ 140,000 relating to the Verity License Agreement. The revenue recognized in 2024 was 99 % from one major customer, Verity Pharma. There was no revenue recognized in the three months ended June 30, 2023. License revenue recognized in the six months ended June 30, 2023 of $ 55,000 was 100 % from a related-party, Spriaso. (3) Earnings (Loss) per Share Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is based on the weighted average number of common shares outstanding plus, where applicable, the additional potential common shares that would have been outstanding related to dilutive options, warrants and unvested restricted stock units to the extent such shares are dilutive. 8 The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock for the three and six months ended June 30, 2024 and 2023: Schedule of Computation of Basic and Diluted Earnings (Loss) Per Share of Common Stock 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Basic earnings (loss) per share attributable to common stock: Numerator Net income (loss) $ ( 3,068,634 ) $ ( 3,548,629 ) $ 444,987 $ ( 7,418,948 ) Denominator Weighted avg. common shares outstanding 5,343,922 5,234,830 5,329,876 5,234,830 Basic earnings (loss) per share attributable to common stock $ ( 0.57 ) $ ( 0.68 ) $ 0.08 $ ( 1.42 ) Diluted earnings (loss) per share attributable to common stock: Numerator Net income (loss) $ ( 3,068,634 ) $ ( 3,548,629 ) $ 444,987 $ ( 7,418,948 ) Effect of dilutive securities on net income (loss): Common stock warrants ( 84,430 ) 27,455 ( 124,502 ) 125,589 Total net earnings (loss) for purpose of calculating diluted earnings (loss) per common share $ ( 2,984,204 ) $ ( 3,576,084 ) $ 569,489 $ ( 7,544,537 ) Denominator Weighted avg. common shares outstanding 5,343,922 5,234,830 5,329,876 5,234,830 Weighted average effect of dilutive securities: Stock options - - 122,074 - Restricted stock units - - 7,254 - Dilutive securities - - 7,254 - Total shares for purpose of calculating diluted net earnings (loss) per common share 5,343,922 5,234,830 5,459,204 5,234,830 Diluted earnings (loss) per share attributable to common stock $ ( 0.56 ) $ ( 0.68 ) $ 0.10 $ ( 1.44 ) The computation of diluted loss per share for the six months ended June 30, 2024 and 2023 does not include the following stock options and warrants to purchase shares of common stock or unvested restricted stock units 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 For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Stock options 295,517 264,150 173,443 264,150 Unvested restricted stock units 21,762 - 14,508 - Warrants 49,333 49,433 49,433 49,433 (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 June 30, 2024, and December 31, 2023, were as follows: 9 Schedule of Available for Sale Securities June 30, 2024 Amortized Cost Gross unrealized holding gains Gross unrealized holding losses Aggregate fair value Government treasury bills $ 6,212,764 $ 98 $ - $ 6,212,862 U.S. government agency securities 10,792,379 - ( 9,817 ) 10,782,562 $ 17,005,143 $ 98 $ ( 9,817 ) $ 16,995,424 December 31, 2023 Amortized Cost Gross unrealized holding gains Gross unrealized holding losses Aggregate fair value Government treasury bills $ 14,272,530 $ 8,574 $ - $ 14,281,104 U.S. government agency securities 2,983,999 - ( 1,315 ) 2,982,684 $ 17,256,529 $ 8,574 $ ( 1,315 ) $ 17,263,788 Maturities of debt securities classified as available-for-sale securities as of June 30, 2024 are as follows: Schedule of Maturities of Debt Securities Classified as Available-for-Sale Securities June 30, 2024 Amortized Cost Aggregate fair value Due within one year $ 17,005,143 $ 16,995,424 $ 17,005,143 $ 16,995,424 There were no sales of marketable investment securities during either the three or six months ended June 30, 2024 and 2023 and therefore no realized gains or losses. Additionally, during the three months ended June 30, 2024 and 2023, $ 11.5 million and $ 5.9 million of marketable investment securities matured, and during the six months ended June 30, 2024 and 2023, $ 18.2 million and $ 17.9 million of marketable securities matured, respectively. The Company determined there were no other-than-temporary impairments for either the three or six months ended June 30, 2024 and 2023. (5) Fair Value The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: ● Level 1 Inputs: Quoted prices for identical instruments in active markets. ● Level 2 Inputs: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets. ● Level 3 Inputs: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 10 All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For accrued interest income, prepaid and other current assets, accounts payable, and accrued expenses, the carrying amounts approximate fair value because of the short maturity of these instruments. The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis Fair value measurements at reporting date using June 30, 2024 Level 1 inputs Level 2 inputs Level 3 inputs Assets: Cash equivalents - money market funds $ 4,459,338 $ 4,459,338 $ - $ - Cash equivalents - treasury bills 1,290,186 1,290,186 - - Government treasury bills 6,212,862 6,212,862 - - US. Government agency securities 10,782,562 10,782,562 - - $ 22,744,948 $ 22,744,948 $ - $ - Liabilities: Warrant liability $ 141,668 $ - $ - $ 141,668 $ 22,886,616 $ 22,744,948 $ - $ 141,668 Fair value measurements at reporting date using December 31, 2023 Level 1 inputs Level 2 inputs Level 3 inputs Assets: Cash equivalents - money market funds $ 4,695,491 $ 4,695,491 $ - $ - Government treasury bills 14,281,104 14,281,104 - - U.S. government agency securities 2,982,684 - 2,982,684 - $ 21,959,279 $ 18,976,595 $ 2,982,684 $ - Liabilities: Warrant liability $ 17,166 $ - $ - $ 17,166 $ 21,976,445 $ 18,976,595 $ 2,982,684 $ 17,166 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. 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. U.S. government agency securities: The Company uses a third-party pricing service to value these investments. 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. 11 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 June 30, 2024, include (i) volatility of 110.64 % , (ii) risk free interest rate of 5.45 % , (iii) strike price of $ 8.50 , (iv) fair value of common stock of $ 8.24 , and (v) expected life of 0.4 years. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of December 31, 2023, include (i) volatility of 100 % , (ii) risk free interest rate of 4.79 % , (iii) strike price of $ 8.50 , (iv) fair value of common stock of $ 2.79 , and (v) expected life of 0.9 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 or six months ended June 30, 2024. (6) 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 June 30, 2024 and December 31, 2023, 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. (7) Contractual Agreements (a) Verity Pharmaceuticals, Inc. On January 12, 2024, the Company entered into the Verity License Agreement with GSL and Verity Pharma, pursuant to which the Company granted to GSL (an affiliate of Verity Pharma) an exclusive, royalty-bearing, sublicensable right and license to commercialize 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 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 and Canada. The Verity License Agreement also provides GSL with a license to develop and commercialize TLANDO XR (LPCN 1111), the Company’s potential once-daily oral product candidate for testosterone replacement therapy. The Company retains rights to TLANDO and TLANDO XR in applications outside of the Field and to development and commercialization rights in the field outside of the United States and Canada. Upon execution of the Verity License Agreement, GSL agreed to pay the Company a license fee of $ 11.0 million with an initial payment of $ 2.5 million which was received on signing of the Verity License Agreement, $ 5.0 million which was received on February 1, 2024, $ 2.5 million to be paid no later than January 1, 2025, and $ 1.0 million to be paid no later than January 1, 2026. The Company is also eligible to receive development and sales milestone payments of up to $ 259.0 million in the aggregate, depending primarily on the achievement of certain sales milestones in a single calendar year with respect to all products licensed by GSL under the Verity License Agreement. GSL is generally responsible for expenses relating to the development (including the conduct of any clinical trials) and commercialization of licensed products in the Field in the United States and Canada, while the Company is generally responsible for expenses relating to development activities outside of the Field and/or the United States and Canada. The Company concluded that licensing revenue recognized in conjunction with the Verity License Agreement met the requirements under ASC 606, Revenue from Contracts with Customers. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. License revenue from payments to be received in the future will be recognized when it is probable that we will receive license payments under the terms of the Verity License Agreement. 12 Under the Verity License Agreement with Verity Pharma, during the three months ended June 30, 2024, the Company recognized approximately $ 90,000 in royalty revenue. During the six months ended June 30, 2024, the Company recognized $ 7.5 million in licensing revenue and approximately $ 140,000 in royalty revenue. (b) Antares Pharma, Inc. On October 14, 2021, the Company entered into the Antares License Agreement with 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 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, 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 agreed to make additional payments of $ 5.0 million to the Company on each of January 1, 2025, and January 1, 2026, provided that certain conditions were satisfied. The Company was 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 was to receive tiered royalty payments at rates ranging from percentages in the mid-teens 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 Antares License Agreement. In accordance with the terms of the Antares License Agreement, the Antares License Agreement terminated effective January 31, 2024. On January 12, 2024, the Company entered into the Verity License Agreement with Verity Pharma. Upon termination of the Antares License Agreement, all rights and licenses granted by the Company to Antares under the Antares License Agreement terminated and all rights in TLANDO were transferred to the Company’s new licensing partner, Verity Pharma. Under the Antares License Agreement, the Company did not recognize revenue during either the three months ended June 30, 2024 or 2023, and recognized revenue of approximately $ 67,000 and $ 0 for the six months ended June 30, 2024 and 2023, respectively. The Company does not expect to receive any further royalties under the Antares License Agreement in the future. (c) Abbott Products, Inc. On March 29, 2012, the Company terminated its collaborative agreement with Solvay Pharmaceuticals, Inc. (later acquired by Abbott Products, Inc. (“Abbott”) 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 $ 7,000 and $ 9,000 during the three months ended June 30, 2024 and 2023, respectively, and approximately $ 16,000 and $ 13,000 during the six months ended June 30, 2024 and 2023, respectively. (d) 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 $ 1.1 million and $ 1.7 million, respectively, for the three months ended June 30, 2024 and 2023, respectively, and $ 2.9 million and $ 3.8 million for the six months ended June 30, 2024 and 2023, respectively, under these agreements and has recorded these expenses in research and development expenses. 13 (8) 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, 2025. Future minimum lease payments under the non-cancelable operating lease as of June 30, 2024 are: Schedule of Future Minimum Rental Payments for Operating Leases Operating leases Year ending December 31: 2024 $ 184,038 2025 61,346 Total minimum lease payments $ 245,384 The Company’s rent expense was $ 92,000 and $ 89,000 for the three months ended June 30, 2024 and 2023, respectively. The Company’s rent expense was $ 182,000 and $ 176,000 , for the six months ended June 30, 2024, respectively. (9) Stockholders’ Equity 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. The Company is authorized to issue up to 200,000,000 shares of its common stock, par value $ 0.0001 . (a) Issuance of Common Stock On April 26, 2024, the Company entered into a sales agreement with A.G.P. (the “A.G.P. Sales Agreement”) 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 $ 10,616,169 shares of common shares for sale under the Sales Agreement, pursuant to the Registration Statement on Form S-3, as amended (File No. 333-275716) (the “Form S-3”), through A.G.P. as the Company’s sales agent. A.G.P. 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. A.G.P. will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell shares under the A.G.P. Sales Agreement. The Company will pay A.G.P. 3.0 % of the aggregate gross proceeds from each sale of shares under the A.G.P. Sales Agreement. In addition, the Company has also provided A.G.P. with customary indemnification rights. The shares of the Company’s common stock to be sold under the A.G.P. Sales Agreement will be sold and issued pursuant to the Form S-3, as amended, 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 A.G.P. Sales Agreement. The offering of common stock pursuant to the A.G.P. Sales Agreement will terminate upon the termination of the A.G.P. Sales Agreement as permitted therein. The Company and A.G.P. may each terminate the A.G.P. Sales Agreement at any time upon ten days’ prior notice. As of June 30, 2024, the Company had not sold any shares under the A.G.P. Sales Agreement. 14 Previously, on March 6, 2017, the Company entered into a sales agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company could 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. As of June 30, 2024, the Company had sold an aggregate of 996,821 shares at a weighted-average sales price of $ 33.62 per share under the At the Market Offering ( the “ATM Offering”) Cantor Sales Agreement, for aggregate gross proceeds of $ 33.5 million and net proceeds of $ 32.4 million, after deducting sales agent commission and discounts and other offering costs. During the three and six months ended June 30, 2024, the Company sold 32,110 shares of its common stock pursuant to the Cantor Sales Agreement. On April 24, 2024 the Cantor Sales Agreement was terminated. (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”). 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. 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 May 10, 2023, all shares of Series B Preferred Stock had been redeemed by the Company. 15 (c) Rights Agreement On November 13, 2015, the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent, entered into a Rights Agreement. Also on November 12, 2015, the Board of the Company authorized and the Company declared a dividend of one preferred stock purchase right (each a “Right” and collectively, the “Rights”) for each outstanding share of common stock of the Company. The dividend was payable to stockholders of record as of the close of business on November 30, 2015 and entitles the registered holder to purchase from the Company one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock of the Company at a price of $ 63.96 per one-thousandth share (the “Purchase Price”). The Rights will generally become exercisable upon the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as defined below) or (ii) 10 business days (or such later date as may be determined by action of the Board prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding common stock of the Company. Except in certain situations, a person or group of affiliated or associated persons becomes an “Acquiring Person” upon acquiring beneficial ownership of 15% or more of the outstanding shares of common stock of the Company. In general, in the event a person becomes an Acquiring Person, then each Right not owned by such Acquiring Person will entitle its holder to purchase from the Company, at the Right’s then current exercise price, in lieu of shares of Series A Junior Participating Preferred Stock, common stock of the Company with a market value of twice the Purchase Price. In addition, if after any person has become an Acquiring Person, (a) the Company is acquired in a merger or other business combination, or (b) 50% or more of the Company’s assets, or assets accounting for 50% or more of its earning power, are sold, leased, exchanged or otherwise transferred (in one or more transactions), proper provision shall be made so that each holder of a Right (other than the Acquiring Person, its affiliates and associates and certain transferees thereof, whose Rights became void) shall thereafter have the right to purchase from the acquiring corporation, for the Purchase Price, that number of shares of common stock of the acquiring corporation which at the time of such transaction would have a market value of twice the Purchase Price. The Company will be entitled to redeem the Rights at $ 0.001 per Right at any time prior to the time an Acquiring Person becomes such. The terms of the Rights are set forth in the Rights Agreement, which is summarized in the Company’s Current Report on Form 8-K dated November 13, 2015. The rights plan was originally set to expire on November 12, 2018; however, on November 5, 2018 our Board approved an Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 5, 2021, and again on November 2, 2021, the Company adopted a Second Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 1, 2024, unless the rights are earlier redeemed or exchanged by the Company. (d) Share-Based Payments The Company recognizes stock-based compensation expense for grants of stock option awards, restricted stock units and restricted stock under the Company’s Incentive Plan to employees, nonemployees and nonemployee members of the Company’s Board based on the grant-date fair value of those awards. The grant-date fair value of an award is generally recognized as compensation expense over the award’s requisite service period. In addition, the Company has granted performance-based stock option awards and restricted stock units, which vest based upon the Company satisfying certain performance conditions. Potential compensation cost, measured on the grant date, related to these performance options will be recognized only if, and when, the Company estimates that these options or units will vest, which is based on whether the Company considers the performance conditions to be probable of attainment. The Company’s estimates of the number of performance-based options or units that will vest will be revised, if necessary, in subsequent periods. 16 The Company uses the Black-Scholes model to compute the estimated fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to (i) expected volatility of the Company’s common stock price, (ii) the periods of time over which employees and members of the board of directors are expected to hold their options prior to exercise (expected term), (iii) expected dividend yield on the Common Stock, and (iv) risk-free interest rates. Stock-based compensation expense also includes an estimate, which is made at the time of grant, of the number of awards that are expected to be forfeited. This estimate is revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation cost that has been expensed in the statements of operations amounted to approximately $ 102,000 and $ 165,000 , respectively, for the three months ended June 30, 2024 and 2023, and approximately $ 202,000 and $ 343,000 , respectively, for the six months ended June 30, 2024 and 2023, and is allocated as follows: Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 57,786 $ 83,229 $ 112,866 $ 178,742 General and administrative 44,479 81,636 88,705 163,895 Total $ 102,265 $ 164,865 $ 201,571 $ 342,637 The Company issued 8,820 stock options, during each of the three months ended June 30, 2024 and 2023, and issued 34,446 and 10,086 stock options, respectively, during the six months ended June 30, 2024 and 2023. 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 average of the contractual term and the vesting period of the stock option. For awards with performance conditions, and that have the contractual term to satisfy the performance condition, the contractual term was used. Risk-Free Interest Rate: The risk-free interest rate used was based on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term. Expected Dividend : The expected dividend assumption is based on management’s current expectation about the Company’s anticipated dividend policy. The Company does not anticipate declaring dividends in the foreseeable future. Expected Volatility : The volatility factor is based solely on the Company’s trading history. For options granted during the six months ended June 30, 2024 and 2023, 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 2024 2023 Expected term 5.76 years 5.73 years Risk-free interest rate 4.32 % 3.73 % Expected dividend yield — — Expected volatility 97.78 % 98.97 % The Company recognizes 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 June 30, 2024, there was approximately $ 384,000 of total unrecognized compensation cost related to unvested stock option compensation granted under the Company’s stock option plan. That cost is expected to be recognized over a weighted average period of 0.8 years and will be adjusted for subsequent changes in estimated forfeitures. Additionally, as of June 30, 2024, there was $ 76,000 of total unrecognized compensation costs related to unvested restricted stock units that have either time-based or performance vesting. 17 (e) Stock Option Plan In April 2014, the Board adopted the 2014 Stock and Incentive Plan (“2014 Plan”) subject to shareholder approval which was received in June 2014. The 2014 Plan provides for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units, restricted stock and dividend equivalents. An aggregate of 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 . 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 . In June 2024, 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 from 336,582 to 600,000 . 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 600,000 shares of common stock are authorized for issuance under the 2014 Plan, with 257,046 shares remaining available for grant as of June 30, 2024. 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, 2023 262,247 $ 34.21 Options granted 34,446 4.77 Options exercised - - Options forfeited - - Options cancelled ( 1,176 ) 140.25 Balance at June 30, 2024 295,517 30.36 Options exercisable at June 30, 2024 224,887 37.54 The following table summarizes information about stock options outstanding and exercisable at June 30, 2024: 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 295,517 6.55 $ 30.36 $ 230,307 224,887 5.79 $ 37.54 $ 77,671 The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were 0 stock options exercised during either the three or six months ended June 30, 2024 or 2023. 18 (f) Restricted Stock Units A summary of restricted stock unit activity is as follows: Summary of Restricted Stock Unit Activity Number of unvested restricted stock units Balance at December 31, 2023 - Granted 21,762 Vested - Cancelled - Balance at June 30, 2024 21,762 There were no restricted stock units awarded during either the three months ended June 30, 2024 or 2023 . There were 21,762 and 0 restricted stock units awarded during the six months ended June 30, 2024 and 2023, respectively. The weighted average grant date fair value of restricted stock units awarded during the six months ended June 30, 2024 was $ 3.61 per share. (g) 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 June 30, 2024, 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 June 30, 2024 and on December 31, 2023 was determined using the Black-Scholes option pricing model with the following Level 3 inputs (as defined in the November 2019 Offering): Schedule of Fair Value of Warrants June 30, 2024 December 31, 2023 Expected life in years 0.39 0.88 Risk-free interest rate 5.45 % 4.79 % Dividend yield — — Volatility 110.64 % 100.00 % Stock price $ 8.24 $ 2.79 During the three and six months ended June 30, 2024, the Company recorded a non-cash loss of approximately $ 84,000 and $ 125,000 , respectively, from the change in fair value of the November 2019 Offering warrants. During the three and six months ended June 30, 2023, the Company recorded non-cash gains of approximately $ 27,000 and $ 126,000 , 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, 2023 $ 17,166 Change in fair value of common stock warrants 124,502 Balance at June 30, 2024 $ 141,668 19 Additionally, in an offering in February 2020, 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 June 30, 2024, and 2023, there were 49,433 warrants outstanding that were issued in February 2020. 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, 2023 113,795 $ 8.72 Issued - - Exercised - - Expired - - Cancelled - - Forfeited - - Balance at June 30, 2024 113,795 $ 8.72 There were no common stock warrants exercised during either the three or six months ended June 30, 2024 or 2023. The following table summarizes information about common stock warrants outstanding at June 30, 2024: 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 0.50 $ 8.72 $ - (10) Commitments and Contingencies Litigation The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business. The Company records a liability when a particular contingency is probable and estimable. On 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. 20 The Company is not currently aware of any matter, individually or in the aggregate, that could 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. (11) 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. During the three and six months ended June 30, 2024, the Company did not receive any revenue from Spriaso. During the three and six months ended June 30, 2023, the Company received licensing revenue from Spriaso of $ 0 and approximately $ 55,000 , respectively. Spriaso filed its first NDA and as an affiliated entity of the Company, it used up the one-time waiver for user fees for a small business submitting its first human drug application to the FDA. Spriaso is considered a variable interest entity under the FASB ASC Topic 810-10, Consolidations, however the Company is not the primary beneficiary and has therefore not consolidated Spriaso. (12) Recent Accounting Pronouncements Accounting Pronouncements Issued Not Yet Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances. This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. This change will apply retrospectively to all periods presented. Management is currently assessing the impact of the adoption of this ASU on the financials statements of the Company. 21