Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ~~Yes:~~ xYes: ☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx ☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ Nox ☒

As of ~~November 9, 2020,~~August 4, 2021, the registrant had ~~65,686,150~~88,290,650 shares of common stock outstanding.


~~Item 6.~~	~~Exhibits~~	45

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

							2021			2020
	September 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	12,938,186		$	9,728,523		$	10,967,713		$	19,217,382
Restricted cash		5,000,000			5,000,000			-			5,000,000
Marketable investment securities		5,861,797			4,340,041			35,672,059			449,992
Accrued interest income		11,216			16,522			232,568			391
Prepaid and other current assets		915,575			545,887			283,180			661,258

Total current assets		24,726,774			19,630,973			47,155,520			25,329,023

Property and equipment, net of accumulated depreciation of $1,142,540 and $1,140,143, respectively		1,157			3,554
Other assets		23,753			23,753			23,753			23,753

Total assets	$	24,751,684		$	19,658,280		$	47,179,273		$	25,352,776

Liabilities and Stockholders' Equity
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,047,729		$	1,182,241		$	906,476		$	1,597,220
Accrued expenses		1,534,495			449,303			1,444,188			1,653,178
Debt - current portion		3,206,290			3,333,333			3,957,627			3,333,333
Litigation settlement liability - current portion								2,500,000			-

Total current liabilities		5,788,514			4,964,877			8,808,291			6,583,731

Debt - non-current portion		3,151,010			3,814,407			-			2,257,075
Warrant liability		1,303,859			4,591,200			1,125,429			1,170,051
Litigation settlement liability - non-current portion								1,500,000			-

Total liabilities		10,243,383			13,370,484			11,433,720			10,010,857

Commitments and contingencies (notes 5, 7, 8 and 10)								-			-

Stockholders' equity:
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; zero issued and outstanding		-			-
Common stock, par value $0.0001 per share, 100,000,000 shares authorized; 65,691,860 and 37,655,175 issued and 65,686,150 and 37,649,465 outstanding		6,569			3,766
Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 issued and outstanding								-			-
Common stock, par value $0.0001 per share, 100,000,000 shares authorized; 88,296,360 and 70,041,967 issued and 88,290,650 and 70,036,257 outstanding								8,830			7,005
Additional paid-in capital		182,062,701			157,391,969			217,986,752			187,407,634
Treasury stock at cost, 5,710 shares		(40,712	)		(40,712	)		(40,712	)		(40,712	)
Accumulated other comprehensive gain (loss)		475			(38	)
Accumulated other comprehensive loss								(186	)		-
Accumulated deficit		(167,520,732	)		(151,067,189	)		(182,209,131	)		(172,032,008	)
Total stockholders' equity		14,508,301			6,287,796

Total liabilities and stockholders' equity	$	24,751,684		$	19,658,280
Total stockholders’ equity								35,745,553			15,341,919

Total liabilities and stockholders’ equity							$	47,179,273		$	25,352,776

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

~~(Unaudited)~~

	2021			2020			2021			2020
	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Operating expenses:
Research and development	$	1,464,687		$	2,268,984		$	3,045,228		$	4,780,739
General and administrative		1,525,592			1,953,535			3,059,544			4,038,795
Total operating expenses		2,990,279			4,222,519			6,104,772			8,819,534
Operating loss		(2,990,279	)		(4,222,519	)		(6,104,772	)		(8,819,534	)

Other income (expense):
Interest and investment income		17,344			7,177			27,993			67,115
Interest expense		(57,428	)		(87,847	)		(126,401	)		(221,192	)
Unrealized gain (loss) on warrant liability		221,322			(2,066,445	)		26,257			(3,166,474	)
Litigation settlement		(4,000,000	)		-			(4,000,000	)		-
Total other expense, net		(3,818,762	)		(2,147,115	)		(4,072,151	)		(3,320,551	)

Loss before income tax expense		(6,809,041	)		(6,369,634	)		(10,176,923	)		(12,140,085	)

Income tax expense		-			-			(200	)		(200	)

Net loss	$	(6,809,041	)	$	(6,369,634	)	$	(10,177,123	)	$	(12,140,285	)

Basic loss per share attributable to common stock	$	(0.08	)	$	(0.13	)	$	(0.12	)	$	(0.27	)

Weighted average common shares outstanding, basic		88,290,650			49,769,253			85,556,110			45,558,442
Diluted loss per share attributable to common stock	$	(0.08	)	$	(0.13	)	$	(0.12	)	$	(0.27	)

Weighted average common shares outstanding, diluted		88,290,650			49,769,253			85,556,110			45,558,442

Comprehensive loss:
Net loss	$	(6,809,041	)	$	(6,369,634	)	$	(10,177,123	)	$	(12,140,285	)
Net unrealized gain (loss) on available-for-sale securities		22,273			(104	)		(186	)		(66	)

Comprehensive loss	$	(6,786,768	)	$	(6,369,738	)	$	(10,177,309	)	$	(12,140,351	)

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenues:
License revenue $ - $ 164,990 $ - $ 164,990
Total revenues - 164,990 - 164,990

Operating expenses:
Research and development $ 2,487,861 $ 1,713,417 $ 7,268,599 $ 5,627,383
General and administrative 1,887,195 1,427,261 5,925,991 3,989,645
Total operating expenses 4,375,056 3,140,678 13,194,590 9,617,028

Operating loss (4,375,056 ) (2,975,688 ) (13,194,590 ) (9,452,038 )

Other income (expense):
Interest and investment income 5,614 98,988 72,729 348,833
Interest expense (84,293 ) (183,500 ) (305,485 ) (611,864 )
Gain (loss) on warrant liability 140,477 - (3,025,997 ) -
Total other expense, net 61,798 (84,512 ) (3,258,753 ) (263,031 )
Loss before income tax expense (4,313,258 ) (3,060,200 ) (16,453,343 ) (9,715,069 )

Income tax expense - - (200 ) (200 )
Net loss $ (4,313,258 ) $ (3,060,200 ) $ (16,453,543 ) $ (9,715,269 )

Basic loss per share attributable to common stock $ (0.07 ) $ (0.12 ) $ (0.32 ) $ (0.40 )
Weighted average common shares outstanding, basic 64,833,714 24,911,908 52,030,431 24,301,045

Diluted loss per share attributable to common stock $ (0.07 ) $ (0.12 ) $ (0.32 ) $ (0.40 )
Weighted average common shares outstanding, diluted 64,833,714 24,911,908 52,030,431 24,301,045

Comprehensive loss:
Net loss $ (4,313,258 ) $ (3,060,200 ) $ (16,453,543 ) $ (9,715,269 )
Net unrealized gain (loss) on available-for-sale securities 579 (2,656 ) 513 1,224

Comprehensive loss $ (4,312,679 ) $ (3,062,856 ) $ (16,453,030 ) $ (9,714,045 )

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited)

	Common Stock				Treasury Stock					Additional		Accumulated Other						Total			Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital			Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital		Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Equity			Common Stock				Treasury Stock					Additional			Accumulated Other						Total
Balances at June 30, 2019		24,723,990	$	2,473		5,710	$	(40,712	)	$	154,600,442	$	2,917		$	(144,714,914	)	$	9,850,206
																					Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital			Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity

Balances at March 31, 2020																						47,854,499	$	4,786		5,710	$	(40,712	)	$	163,426,502		$	-		$	(156,837,840	)	$	6,552,736

Net loss		-		-		-		-			-		-			(3,060,200	)		(3,060,200	)		-		-		-		-			-			-			(6,369,634	)		(6,369,634	)

Unrealized net loss on marketable investment securities		-		-		-		-			-		(2,656	)		-			(2,656	)
Unrealized net gain on marketable investment securities																						-		-		-		-			-			(104	)		-			(104	)

Stock-based compensation		-		-		-		-			58,113		-			-			58,113			-		-		-		-			465,058			-			-			465,058

Common stock sold through ATM offering		283,782		28		-		-			603,649		-			-			603,677
Vesting of restricted stock units																						25,000		2		-		-			(2	)		-			-			-

Common stock issued for warrant exercises																						13,497,807		1,350		-		-			6,852,308			-			-			6,853,658

Settlement of warrant liability on warrant exercises																						-		-		-		-			5,591,362			-			-			5,591,362

Common stock sold through equity offering

Option exercises		20,000		2		-		-			56,198		-			-			56,200

Balances at September 30, 2019		25,027,772	$	2,503		5,710	$	(40,712	)	$	155,318,402	$	261		$	(147,775,114	)	$	7,505,340
Common stock sold through ATM offering

Costs associated with ATM offering																						-		-		-		-			(8,108	)		-			-			(8,108	)

Balances at June 30, 2020																						61,377,306	$	6,138		5,710	$	(40,712	)	$	176,327,120		$	(104	)	$	(163,207,474	)	$	13,084,968

Common Stock Treasury Stock Additional Accumulated
Other Total
Number of
Shares Amount Number of
Shares Amount Paid-In
Capital Comprehensive
Gain (Loss) Accumulated
Deficit Stockholders'
Equity
Balances at December 31, 2018 21,731,486 $ 2,174 5,710 $ (40,712 ) $ 147,533,019 $ (963 ) $ (138,059,845 ) $ 9,433,673

Net loss - - - - - - (9,715,269 ) (9,715,269 )

Unrealized net gain on marketable investment securities - - - - - 1,224 - 1,224

Stock-based compensation - - - - 781,390 - - 781,390

Common stock sold through ATM offering 3,276,286 327 - - 6,947,795 - - 6,948,122

Option exercises 20,000 2 - - 56,198 - - 56,200

Balances at September 30, 2019 25,027,772 $ 2,503 5,710 $ (40,712 ) $ 155,318,402 $ 261 $ (147,775,114 ) $ 7,505,340

	Common Stock				Treasury Stock					Additional			Accumulated Other						Total
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital			Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity

Balances at December 31, 2019		37,649,465	$	3,766		5,710	$	(40,712	)	$	157,391,969		$	(38	)	$	(151,067,189	)	$	6,287,796

Net loss		-		-		-		-			-			-			(12,140,285	)		(12,140,285	)

Unrealized net gain on marketable investment securities		-		-		-		-			-			(66	)		-			(66	)

Stock-based compensation		-		-		-		-			786,971			-			-			786,971

Vesting of restricted stock units		25,000		2		-		-			(2	)		-			-			-

Common stock sold through equity offering		10,084,034		1,008		-		-			5,652,132			-			-			5,653,140

Common stock issued for warrant exercises		13,618,807		1,362		-		-			6,912,796			-			-			6,914,158

Settlement of warrant liability on warrant exercises		-		-		-		-			5,591,362			-			-			5,591,362

Costs associated with ATM offering		-		-		-		-			(8,108	)		-			-			(8,108	)

Balances at June 30, 2020		61,377,306	$	6,138		5,710	$	(40,712	)	$	176,327,120		$	(104	)	$	(163,207,474	)	$	13,084,968

Common Stock Treasury Stock Additional Accumulated
Other Total
Number of
Shares Amount Number of
Shares Amount Paid-In
Capital Comprehensive
Gain (Loss) Accumulated
Deficit Stockholders'
Equity
Balances at June 30, 2020 61,377,306 $ 6,138 5,710 $ (40,712 ) $ 176,327,120 $ (104 ) $ (163,207,474 ) $ 13,084,968

Net loss - - - - - - (4,313,258 ) (4,313,258 )

Unrealized net gain on marketable investment securities - - - - - 579 - 579

Stock-based compensation - - - - 351,623 - - 351,623

Vesting of restricted stock units - - - -

Common stock issued for warrant exercises 1,478,844 148 - - 760,570 - - 760,718

Settlement of warrant liability on warrant exercises - - - - 721,976 - - 721,976

Common stock sold through ATM offering 2,830,000 283 - - 3,901,412 - - 3,901,695

Balances at September 30, 2020 65,686,150 $ 6,569 5,710 $ (40,712 ) $ 182,062,701 $ 475 $ (167,520,732 ) $ 14,508,301

	Common Stock				Treasury Stock					Additional			Accumulated Other						Total
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital			Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders’ Equity

Balances at March 31, 2021		88,290,650	$	8,830		5,710	$	(40,712	)	$	217,845,280		$	(22,459	)	$	(175,400,090	)	$	42,390,849

Net loss		-		-		-		-			-			-			(6,809,041	)		(6,809,041	)

Unrealized net gain on marketable investment securities		-		-		-		-			-			22,273			-			22,273

Stock-based compensation		-		-		-		-			146,747			-			-			146,747

Costs associated with ATM offering		-		-		-		-			(5,275	)		-			-			(5,275	)

Balances at June 30, 2021		88,290,650	$	8,830		5,710	$	(40,712	)	$	217,986,752		$	(186	)	$	(182,209,131	)	$	35,745,553

	Common Stock				Treasury Stock					Additional			Accumulated						Total			Common Stock				Treasury Stock					Additional		Accumulated Other						Total
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital			Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Equity			Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital		Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders’ Equity
Balances at December 31, 2019		37,649,465	$	3,766		5,710	$	(40,712	)	$	157,391,969		$	(38	)	$	(151,067,189	)	$	6,287,796

Balances at December 31, 2020																							70,036,257	$	7,005		5,710	$	(40,712	)	$	187,407,634	$	-		$	(172,032,008	)	$	15,341,919
Balances																							70,036,257	$	7,005		5,710	$	(40,712	)	$	187,407,634	$	-		$	(172,032,008	)	$	15,341,919

Net loss		-		-		-		-			-			-			(16,453,543	)		(16,453,543	)		-		-		-		-			-		-			(10,177,123	)		(10,177,123	)

Unrealized net gain on marketable investment securities		-		-		-		-			-			513			-			513
Unrealized net loss on marketable investment securities																							-		-		-		-			-		(186	)		-			(186	)

Stock-based compensation		-		-		-		-			1,138,594			-			-			1,138,594			-		-		-		-			294,313		-			-			294,313

Vesting of restricted stock units		25,000		2		-		-			(2	)		-			-			-
Option exercises																							4,584		-		-		-			6,693		-			-			6,693

Common stock sold through equity offering		10,084,034		1,008		-		-			5,652,132			-			-			5,653,140			16,428,571		1,643		-		-			26,838,814		-			-			26,840,457

Common stock issued for warrant exercises		15,097,651		1,510		-		-			7,673,366			-			-			7,674,876			10,000		1		-		-			4,999		-			-			5,000

Settlement of warrant liability on warrant exercises		-		-		-		-			6,313,338			-			-			6,313,338			-		-		-		-			18,365		-			-			18,365

Common stock sold through ATM offering		2,830,000		283		-		-			3,893,304			-			-			3,893,587			1,811,238		181		-		-			3,415,934		-			-			3,416,115

Balances at September 30, 2020		65,686,150	$	6,569		5,710	$	(40,712	)	$	182,062,701		$	475		$	(167,520,732	)	$	14,508,301
Balances at June 30, 2021																							88,290,650	$	8,830		5,710	$	(40,712	)	$	217,986,752	$	(186	)	$	(182,209,131	)	$	35,745,553
Balances																							88,290,650	$	8,830		5,710	$	(40,712	)	$	217,986,752	$	(186	)	$	(182,209,131	)	$	35,745,553

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

~~(Unaudited)~~

	2021			2020
	Six Months Ended June 30,
	2021			2020

Cash flows from operating activities:

Net loss	$	(10,177,123	)	$	(12,140,285	)

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation expense		-			1,598
Stock-based compensation expense		294,313			786,971
Non-cash interest expense		33,886			63,765
Non-cash loss (gain) on change in fair value of warrant liability		(26,257	)		3,166,474
Amortization of premium (discount) on marketable investment securities		203,958			(9,755	)

Changes in operating assets and liabilities:
Accrued interest income		(232,177	)		8,603
Prepaid and other current assets		378,078			398,579
Accounts payable		(690,744	)		(275,415	)
Accrued expenses		(208,990	)		543,955
Litigation settlement liability		4,000,000			-

Cash used in operating activities		(6,425,056	)		(7,455,510	)

Cash flows from investing activities:

Purchases of marketable investment securities		(35,876,211	)		(4,466,811	)
Maturities of marketable investment securities		450,000			4,350,000

Cash used in investing activities		(35,426,211	)		(116,811	)

Cash flows from financing activities:

Debt repayments		(1,666,667	)		(1,111,111	)
Proceeds from debt		-			233,537
Net proceeds from common stock offering		26,840,457			5,653,140
Net proceeds from (costs associated with) ATM		3,416,115			(8,108	)
Proceeds from stock option exercises		6,693			-
Net proceeds from exercise of warrants		5,000			6,914,158

Cash provided by financing activities		28,601,598			11,681,616

Net increase (decrease) in cash, cash equivalents, and restricted cash		(13,249,669	)		4,109,295

Cash, cash equivalents, and restricted cash at beginning of period		24,217,382			14,728,523

Cash, cash equivalents, and restricted cash at end of period	$	10,967,713		$	18,837,818

Supplemental disclosure of cash flow information:
Interest paid	$	92,515		$	156,979
Income taxes paid		200			200

Supplemental disclosure of non-cash investing and financing activity:
Settlement of warrant liability on warrant exercises	$	18,365		$	5,591,362
Net unrealized loss on available-for-sale securities		(186	)		(66	)
Accrued final payment charge on debt		33,886			63,765
Other accrued interest		-			448

Nine Months Ended September 30,
2020 2019
Cash flows from operating activities:

Net loss $ (16,453,543 ) $ (9,715,269 )

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation expense 2,397 11,582
Stock-based compensation expense 1,138,594 781,390
Non-cash interest expense 87,134 175,305
Non-cash loss on change in fair value of warrant liability 3,025,997 -
Amortization of discount on marketable investment securities (5,946 ) (147,437 )

Changes in operating assets and liabilities:
Accrued interest income 5,306 27,660
Prepaid and other current assets (369,688 ) (234,391 )
Accounts payable (134,512 ) 689,166
Accrued expenses 1,085,192 53,819

Cash used in operating activities (11,619,069 ) (8,358,175 )

Cash flows from investing activities:

Purchases of marketable investment securities (6,315,297 ) (15,108,973 )
Maturities of marketable investment securities 4,800,000 17,549,795
Cash provided by (used in) investing activities (1,515,297 ) 2,440,822

Cash flows from financing activities:

Debt repayments (1,111,111 ) (2,500,000 )
Proceeds from debt 233,537 -
Proceeds from stock option exercises - 56,200
Net proceeds from common stock offering 5,653,140 -
Net proceeds from sale of common stock through ATM 3,893,587 6,948,122
Net proceeds from exercise of warrants 7,674,876 -

Cash provided by financing activities 16,344,029 4,504,322

Net increase (decrease) in cash, cash equivalents, and restricted cash 3,209,663 (1,413,031 )

Cash, cash equivalents, and restricted cash at beginning of period 14,728,523 13,077,539

Cash, cash equivalents, and restricted cash at end of period $ 17,938,186 $ 11,664,508

Supplemental disclosure of cash flow information:
Interest paid $ 217,319 $ 436,559
Income taxes paid 200 200

Supplemental disclosure of non-cash investing and financing activity:
Settlement of warrant liability on warrant exercises $ 6,313,338 $ -
Net unrealized gain on available-for-sale securities 513 1,224
Accrued final payment charge on debt 87,134 175,305
Other accrued interest 1,032 -

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(1)~~

~~Basis of Presentation~~

(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~~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 has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, ~~2020.~~2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the ~~Company's~~Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, ~~2019.~~2020.

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. generally accepted accounting principles. Actual results could differ from these estimates.

~~Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the previously reported net loss.~~

The Company believes that its existing capital resources, together with interest thereon, will be sufficient to meet its projected operating requirements through at least ~~September~~June 30, ~~2021~~2022 which includes an on-going clinical study for LPCN 1144, future clinical studies for LPCN 1148 and LPCN 1154, compliance with regulatory requirements and on-going litigation and settlement activities. 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 pre-commercial and commercial activities for TLANDO and new clinical studies for LPCN 1144, TLANDO XR, LPCN 1148 and LPCN ~~1148 .While~~1154. While the Company believes it has sufficient liquidity and capital resources to fund our projected operating requirements through at least ~~September~~June 30, ~~2021,~~2022, the Company will need to raise additional capital at some point through the equity or debt markets or through out-licensing activities, before or after ~~September~~June 30, ~~2021,~~2022, 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 1144, TLANDO XR, LPCN 1148 and LPCN ~~1148.~~1154. Conversely, the Company’s capital resources could last longer if it reduces expenses, reduces the number of activities currently contemplated under our operating plan or if it terminates, modifies the design or suspends on-going clinical ~~studies, or if it terminates or settles any on-going litigation activities.~~studies..

~~(2)~~

~~Earnings (Loss) per Share~~

(2) 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.

The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

Schedule of Computation of Basic and Diluted Earnings (loss) Per Share of Common Stock

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Basic loss per share attributable to common stock:
Numerator
Net loss $ (4,313,258 ) $ (3,060,200 ) $ (16,453,543 ) $ (9,715,269 )
Denominator
Weighted avg. common shares outstanding 64,833,714 24,911,908 52,030,431 24,301,045

Basic loss per share attributable to common stock $ (0.07 ) $ (0.12 ) $ (0.32 ) $ (0.40 )

Diluted loss per share attributable to common stock:
Numerator
Net loss $ (4,313,258 ) $ (3,060,200 ) $ (16,453,543 ) $ (9,715,269 )
Denominator
Weighted avg. common shares outstanding 64,833,714 24,911,908 52,030,431 24,301,045

Diluted loss per share attributable to common stock $ (0.07 ) $ (0.12 ) $ (0.32 ) $ (0.40 )

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Basic loss per share attributable to common stock:
Numerator
Net loss	$	(6,809,041	)	$	(6,369,634	)	$	(10,177,123	)	$	(12,140,285	)

Denominator
Weighted avg. common shares outstanding		88,290,650			49,769,253			85,556,110			45,558,442

Basic loss per share attributable to common stock	$	(0.08	)	$	(0.13	)	$	(0.12	)	$	(0.27	)

Diluted loss per share attributable to common stock:
Numerator
Net loss	$	(6,809,041	)	$	(6,369,634	)	$	(10,177,123	)	$	(12,140,285	)
Denominator
Weighted avg. common shares outstanding		88,290,650			49,769,253			85,556,110			45,558,442

Diluted loss per share attributable to common stock	$	(0.08	)	$	(0.13	)	$	(0.12	)	$	(0.27	)

The computation of diluted loss per share for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 does not include the following stock options and warrants to purchase shares or unvested restricted stock units in the computation of diluted loss per share because these instruments were antidilutive:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	September 30,				June 30,
	2020		2019		2021		2020
Stock options		2,958,485		2,310,485		3,915,790		3,012,041
Unvested restricted stock units		605,682		678,687		-		605,682
Warrants		1,944,366		-		1,934,366		3,423,210

~~(3)~~

~~Marketable Investment Securities~~8

(3) 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 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:

Schedule of Available-for-Sale Securities

September 30, 2020 Amortized
Cost Gross
unrealized
holding
gains Gross
unrealized
holding
losses Aggregate
fair value
Government treasury bills $ 1,999,426 $ 274 $ - $ 1,999,700
Corporate bonds, notes and commercial paper 3,861,896 201 - 3,862,097
$ 5,861,322 $ 475 $ - $ 5,861,797

June 30, 2021	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses			Aggregate fair value

Corporate bonds, notes and commercial paper	$	35,672,245	$	-	$	(186	)	$	35,672,059
	$	35,672,245	$	-	$	(186	)	$	35,672,059

December 31, 2019 Amortized
Cost Gross
unrealized
holding
gains Gross
unrealized
holding
losses Aggregate
fair value
Corporate bonds, notes and commercial paper 4,340,079 - (38 ) 4,340,041
$ 4,340,079 $ - $ (38 ) $ 4,340,041

December 31, 2020	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses		Aggregate fair value

Commercial paper	$	449,992		-		-	$	449,992
	$	449,992	$	-	$	-	$	449,992

Maturities of debt securities classified as available-for-sale securities at ~~September~~June 30, ~~2020~~2021 are as follows:

Schedule of Maturities of Debt Securities Classified as Available-for-sale Securities

September 30, 2020 Amortized
Cost Aggregate
fair value
Due within one year $ 5,861,322 $ 5,861,797
$ 5,861,322 $ 5,861,797

June 30, 2021

Amortized

Cost

Aggregate

fair value

Due within one year

35,672,245

35,672,059

35,672,245

35,672,059

There were no sales of marketable investment securities during the three and ~~nine~~six months ended ~~September 31,~~June 30, 2021 and 2020 and ~~2019 and~~ therefore no0 realized gains or losses. Additionally, ~~$450,000~~during the three months ended June 30, 2021 and ~~$8.5~~2020, 0 marketable investment securities matured, and $450,000 and $4.3 million of marketable investment securities matured during the ~~three~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~September 30, 2019, respectively, and $4.8 million and $17.5 million of marketable investment securities matured during the nine months ended September 30,~~ 2020, ~~and 2019,~~ respectively. The Company determined there were no0 other-than-temporary impairments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

~~(4)~~

~~Fair Value~~

(4) 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.

~~Level 1 Inputs: Quoted prices for identical instruments in active markets.~~

~~Level 3 Inputs: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.~~

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 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Schedule of Fair Value, Assets Measured on Recurring Basis

September 30, Fair value measurements at reporting date using
2020 Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Cash equivalents - money market funds and commercial paper $ 12,447,182 $ 12,447,182 $ - $ -
Government treasury bills 1,999,700 1,999,700 - -
Corporate bonds, notes and commercial paper 3,862,097 - 3,862,097 -
$ 18,308,979 $ 14,446,882 $ 3,862,097 $ -

Liabilities:
Warrant liability $ 1,303,859 - - 1,303,859
$ 19,612,838 $ 14,446,882 $ 3,862,097 $ 1,303,859

			Fair value measurements at reporting date using
	June 30, 2021		Level 1 inputs		Level 2 inputs		Level 3 inputs

Assets:
Cash equivalents - money market funds	$	10,179,073	$	10,179,073	$	-	$	-
Commercial Paper		13,987,623		-		13,987,623		-
Corporate bonds and notes		21,684,436		-		21,684,436		-
	$	45,851,132	$	10,179,073	$	35,672,059	$	-

Liabilities:
Warrant liability	$	1,125,429		-		-		1,125,429
	$	46,976,561	$	10,179,073	$	35,672,059	$	1,125,429

December 31, Fair value measurements at reporting date using
2019 Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Cash equivalents - money market funds and commercial paper $ 8,921,249 $ 6,575,862 $ 2,345,387 $ -
Corporate bonds, notes and commercial paper 4,340,041 - 4,340,041 -
$ 13,261,290 $ 6,575,862 $ 6,685,428 $ -

Liabilities:
Warrant liability $ 4,591,200 - - 4,591,200
$ 17,852,490 $ 6,575,862 $ 6,685,428 $ 4,591,200

			Fair value measurements at reporting date using
	December 31, 2020		Level 1 inputs		Level 2 inputs		Level 3 inputs

Assets:
Cash equivalents - money market funds	$	18,399,585	$	18,399,585	$	-	$	-
Commercial paper		449,992		-		449,992		-
	$	18,849,577	$	18,399,585	$	449,992	$	-

Liabilities:
Warrant liability	$	1,170,051		-		-		1,170,051
	$	20,019,628	$	18,399,585	$	449,992	$	1,170,051

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 ~~commercial paper~~ 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. Cash equivalents related to commercial paper 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.

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, and commercial paper: The Company uses a third-party pricing service to value these investments. Corporate bonds, notes and commercial paper 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~~June 30, ~~2020,~~2021, include (i) volatility of ~~103.45%~~72.62%, (ii) risk free interest rate of ~~0.22%~~0.46%, (iii) strike price of ~~$0.50,~~$0.50, (iv) fair value of common stock of ~~$1.41,~~$1.40, and (v) expected life of ~~4.13~~3.38 years. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of December 31, ~~2019,~~2020, include (i) volatility of ~~225.93%~~88.46%, (ii) risk free interest rate of ~~1.69%~~0.27%, (iii) strike price of ~~$0.50,~~$0.50, (iv) fair value of common stock of ~~$0.385,~~$1.36, and (v) expected life of ~~4.9~~3.9 years.

The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2, or Level 3 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

~~(5)~~

~~Loan and Security Agreements~~

(5) Loan and Security Agreements and Other Liabilities

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~~$10.0 million. The principal borrowed under the Loan and Security Agreement bears 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 ~~(4.25%~~(4.25% as of ~~September~~June 30, ~~2020)~~2021), which interest is payable ~~monthly.~~monthly. Additionally on April 1, 2020, the Company ~~and SVB~~ entered into a Deferral ~~Agreement.~~Agreement with SVB. Under the Deferral Agreement, principal repayments ~~are~~were deferred by six months and the Company iswas only required to make monthly interest payments. The loan matures on June 1, ~~2022.~~2022. Previously, the Company only made monthly interest payments until December 31, 2018, following which the Company also made equal monthly payments of principal and interest until the signing of the Deferral Agreement. The Company will also be required to pay an additional final payment at maturity equal to ~~$650,000~~$650,000 (the “Final Payment Charge”). The Final Payment Charge will be due on the scheduled maturity date and to date approximately ~~$568,000~~$624,000 has been recognized as an increase to the principal balance with a corresponding charge to interest expense with the remaining final payment charge to be recognized over the term of the facility using the effective interest method. At its option, the Company may prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge).

In connection with the Loan and Security Agreement, the Company granted to SVB a security interest in substantially all of the Company’s assets now owned or hereafter acquired, excluding intellectual property and certain other assets. In addition, as TLANDO was not approved by the United States Food and Drug Administration (“FDA”) prior to May 31, 2018, the Company ~~maintains $5.0~~maintained $5.0 million of cash collateral at SVB as required under the Loan and Security Agreement until such time as TLANDO is approved by the FDA. However on February 16, 2021, the Company amended the Loan and Security Agreement with SVB to, among other things, remove the financial trigger and financial trigger release event provisions requiring the Company to maintain a minimum cash collateral value and collateral pledge thereof.

While any amounts are outstanding under the Loan and Security Agreement, the Company is subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. The credit facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus ~~5.0%~~5.0% and would provide SVB, as collateral agent, with the right to exercise remedies against the Company and the collateral securing the credit facility, including foreclosure against the property securing the credit facilities, including its cash. These events of default include, among other things, any failure by the Company to pay principal or interest due under the credit facility, a breach of certain covenants under the credit facility, the Company’s insolvency, a material adverse change, and one or more judgments against the Company in an amount greater than ~~$100,000~~$100,000 individually or in the aggregate.

Future maturities of principal payments on the Loan and Security Agreement at ~~September~~June 30, ~~2020,~~2021 (excluding accrued final payment fee) are as follows:

Schedule of Maturities of Debt


Years Ending December 31,	Amount (in thousands)
2021	$	1,666
2022		1,667
Thereafter		—
Long-term Debt	$	3,333

Years Ending December 31,
Amount
(in thousands)

2020 $ 556
2021 3,333
2022 1,667
Thereafter —
$ 5,556

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.

September 30,
2020
Cash and cash equivalents $ 12,938,186
Restricted cash 5,000,000
Cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 17,938,186

~~Amounts included in restricted cash represent those required to be set aside by the Loan and Security Agreement. The restriction will lapse if and when TLANDO is approved by the FDA.~~

~~Payroll Protection Program Loan~~

On April 21, 2020, the Company was granted a loan from SVB in the aggregate amount of $233,537, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP loan, which was in the form of a note dated April 21, 2020 issued by SVB, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020 (“Note”). The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP loan amount for qualifying expenses. Under the terms of the PPP loan, certain amounts of the PPP loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company has requested forgiveness of the PPP loan and is awaiting a final decision from the Small Business Administration.

~~Future maturities of principal payments on the PPP Loan at September 30, 2020, are as follows:~~

Years Ending December 31,
Amount
(in thousands)

2020 $ 27
2021 165
2022 42
Thereafter —
$ 234

Other

Effective June 15, 2020 and through December 31, 2020, the Company ~~began deferring~~deferred Federal Insurance Contributions Act (“FICA”) taxes under the CARES Act Section 2302. Payment of these tax deferrals are delayed to December 31, 2021 and December 31, 2022. As of June 30, 2021 the tax deferrals totaled $36,000 and are included in accrued liabilities.

~~(6)~~

~~Income Taxes~~

(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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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)~~

~~Abbott Products, Inc.~~

(7) 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~~$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%~~50%. The Company did not incur any royalties expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~ 2020.

~~(b)~~

~~Contract Research and Development~~

(b) Contract Research and Development

The Company has entered into agreements with various contract organizations that conduct preclinical, 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 ~~$1.8 million~~$786,000 and ~~$1.2~~$1.2 million, respectively, for the three months ended ~~September~~June 30, 2021 and 2020 and ~~2019 and $5.1~~$1.7 million and ~~$4.0~~$2.9 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 under these agreements and has recorded these expenses in research and development expenses.

~~(8)~~

~~Leases~~

(8) Leases

On August 6, 2004, the Company assumed a non-cancelable operating lease for office space and laboratory facilities in Salt Lake City, Utah. On May 6, 2014, the Company modified and extended the lease through February 28, 2018. On February 8, 2018, the Company extended the lease through February 28, 2019, on January 2, 2019, the Company extended the lease through February 29, 2020, ~~and~~ on February 24, 2020, the Company extended the lease through February 28, ~~2021.~~2021 and on March 3, 2021, the Company extended the lease through February 28, 2022.

Future minimum lease payments under non-cancelable operating leases as of ~~September~~June 30, ~~2020~~2021 are:

Schedule of Future Minimum Rental Payments for Operating Leases


			Operating
			leases
Year ending December 31:
2020	$	82,596
2021		55,064		165,191
2022				55,064

Total minimum lease payments	$	137,660	$	220,255

The Company’s rent expense was ~~$83,000~~$83,000 for each of the three months ended ~~September~~June 30, 2021 and 2020 and ~~2019 and~~ was ~~$248,000 and $246,000, respectively,~~$165,000 for each of the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

~~(9)~~

~~Stockholders’ Equity~~12

~~(a)~~

~~Issuance of Common Stock~~

(9) Stockholders’ Equity

(a) Issuance of Common Stock

On January 28, 2021, the Company completed a public offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“January 2021 Offering”). The gross proceeds from the January 2021 Offering were approximately $28.7 million, before deducting underwriter fees and other offering expenses of $1.9 million. In the January 2021 Offering, the Company sold 16,428,571 shares of its common stock.

On February 27, 2020, the Company completed a registered direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“February 2020 Offering”). The gross proceeds from the February 2020 Offering were approximately ~~$6.0~~$6.0 million, before deducting placement agent fees and other offering expenses of ~~approximately $347,000.~~$347,000. In the February 2020 Offering, the Company sold 10,084,034 Class A Units at an offering price of ~~$0.595~~$0.595 per unit, with each Class A Unit consisting of one share of its common stock and one-half of a common warrant to purchase one share of common stock at an exercise price of ~~$0.53~~$0.53 per share of common stock. Additionally, the common stock warrants were immediately exercisable and expire on February 27, 2025. By their terms, however, the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

On November 18, 2019, the Company completed a public offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“November 2019 Offering”). The gross proceeds from the November 2019 Offering were approximately ~~$6.0~~ $6.0 million, before deducting placement agent fees and other offering expenses of ~~$404,000.~~$404,000. In the November 2019 Offering, the Company sold (i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of its common stock and a common warrant to purchase one share of its common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of its common stock and a common warrant to purchase one share of its common stock, at a price of ~~$0.50~~ $0.50 per Class A Unit and ~~$0.4999~~ $0.4999 per Class B Unit. The pre-funded warrants, which were exercised for common stock in December 2019, were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of ~~$.0001~~ $.0001 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of ~~$0.50~~ $0.50 per share, subject to adjustment, and expire on November 17, 2024. By their terms, however, neither the pre-funded warrants nor the common stock warrants can be exercised at any time that the pre-funded warrant holder or the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise. On the date of the November 2019 Offering, the Company allocated approximately ~~$768,000~~ $768,000 and ~~$4.8~~ $4.8 million to common stock/additional paid-in capital and warrant liability, respectively.

InOn March 6, 2017, the Company entered into ~~a Controlled Equity Offering~~the Sales Agreement ~~(the “Sales Agreement”)~~ with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may issue and sell, ~~shares of our common stock, with aggregate gross sales proceeds of up to $20.0 million,~~ from time to time, ~~through an “at the market”~~ ~~(“ATM”), equity offering program, under which Cantor acts as sales agent. The~~ shares of its common stock having an aggregate offering price of up to ~~be sold~~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, ~~were originally sold and issued~~ pursuant to the ~~Company’s~~ Registration Statement on Form S-3 (File No. ~~333-199093)~~333-250072) through Cantor as the Company’s sales agent. Cantor may sell the Company’s common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Capital Market or any other existing trade market for our common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. Cantor uses its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell these shares. The Company pays Cantor 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. In addition, the Company has also provided Cantor with customary indemnification rights.

The shares of the Company’s common stock sold under the Sales Agreement are sold and issued pursuant to the Registration Statement on Form S-3 (File No. 333-250072) (the ~~“Prior Form~~“Form S-3”), which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. ~~On October 13, 2017,~~

The Company is not obligated to make any sales of its common stock under the ~~Company filed a Form S-3 (File No. 333-220942) (the “New Form S-3”) to replace the Prior Form S-3.~~Sales Agreement. The New Form S-3 has been declared effective by the Securities and Exchange Commission, and the Prior Form S-3 has been terminated. The New Form S-3 registered the sale of up to $150.0 million of any combinationoffering of common stock preferred stock, debt securities, warrants and units pursuant to a shelf registration statement. The New Form S-3 also contains a prospectus pursuant to which we may sell, from time to time, shares of our common stock having an aggregate offering price of up to $25.0 million through Cantor as our sales agent, pursuant to the Sales Agreement. On August 21, 2020, the Company filed a prospectus supplement in which the Company increased the aggregate offering price in which shares of our common stock can be sold through Cantor as our sales agent, pursuant to the Sales Agreement ~~to a total~~will terminate upon the termination of ~~$63.0 million of which $13.0 million of our common stock has already been sold under~~ the Sales ~~Agreement.~~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~~June 30, ~~2020,~~2021, we had sold an aggregate of ~~9,465,535~~15,023,073 shares at a weighted-average sales price of ~~$2.54~~$2.19 per share under the ~~ATM~~Sales Agreement for aggregate gross proceeds of ~~$24.1~~$32.9 million and net proceeds of ~~$23.2~~$31.7 million, after deducting sales agent commission and discounts and our other offering costs. During the three ~~and nine~~ months ended ~~September~~June 30, ~~2020,~~2021, the Company did not sell any shares of our common stock pursuant to the current Registration Statement on Form S-3 (File No. 333-250072). During the six months ended June 30, 2021, the Company sold ~~2,830,000~~1,811,238 shares of our common stock pursuant to the current Registration Statement on Form S-3 (File No. 333-250072) at a weighted-average sales price of ~~$1.43~~$1.95 per share, ~~under the ATM for aggregate gross proceeds of $4.0 million and~~resulting in net proceeds of ~~$3.9 million.~~approximately $3.4 million under the Sales Agreement which is net of $112,000 in expenses. During the three and six months ended ~~September~~June 30, ~~2019,~~2020, the Company ~~sold an aggregate~~did not sell any shares of ~~283,782 shares at a weighted-average sales price~~our common stock pursuant to the prior Registration Statement on Form S-3 (File No. 333-220942). As of ~~$2.22 per share~~June 30, 2021, the Company had $41.2 million available for sale under the ATM for aggregate gross proceeds of $629,000 and $604,000 in net proceeds. During the nine months ended September 30, 2019, the Company sold an aggregate of 3,276,286 shares at a weighted-average sales price of $2.19 per share under the ATM for aggregate gross proceeds of $7.2 million and $6.9 million in net proceeds.Sales Agreement.

~~(b)~~

~~Rights Agreement~~

(b) 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 directors 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~~$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 of directors 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~~$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~~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 of Directors approved an Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 5, 2021, unless the rights are earlier redeemed or exchanged by the Company.

~~(c)~~

~~Share-Based Payments~~

(c) 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 of directors 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 ~~grants~~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 ~~nonemployee consultants from time to time~~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 ~~exchange for services performed for the Company.~~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 ~~$352,000~~$147,000 and ~~$58,000,~~$465,000, respectively, for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020, and amounted to ~~$1.1 million~~$294,000 and ~~$781,000,~~$787,000, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, and is allocated as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Research and development $ 150,435 $ 27,072 $ 484,876 $ 313,247
General and administrative 201,188 31,041 653,718 468,143
$ 351,623 $ 58,113 $ 1,138,594 $ 781,390

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Research and development	$	69,483	$	199,777	$	136,369	$	334,441
General and administrative		77,264		265,281		157,944		452,530
Allocated Share-based Compensation Expense	$	146,747	$	465,058	$	294,313	$	786,971

The Company ~~did not issue any~~issued 66,000 stock options and 376,000 stock options, respectively, during the three and six months ended June 30, 2021 and issued 113,000 and 739,000 stock options during the three and six months ended ~~September~~June 30, 2020 and issued 24,000 stock options during the three months ended September 30, 2019. Additionally, during the nine months ended September 30, 2020 and 2019, the Company issued 739,000 and 79,000 stock options, respectively.2020.

Key assumptions used in the determination of the fair value of stock options granted are as follows:

2020 2019
Expected term 5.81 years 5.67 years
Risk-free interest rate 1.33 % 1.82 %
Expected dividend yield — —
Expected volatility 99.52 % 80.38 %

Expected Term: The expected term represents the period that the stock-based awards are expected to be outstanding. Due to limited historical experience of similar awards, 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 since March 2014.~~history.

For options granted during the six months ended June 30, 2021 and 2020, 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

	2021			2020
Expected term		5.70 years			5.81 years
Risk-free interest rate		0.52	%		1.33	%
Expected dividend yield		—			—
Expected volatility		95.52	%		99.52	%

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~~June 30, ~~2020,~~2021, there was ~~$430,000~~$1.1 million 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 ~~1.59~~2.21 years and will be adjusted for subsequent changes in estimated forfeitures. ~~Additionally, as of September 30, 2020, there was $118,000 of total unrecognized compensation cost related to unvested restricted stock units that have either time-based or performance vesting.~~

~~(d)~~

~~Stock Option Plan~~

(d) Stock Option Plan

In April 2014, the board of directors adopted the 2014 Stock and Incentive Plan ("(“2014 ~~Plan"~~Plan”) subject to shareholder approval which was received in June 2014. The 2014 Plan provides for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units, restricted stock and dividend equivalents. An aggregate of 1,000,000 shares were authorized for issuance under the 2014 Plan. Additionally, 271,906 remaining authorized shares under the 2011 Equity Incentive Plan ("(“2011 ~~Plan"~~Plan”) were issuable under the 2014 Plan at the time of the 2014 Plan adoption. Upon receiving shareholder approval in June 2016, the 2014 Plan was amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 1,271,906 to ~~2,471,906.~~2,471,906. Additionally, upon receiving shareholder approval in June 2018, the 2014 Plan was further amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 2,471,906 to ~~3,221,906.~~3,221,906. Finally, upon receiving shareholder approval in June 2020, the 2014 Plan was further amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 3,221,906 to ~~5,721,906.~~5,721,906. The board of directors, 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~~ten-year contractual life. The Company issues shares of common stock upon the exercise of options with the source of those shares of common stock being either newly issued shares or shares held in treasury. An aggregate of 5,721,906 shares are authorized for issuance under the 2014 Plan, with ~~2,544,888~~1,584,874 shares remaining available for grant as of ~~September~~June 30, ~~2020.~~2021.

A summary of stock option activity is as follows:

Schedule of Stock Option Activity

	Outstanding stock options				Outstanding stock options
	Number of shares			Weighted average exercise price	Number of shares			Weighted average exercise price
Balance at December 31, 2019	2,310,485		$	4.81
Balance at December 31, 2020						3,564,458		$	3.36
Options granted	739,000			0.54		376,000			1.44
Options exercised	-			-		(4,584	)		1.46
Options forfeited	(37,444	)		0.94		-			-
Options cancelled	(53,556	)		6.32		(20,084	)		6.45
Balance at September 30, 2020	2,958,485			3.77
Balance at June 30, 2021						3,915,790			3.16

Options exercisable at September 30, 2020	2,070,073			5.04
Options exercisable at June 30, 2021						2,528,729			4.24

The following table summarizes information about stock options outstanding and exercisable at ~~September~~June 30, ~~2020:~~2021:

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
2,958,485 6.26 $ 3.77 $ 627,210 2,070,073 5.02 $ 5.04 $ 9,084

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

3,915,790		6.39	$	3.16	$	636,639	2,528,729		4.84	$	4.24	$	311,190

The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were no0and 4,584, respectively, stock options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, and ~~there were 20,000~~ 0stock options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

~~(e)~~

~~Restricted Stock Units~~

~~A summary of restricted stock unit activity is as follows:~~

~~Number of~~
~~unvested restricted~~
~~stock units~~

~~Balance at December 31, 2019~~

~~661,307~~

~~Granted~~

~~Vested~~

~~(25,000~~

)

~~Forfeited~~

~~(30,625~~

)

~~Balance at September 30, 2020~~

~~605,682~~

~~(f)~~

~~Common Stock Warrants~~

(e) 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 ~~warranty~~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~~June 30, ~~2020,~~2021, the Company had ~~1,104,030~~1,094,030 common stock warrants outstanding from the November 2019 Offering to purchase an equal number of shares of common stock. The fair value of these warrants on ~~September~~June 30, ~~2020~~2021 and on December 31, ~~2019~~2020 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

September 30, 2020 December 31, 2019
Expected life in years 4.13 4.88
Risk-free interest rate 0.22 % 1.69 %
Dividend yield — —
Volatility 103.45 % 225.93 %
Stock price $ 1.41 $ 0.39

	June 30, 2021			December 31, 2020
Expected life in years		3.38			3.88
Risk-free interest rate		0.46	%		0.27	%
Dividend yield		—			—
Volatility		72.62	%		88.46	%
Stock price	$	1.40		$	1.36

During the three and ~~nine~~six months ended ~~September~~June 30, 2021, the Company recorded a non-cash gain of $221,000 and $26,000, respectively, from the change in fair value of the November 2019 Offering warrants. During the three and six months ended June 30, 2020, the Company recorded a non-cash ~~gain of approximately $140,000 and a non-cash~~ loss of ~~approximately $3.0~~$2.1 million ~~respectively,~~and $3.2 million from the change in fair value of the November 2019 Offering warrants. The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs:

Schedule of Reconciliation of Warrant Liability

Warrant Liability
Balance at December 31, 2019 $ 4,591,200
Settlement of liabilty on warrant exercise (6,313,338 )
Change in fair value of common stock warrants 3,025,997
Balance at September 30, 2020 $ 1,303,859

	Warrant Liability
Balance at December 31, 2020	$	1,170,051
Settlement of liability on warrant exercise		(18,365	)
Change in fair value of common stock warrants		(26,257	)
Balance at June 30, 2021	$	1,125,429

Additionally, in the February 2020 Offering, the Company issued 5,042,017 common stock ~~warrants. However, the February 2020 Offering~~warrants, however, because these warrants do not provide the warrant holder the option to ~~receive an amount of cash equal~~put the warrant back to the ~~Black-Scholes value of~~Company, the warrants ~~upon a fundamental transaction. Therefore, the Company has not recorded a warrant liability with respect to the warrants issued in the February 2020 Offering.~~are classified as equity.

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

	Common Stock Warrants			Weighted Average Exercise Price		Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2019		12,000,000		$	0.50
Outstanding at December 31, 2020							1,944,366		$	0.51
Issued		5,042,017			0.53		-			-
Exercised		(15,097,651	)		0.51		(10,000	)		0.50
Expired		-			-		-			-
Cancelled		-			-		-			-
Forfeited		-			-		-			-
Balance at September 30, 2020		1,944,366		$	0.51
Balance at June 30, 2021							1,934,366		$	0.51

During the three and ~~nine~~six months ended ~~September~~June 30, 2021, 0 and 10,000 common stock warrants to purchase one share of our common stock were exercised, respectively, resulting in proceeds of 0 and $5,000. Additionally, during the three and six months ended June 30, 2020, ~~1,478,844,~~13,497,807 and ~~15,097,651~~13,618,807 common stock warrants to purchase one share of our common stock were exercised, respectively, resulting in proceeds of approximately ~~$761,000 and $7.7~~$6.9 million ~~respectively,~~ in each of the three and ~~nine months ended September~~six-month periods ending June 30, 2020.

The following table summarizes information about common stock warrants outstanding at ~~September~~June 30, ~~2020:~~

Warrants outstanding
Number exercisable Weighted average
remaining
contractual life
(Years) Weighted average
exercise price Aggregate intrinsic
value
1,944,366 4.25 $ 0.51 $ 1,744,163

2021:

Warrants outstanding
Number exercisable	Weighted average remaining contractual life (Years)		Weighted average exercise price		Aggregate intrinsic value

1,934,366		3.50	$	0.51	$	1,715,719

~~(10)~~

~~Commitments and Contingencies~~

(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 February 15, 2019, a purported shareholder filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware,~~ ~~John Wajda, derivatively on behalf of Lipocine Inc. v. Mahesh Patel, et al.,~~ against certain of the Company’s current and former officers and directors as well as the Company as a nominal defendant. The complaint asserts claims for alleged breaches of fiduciary duty and unjust enrichment arising out of the Company’s dissemination of purportedly false and misleading statements relating to the filing of the New Drug Application (“NDA”) for TLANDO. The relief sought in the complaint includes unspecified damages, changes to the Company’s corporate governance procedures, equitable and/or injunctive relief, restitution, and attorneys’ fees. On August 16, 2019, defendants filed a motion to dismiss the complaint. In response, the plaintiff’s filed an amended stockholder derivative complaint. Defendants’ motion to dismiss the amended complaint was filed on December 12, 2019; plaintiff’s response was filed on January 27, 2020 and defendants’ reply was filed on February 26, 2020. Oral arguments on the motion to dismiss were held on July 28, 2020. On July 30, 2020, the court entered an order dismissing the complaint in its entirety.

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. ~~Clarus has answered the complaint and asserted counterclaims of non-infringement and invalidity. The Company answered Clarus’s counterclaims~~However on ~~April 29, 2019. The Court held a scheduling conference on August 15, 2019, a claim construction hearing on February 11, 2020 and scheduled a five-day jury trial beginning on February 8, 2021. 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 has answered the complaint and asserted counterclaims of non-infringement, inequitable conduct and invalidity. The ~~parties are currently engaged in~~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 Judgement Hearing on January 15, 2021. In May 2021, the ~~fact discovery~~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 ~~expert testimony phase~~9,757,390 invalid for failure to satisfy the written description requirement of 35 U.S.C. § 112. Clarus still had remaining counterclaims before the Court. On July 13, 2021, Clarus and the Company entered into a global settlement agreement (“Global Agreement’) 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 ~~lawsuit.~~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. No future royalties are owing from either party. On July 15, 2021, the Court dismissed with prejudice the Company’s claims and Clarus’ counterclaims.

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 our filing of the NDA for TLANDO to the FDA contained deficiencies and as a result the defendants’ statements about our business and operations were false and misleading and/or lacked a reasonable basis in violation of federal securities laws. The lawsuit seeks certification as a class action (for a purported class of purchasers of the Company’s securities from March 27, 2019 through November 8, 2019), compensatory damages in an unspecified amount, and unspecified equitable or injunctive relief. The Company has insurance that covers claims of this nature. The retention amount payable by the Company under our policy is ~~$1.25~~$1.25 million. The Company filed a motion to dismiss the class action lawsuit on July 24, 2020. In response, the ~~plaintiff’s~~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. ~~Further, the~~The Company intends to vigorously defend itself ~~and its current and former officers and directors~~ against these allegations and has not recorded a liability related to this shareholder class action lawsuit as the outcome is not probable nor can an estimate be made of loss, if any.

~~Beyond~~ ~~Solomon Abady v.~~On March 13, 2020, the Company filed U.S. patent application serial number 16/818,779 (“the Lipocine ‘779 Application”) with the USPTO. On October 16 and November 3, 2020, Lipocine filed suggestions for interference with the USPTO requesting that a patent interference be declared between the Lipocine ‘779 Application and US patent application serial number 16/656,178 to Clarus Therapeutics, Inc. ~~et al~~(“the Clarus ‘178 Application”).~~, 2:19-cv-00906-PM, management does not currently believe that any~~ Pursuant to the Company’s request, the Patent Trial and Appeal Board (“PTAB”) at the USPTO declared the interference on January 4, 2021 to ultimately determine, as between the Company and Clarus, who is entitled to the claimed subject matter. The interference number is 106,128, and the Company was initially declared Senior Party. A conference call with the PTAB was held on January 25, 2021 to discuss proposed motions. On February 1, 2021, the PTAB issued an order authorizing certain motions and setting the schedule for the preliminary motions phase. On July 13, 2021, Clarus and the Company entered into the Global Agreement to resolve interference No. 106,128 among other ~~matter, individually or~~items. On July 26, 2021, the PTAB granted the Company’s request for adverse judgment in interference No. 106,128 in accordance with the ~~aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations.~~Global Agreement.

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)~~

~~Spriaso, LLC~~

(11) Agreement with Spriaso, LLC

On July 23, 2013, the Company entered into an assignment/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~~$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. Under the service agreement, the Company provided facilities and up to 10 percent of the services of certain employees to Spriaso for a period of 18 months which expired January 23, 2015. Effective January 23, 2015, the Company entered into an amended services agreement with Spriaso in which the Company agreed to continue providing up to 10 percent of the services of certain employees to Spriaso at a rate of ~~$230/~~$230/hour for a period of six months. The agreement was further amended on July 23, 2015, on January 23, 2016, on July 23, 2016, on January 23, 2017, on July 23, 2017, on January 23, 2018, on July 23, 2018 and again on January 23, 2019 to extend the term of the agreement for an additional six months. The agreement was further amended on July 23, 2019 and again on July 23, 2020 to extend the term of the agreement for an additional twelve months. The agreement may be extended upon written agreement of Spriaso and the Company. The Company did not receive any reimbursements during the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. Additionally, the Company did not receive any royalty payments from Spriaso during the three and nine months ended September 30, 2020. The Company received $165,000 during the three and nine months ended September 30, 2019. 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~~

(12) Recent Accounting Pronouncements

Accounting Pronouncements Issued Not Yet Adopted

In 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables, and requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The original effective date for ASU 2016-13 was for annual and interim periods beginning after December 15, 2019.

However, in October 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses, Derivatives and Hedging, and Leases: Effective Dates, which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible to be smaller reporting companies. A company’s determination about whether it is eligible for the deferral is a one-time assessment as of November 15, 2019 based on its most recent determination of its small reporting company eligibility as of the last business day of the most recently completed second quarter. Based on this determination, the Company qualifies as a smaller reporting entity and is therefore eligible for the deferral of adoption of ASU 2016-13, resulting in a new effective date of January 1, 2023. The Company has historically not had credit losses on financial instruments and is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial ~~statements~~statements.

ITEM 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 ~~13, 2020~~11, 2021, our first quarter Form 10-Q filed with the SEC on May 6, 2021, 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 ~~our~~this Form 10-Q, ~~for the quarter ended March 31, 2020 filed with the SEC on May 7, 2020,~~or in Part II, Item 1A (Risk Factors) of our Form 10-Q for the quarter ended ~~June 30, 2020~~March 31, 2021 filed with the SEC on ~~August~~May 6, ~~2020, in Item 1A (Risk Factors) of this Form 10-Q,~~2021 or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March ~~13, 2020.~~11, 2021. 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 clinical-stage biopharmaceutical company focused on applying our oral drug delivery technology for the development of pharmaceutical products focusing on metabolic and endocrine 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 proprietary product candidates designed to produce favorable ~~pharmacokinetic (“PK”)~~PK characteristics and facilitate lower dosing requirements, bypass first-pass metabolism in certain cases, reduce side effects, and eliminate gastrointestinal interactions that limit bioavailability.

Our most advanced product candidate, ~~TLANDO™~~TLANDO®, is an oral ~~testosterone replacement therapy (“TRT”).~~TRT comprised of TU. On ~~November~~December 8, ~~2019~~2020, we received ~~a Complete Response Letter ("CRL")~~tentative approval from the ~~United States Food and Drug Administration ("FDA")~~FDA regarding our ~~New Drug Application ("NDA")~~NDA filed in ~~May 2019~~February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. ~~A CRL is a communication from~~In granting tentative approval, the FDA concluded that ~~informs companies that an application cannot be approved~~TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval to market in ~~its present form. The CRL identified one deficiency stating~~ the ~~efficacy trial did not meet~~U.S. until the ~~three secondary endpoints for maximal testosterone concentrations (“Cmax”). The CRL did not identify any specific issues relating~~expiration of the exclusivity period previously granted to ~~chemistry, manufacturing and controls (“CMC”)~~Clarus Therapeutics, Inc. with respect to Jatenzo®, which expires on March 27, 2022. We remain committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO. We had our Post Action meeting with the FDA in January 2020 and discussed a potential path forward for the approval of TLANDO. Based on the Post Action meeting and written feedback, the FDA indicated our approach to addressing the deficiency through the reanalysis of existing data in accordance with FDA feedback appears to be a reasonable path forward. The FDA requested that the information generated by the reanalysis be submitted as part of an NDA resubmission with a six-month Prescription Drug User Fee Act (“PDUFA”) clock. We resubmitted the NDA on February 28, 2020 and it was assigned a PDUFA date of August 28, 2020. However, on August 28, 2020 the FDA informed us that it needed additional time to complete its review of the NDA. On November 5, 2020, the FDA informed us that it is working towards taking action on the TLANDO NDA on or about the week of November 30, 2020. However, the Company cannot assure that the FDA will act in that time frame. The FDA has ~~not asked for any additional data~~also required us to conduct certain post-marketing studies to (i) assess patient understanding of key risks relating to TLANDO and ~~we have provided the FDA~~(ii) evaluate development of adrenal insufficiency with ~~all information requested to date.~~ chronic TLANDO therapy.

Additional pipeline candidates include LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU for the treatment of non-cirrhotic ~~non-alcoholic steatohepatitis (“NASH”), TLANDO~~NASH which is currently in Phase 2 testing, TLANDO® XR, a next generation oral TRT product comprised of testosterone tridecanoate (“TT”) with the potential for once daily dosing which has completed Phase 2 testing, LPCN 1148, an oral prodrug of bioidentical testosterone for the management of symptoms associated with cirrhosis, LPCN 1154, an oral neuro-steroid targeted for the treatment of ~~cirrhosis,~~postpartum depression (“PPD”), and LPCN 1107, potentially the first oral ~~hydroxyprogesterone caproate~~HPC product indicated for the prevention of recurrent ~~preterm birth,~~PTB, which has completed ~~an End-of-Phase~~a dose finding Phase 2 ~~meeting with~~clinical study and has been granted orphan drug designation by the FDA.

LPCN 1144 is currently being tested in the LiFT (“Liver Fat intervention with oral Testosterone”) proof-of-concept (“POC”) Phase 2 clinical study, a paired-biopsy study in confirmed ~~pre-cirrhotic~~non-cirrhotic NASH subjects. Study enrollment has been completed and positive top-line primary endpoint results ~~are expected~~after 12 weeks of treatment were released in January 2021. ~~Additionally,~~Treatments with LPCN 1144 ~~recently completed a Proof-Of-Concept (“POC”) liver imaging clinical study which demonstrated substantial~~resulted in robust liver fat ~~reductions in hypogonadal males at risk~~reduction, assessed by MRI-PDFF technique, and showed improvement of ~~developing NASH as assessed using magnetic resonance imaging, proton density fat fraction (“MRI-PDFF”) technique.~~liver injury markers with no observed tolerability issues.

To date, we have funded our operations primarily through the sale of equity securities, debt and convertible debt and through up-front payments, research funding and royalty and milestone payments from our license and collaboration arrangements. We have not generated any revenues from product sales and we do not expect to generate revenue from product sales unless and until we obtain regulatory approval of TLANDO or other ~~products~~ ~~and (ii), if such approval is obtained, we are able to successfully commercialize such~~ products.

We have incurred losses in most years since our inception. As of ~~September~~June 30, ~~2020,~~2021, we had an accumulated deficit of ~~$168~~$182.2 million. Income and losses fluctuate year to year, primarily depending on the nature and timing of research and development occurring on our product candidates. Our net loss was ~~$16.5~~$10.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 and $9.7~~2021, compared to $12.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate development programs, our research activities and general and administrative costs, including on-going litigation, ~~activities,~~ associated with our operations.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we:

~~conduct any other pre or post-approval clinical studies required in support of TLANDO;~~

	●	conduct any other post-approval clinical studies required in support of TLANDO;
	●	perform pre-commercialization and commercialization activities in support of TLANDO;
	●	conduct further development of our other product candidates, including LPCN 1144, LPCN 1148, LPCN 1154 and LPCN 1107;
	●	continue our research efforts;
	●	research new products or new uses for our existing products;
	●	maintain, expand and protect our intellectual property portfolio; and
	●	provide general and administrative support for our operations, including on-going litigation.

~~perform pre-commercialization and commercialization activities in support of TLANDO;~~

~~conduct further development of our other product candidates, including LPCN 1144;~~

~~continue our research efforts;~~

~~research new products or new uses for our existing products;~~

~~maintain, expand and protect our intellectual property portfolio; and~~

~~provide general and administrative support for our operations, including on-going litigation.~~

To fund future long-term operations, including the potential commercialization of TLANDO or other products, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including capital market conditions, regulatory requirements and outcomes related to TLANDO, regulatory requirements related to our other product development programs, the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs, our ability to license our products to third parties, the pursuit of various potential commercial activities and strategies associated with our development programs and related general and administrative support. We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources, such as potential license, partnering and collaboration agreements. We cannot be certain that anticipated additional financing will be available to us on favorable terms, in amounts sufficient to fund our operations ~~(including the commercialization of TLANDO if we receive FDA approval),~~ or at all. Although we have previously been successful in obtaining financing through public and private equity securities offerings and our license and collaboration agreements, there can be no assurance that we will be able to do so in the future.

Our Product Candidates

Our current portfolio includes our most advanced product candidate, TLANDO, an oral ~~testosterone replacement therapy~~TRT product candidate, ~~that is currently under review by~~which received tentative approval from the ~~FDA.~~FDA on December 8, 2020. Additionally, we are in the process of establishing our pipeline of other clinical candidates including ~~LPCN 1144,~~ an oral androgen therapy for the treatment of non-cirrhotic NASH, ~~, TLANDO XR,~~LPCN 1144, a next-generation potential once daily oral ~~testosterone replacement therapy, LPCN 1148,~~TRT, TLANDO XR, an androgen therapy for the management of cirrhosis, LPCN 1148, an oral neuro-steroid targeted for the treatment of ~~cirrhosis, and~~ PPD, LPCN ~~1107,~~1154, an oral therapy for the prevention of ~~preterm birth.~~PTB, LPCN 1107, and we continue to explore other product candidates targeting indications with a significant unmet need.

These products are based on our proprietary Lip’ral drug delivery technology platform. 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.

Our Development Pipeline

TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy

Our most advanced product, TLANDO, is an oral formulation of the chemical, TU, which is an ~~eleven-carbon~~eleven carbon side chain attached to T. TU is an ester prodrug of T. An ester is chemically formed by bonding an acid and an alcohol. Upon the cleavage, or breaking, of the ester bond, T is formed. TU has been approved for use outside the United States for many years for delivery via intra-muscular injection and in oral dosage form and more recently TU has received regulatory approval in the United States for delivery via intra-muscular ~~injection.~~injection and in oral dosage form. We are using our proprietary technology to facilitate steady gastrointestinal solubilization and absorption of TU. Proof of concept 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").~~Abbott. Following a portfolio review associated with the spin-off of AbbVie 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. Such royalties are limited to $1 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%.

NDA PDUFA Outcome

On ~~November~~December 8, ~~2019~~2020 we received ~~a CRL~~tentative approval from the FDA regarding our NDA filed in ~~May 2019~~February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022. We remain committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO.

Under the Pediatric Research Equity Act (“PREA”), if TLANDO receives full approval, we will need to address the PREA requirement to assess the safety and effectiveness of TLANDO in pediatric patients. The ~~CRL identified one deficiency stating~~FDA has also required us to conduct certain post-marketing studies including: (i) conduct an appropriately designed label comprehension and knowledge study that assesses patient understanding of key risk messages in the ~~efficacy~~Medication Guide for TLANDO and (ii) conduct an appropriately designed one-year trial ~~did not meet~~to evaluate development of adrenal insufficiency with chronic TLANDO therapy. The timetables for these post-marketing requirements will be established at the ~~three Cmax secondary endpoints. The CRL does not identify any specific issues relating to CMC~~time of full approval of TLANDO. We ~~had a Post Action meeting~~are actively pursuing and currently evaluating commercial alternatives with the FDA in January 2020 and discussed a potential path forward for the approval of TLANDO. Based on the Post Action meeting and written feedback, the FDA indicated our approach to addressing the deficiency through the reanalysis of existing data in accordance with FDA feedback appears to be a reasonable path forward. The FDA requested that the information generated by the reanalysis be submitted as part of an NDA resubmission with a six-month PDUFA clock. We resubmitted the NDA on February 28, 2020 and it was assigned a PDUFA date of August 28, 2020. However, on August 28, 2020 the FDA informed us that it needed additional time to complete its review of the NDA. On November 5, 2020, the FDA informed us that it is working towards taking action on the TLANDO NDA on or about the week of November 30, 2020. However, the Company cannot assure that the FDA will act in that time frame. The FDA has not asked for any additional data and we have provided the FDA with all information requested to date. Previously, we have received two other CRL’s from the FDA on TLANDO NDA submissions. The first CRL was received on June 28, 2016 and the second CRL was received on May 8, 2018. We are exploring the possibility of licensing TLANDO to a third party should it receive approval, although no licensing agreement has been entered into by us yet. We are unable to estimate whether or when we will be able to out-license TLANDO, should it be approved. Additionally, the timing of the potential commercial launch of TLANDO, should it receive ~~approval, is uncertain. The timing of any commercial launch of TLANDO is contingent upon numerous factors including~~ FDA approval, ~~the availability of commercial launch supplies, the impact of COVID-19, our financial resources and our ability to license~~including out-licensing TLANDO to a ~~third party or build out a commercial sales and marketing team/organization.~~

~~Results from the ABPM Study~~

~~The ABPM Study was an open label, single arm study that enrolled 144 male hypogonadal subjects undergoing four months of treatment with~~third-party, launching TLANDO 225 mg BID dosing, with 24-hour blood pressure measurements taken at baseline and at the end of the study. There were 138 subjects who received at least one dose of study drug and 126 subjects completed the study. There were 118 subjects enrolled in the ABPM Study with evaluable weighted average 24-hour ABPM data at both baseline and at the end of the study.

~~Subjects receiving treatment in the ABPM Study had the following baseline parameters:~~

~~Baseline Parameters~~			~~Mean (SD)~~
~~Age (years)~~			~~53.8 (10.2)~~
~~BMI (kg/m2)~~			~~33.1 (5.8)~~
~~24h SBP (mm Hg)~~			~~127 (16)~~
~~24h DBP (mm Hg)~~			~~79 (6)~~

~~SD = Standard Deviation, BMI = Body Mass Index, SBP = Systolic Blood Pressure, DBP = Diastolic Blood Pressure~~

~~Additionally, among the subjects enrolled in the ABPM Study, 48% of the subjects were hypertensive and 24% of subjects were type 2 diabetic.~~

~~Top-line results from the ABPM Study are as follows:~~

~~Parameter~~		~~Mean Change, mm Hg (95% CI)~~
~~24-hour SBP~~		~~3.82 (1.69, 5.96)~~
~~24-hour DBP~~		~~1.20 (0.31, 2.08)~~

~~CI = Confidence Interval, SBP = Systolic Blood Pressure, DBP = Diastolic Blood Pressure~~

Of the subjects (n=25) with baseline 24-hour average systolic blood pressure (“SBP”) greater than 140 mm Hg, 32% of the subjects were less than or equal to 140 mm Hg at the end of study. Additionally, of the subjects (n=93) with baseline 24-hour average SBP of less than or equal to 140 mm Hg, 9.7% of the subjects were greater than 140 mm Hg at the end of study.

~~Results from the Definitive Phlebotomy Study~~

The definitive phlebotomy study was designed based on the FDA’s protocol recommendations and conducted in response to a deficiency cited in the TLANDO CRL by the FDA to confirm the reliability of TLANDO Phase 3 study results and to assess the impact of any material deviation from instructions on sample collection/processing times by clinical sites.

The definitive phlebotomy study measured testosterone concentrations in blood samples collected in plain serum separation tubes (“SST”) at three-hour and five-hour time points (N=24) post dose and processed within 30 minutes of sample collection under the tube manufacturer’s recommended conditions and consistent with Phase 3 instructions. The definitive phlebotomy study enrolled 12 hypogonadal male subjects and dosed subjects with a single oral 225 mg TU dose of TLANDO. The testosterone measurements in SST were compared against the FDA’s recommended time zero control (processed immediately) measurement of testosterone concentrations in blood samples in plasma tubes with EDTA (“PT”) to assess ex vivo conversion, if any.

The top-line results of the definitive phlebotomy study demonstrated that the overall (N=24) mean percentage difference and the associated percentage standard deviation post dose of testosterone concentrations measured between SST samples and PT samples are -1.0% and 9.2%, respectively.

~~Results from DV and DF Studies~~

The DV and DF studies were both an open-label, fixed dose (no titration), single treatment clinical study of oral TRT in hypogonadal males with low testosterone (T) (< 300 ng/dL) that assessed TLANDO in hypogonadal males on a fixed daily dose of 450 mg divided into two equal doses (“BID”) in the DV study and into three equal doses (“TID”) in the DF study. In total, 95 and 100 subjects were enrolled into DV and DF studies, respectively, with 94 and 98 subjects completing the DV and DF studies, respectively.

We believe the results from the DV study confirm the validity of a fixed dose approach without the need for dose titration to orally administering TLANDO although there is no guarantee of FDA approval of TLANDO. The DV study is considered our pivotal efficacy clinical study. TLANDO successfully met the FDA primary efficacy guidelines in the DV study safety statistical analysis set (“SS”) where 80% of the subjects achieved average testosterone levels (“Cavg”) within the normal range with a lower bound confidence interval (“CI”) of 72%. The DF study restored 70% of the subjects’ average testosterone levels within the normal range (Cavg) confirming that twice daily (“BID”) dosing is the appropriate dosing regimen for TLANDO and was the basis for resubmission. The safety set is defined as any subject that was randomized into the study and took at least one dose (N=95 subjects in the DV study and N=100 in the DF study). A baseline carried forward approach was used to account for missing data as a result of subject discontinuation.

The primary efficacy endpoint is the percentage of subjects with Cavg within the normal range, which is defined as 300-1080 ng/dL. The FDA guidelines for primary efficacy success is that at least 75% of the subjects on active treatment achieve a testosterone Cavg within the normal range; and the lower bound of the 95% CI must be greater than or equal to 65%.

The adverse event profile of TLANDO in both the DV and DF studies was consistent with the previously conducted 52-week Phase 3 Study of Androgen Replacement (“SOAR”) clinical trial. All drug related adverse events (“AEs”) were either mild or moderate in intensity and none were severe. To date, the safety database of TLANDO includes ~591 subjects demonstrating a profile consistent with other TRT products.

The secondary endpoints assessed the maximum total testosterone concentration (“Cmax”) post dosing using predetermined limits developed by the FDA for transdermals. The FDA guidelines for secondary efficacy success is that at least 85% of the subjects achieve Cmax less than 1500 ng/dL; no greater than 5% of the subjects have Cmax between 1800 ng/dl and 2500 ng/dL; and zero percent of the subjects have Cmax greater than 2500 ng/dL. Consistent with the definition of Cmax and the pharmacokinetic profile of multiple times a day dosing, two pre-specified analyses were performed, Cmax per dose and Cmax per day.

In the DV study SS Cmax per dose analysis, the percentage of subjects with Cmax less than 1500 ng/dL and between 1800 ng/dL and 2500 ng/dL were 85% and 7%, respectively. Deviations from the predetermined limits in the DV study were observed in the Cmax per day dose analysis for these thresholds. As such, this efficacy trial did not meet the three Cmax per day secondary endpoints. Only one subject, who was a major protocol violator, exceeded the 2500 ng/dL limit independent of per dose or per day dose analyses. Through reanalysis of Cmax data in the DV study, we resubmitted the NDA to the FDA on February 28, 2020 and have a PDUFA date of August 28, 2020. However, on August 28, 2020 the FDA informed us that it needed additional time to complete its review of the NDA. On November 5, 2020, the FDA informed us that it is working towards taking action on the TLANDO NDA on or about the week of November 30, 2020. However, the Company cannot assure that the FDA will act in that time frame.

~~The DF study SS met all Cmax thresholds in per dose and per day dose analyses.~~

Prior to conducting the DV study and the DF study, we completed our SOAR pivotal Phase 3 clinical study evaluating efficacy and 52-week safety of TLANDO. The SOAR study is considered our pivotal safety clinical study for the NDA resubmission.

~~Results from SOAR~~

SOAR was a randomized, open-label, parallel-group, active-controlled, Phase 3 clinical study of TLANDO in hypogonadal males with low testosterone (< 300 ng/dL). In total, 315 subjects at 40 active sites were assigned, such that 210 were randomized to TLANDO and 105 were randomized to the active control, AndroGel 1.62%®, for 52 weeks of treatment. The active control is included for safety assessment. TLANDO subjects were started at 225 mg TU (equivalent to ~ 142 mg of T) twice daily (“BID”) with a standard meal and then dose titrated, if needed, based on average T levels during the day, Cavg, and peak serumT levels, Cmax, up to 300 mg TU BID or down to 150 mg TU BID based on serum testosterone measured at weeks 3 and 7 based on PK profile with multiple blood samples drawn at each time period. The mean age of the subjects in the trial was ~53 years with ~91% of the patients < 65 years of age. The discontinuation rate for TLANDO was 38% compared to 32% for AndroGel 1.62%.

Primary statistical analysis was conducted using the Efficacy Population Set ("EPS"). The EPS is defined as subjects randomized into the study with at least one PK profile and no significant protocol deviations and includes imputed missing data by last observation carried forward, N=151. Further analysis was performed using the full analysis set ("FAS") (any subject randomized into the study with at least one post-baseline efficacy variable response, N=193) and the SS (any subject that was randomized into the study and took at least one dose, N=210).

~~Safety~~

The safety component of the SOAR trial was completed the last week of April 2015. The safety extension phase was designed to assess safety based on information such as metabolites, biomarkers, laboratory values, serious adverse events SAEs and AEs, with subjects on their stable dose regimen in both the treatment arm and the active control arm. TLANDO treatment was well tolerated in there were no hepatic, cardiac or drug related SAEs.

~~TLANDO safety highlights include:~~

~~TLANDO was well tolerated during 52 weeks of dosing;~~

~~Overall AE profile for TLANDO was comparable to the active control;~~

Cardiac AE profiles were consistent between treatment groups and none of the observed cardiac AEs occurred in greater than 1.0% of the subjects in the TLANDO arm and none were classified as severe; and

~~All observed adverse drug reactions (“ADRs”) were classified as mild or moderate in severity and no serious ADRs occurred during the 52-week treatment period.~~

~~Food Effect Study~~

We also completed our labeling "food effect" study in May 2015. Results from the labeling "food effect" study indicate that bioavailability of testosterone from TLANDO is not affected by changes in meal fat content. The results demonstrate comparable testosterone levels between the standard fat meal (similar to the meal instruction provided in the Phase 3 clinical study) and both the low and high fat meals. The labeling “food effect” study was conducted per the FDA requirement and we submitted preliminary results from this study to the FDA in the second quarter of 2015 prior to submitting the NDA.

~~Other Safety Requirements~~

Based on our meetings with the FDA, we do not expect to be required to conduct a heart attack and stroke risk study prior to the potential approval of TLANDO. We may, however, be required to conduct a heart attack and stroke risk study on our own, or launching TLANDO on our own with the assistance from a ~~consortium of sponsors that have an approved TRT product subsequent to the potential approval of TLANDO.~~“risk share” partner.

Recent Competition Update

On March 27, 2019, ~~Clarus Therapeutics, Inc.’s (“Clarus”)~~Clarus’ product JATENZO®, an oral ~~testosterone undecanoate~~TU product, was approved by the FDA and also received three years of data exclusivity. It is unclear how Jatenzo’s three years of data exclusivity will impact the potential full approvability of TLANDO. The potential exists that, as a result of Clarus’ data exclusivity, the approval of TLANDO by the FDA, if received, could be delayed until March 27, 2022. On February 10, 2020, Clarus announced that JATENZO® has been launched and is commercially available. Based on the FDA’s tentative approval of TLANDO, we will not be able to begin marketing TLANDO until receiving final approval no earlier than March 27, 2022, the expiration of the exclusivity period granted to Clarus with respect to JATENZO®.

Additionally, our competitors may introduce other T-replacement therapies. For example, on January 5, 2021 Marius submitted a NDA to the FDA seeking approval of KYZATREX®, its novel oral TU soft gelatin capsule for the treatment of primary and secondary hypogonadism in adult men. According to Marius, it has been assigned a PDUFA date of October 31, 2021 for KYZATREX®.

We are also aware of other pharmaceutical companies that have T-replacement therapies or testosterone therapies in development that may be approved for marketing in the United States or outside of the United States.

Based on publicly available information, we believe that several other T-replacement therapies that would be competitive with TLANDO are in varying stages of development, some of which may be approved, marketed and/or commercialized prior to TLANDO. These therapies include T-gels, oral-T, an aromatase inhibitor, a new class of drugs called Selective Androgen Receptor Modulators and hydroalcoholic gel formulations of DHT.

LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH

We are currently evaluating LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU, for the treatment of non-cirrhotic NASH. NASH is a more advanced state of ~~non-alcoholic fatty liver disease (“NAFLD”)~~NAFLD and can progress to a cirrhotic liver and eventually hepatocellular ~~carcinoma or~~carcinoma/ liver cancer. Twenty to thirty percent of the U.S. population is estimated to suffer from NAFLD and fifteen to twenty percent of this group progress to NASH, which is a substantially large population that lacks effective therapy. Currently, there are no FDA approved treatments for ~~NASH.~~NASH, a silent killer that affects approximately 30 million Americans. Approximately 50% of NASH patients are in adult ~~males and the number of NASH cases is projected to increase 63% from 16.5 million cases in 2015 to 27.0 million cases in 2030.~~males. 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 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.

History of Liver Disease

The liver is the largest internal organ in the human body and its proper function is indispensable for many critical metabolic functions, including the regulation of lipid and sugar metabolism, the production of important proteins, including those involved in blood clotting, and purification of blood. There are over 100 described diseases of the liver, and because of its many functions, these can be highly debilitating and life-threatening unless effectively treated. Liver diseases can result from injury to the liver caused by a variety of insults, including ~~hepatitis C virus (HCV), hepatitis B virus (HBV),~~HCV, HBV, obesity, chronic excessive alcohol use or autoimmune diseases. Regardless of the underlying cause of the disease, there are important similarities in the disease progression including increased inflammatory activity and excessive liver cell apoptosis, which if unresolved leads to fibrosis. Fibrosis, if allowed to progress, will lead to cirrhosis, or excessive scarring of the liver, and eventually reduced liver function. Some patients with liver cirrhosis have a partially functioning liver and may appear asymptomatic for long periods of time, which is referred to as decompensated liver disease. Decompensated liver disease is when the liver is unable to perform its normal functions. Many people with active liver disease remain undiagnosed largely because liver disease patients are often asymptomatic for many years.

Markers of Liver Cell Death

~~Alanine aminotransferase (“ALT”)~~ALT is an enzyme that is produced in liver cells and is naturally found in the blood of healthy individuals. In liver disease, liver cells are damaged and as a consequence, ALT is released into the blood, increasing ALT levels above the normal range. Physicians routinely test blood levels of ALT to monitor the health of a ~~patient's~~patient’s liver. ALT level is a clinically important biochemical marker of the severity of liver inflammation and ongoing liver disease. Elevated levels of ALT represent general markers of liver cell death and inflammation without regard to any specific mechanism. ~~Aspartate aminotransferase (“AST”)~~AST is a second enzyme found in the blood that is produced in the liver and routinely measured by physicians along with ALT. As with ALT, AST is often elevated in liver disease and, like ALT, is considered an overall marker of liver inflammation.

Relationship between Hypogonadism and NAFLD

Preclinical and clinical studies in the NAFLD/NASH literature have shown the prevalence of testosterone deficiency across the NAFLD/NASH histological spectrum wherein low testosterone was independently associated with NAFLD/NASH with an inverse relationship between testosterone and NAFLD/NASH symptom severity. A recent ~~National Institute of Diabetes and Digestive and Kidney Diseases (“NIDDK”)~~NIDDK report suggests that 75% of biopsy confirmed NASH subjects have less than 372 ng/dL of total testosterone and that the degree of fibrosis severity is inversely related to free testosterone levels; thus, providing a good rationale for testing LPCN 1144 in adult NASH patients regardless of their hypogonadal status. ~~Recently, we~~We have received clearance from the FDA to clinically investigate LPCN 1144 in an expanded target population of adult male NASH patients. Specifically, the FDA waived the limitation of only testing LPCN 1144 in NASH subjects with total testosterone levels below 300 ng/dL (threshold for hypogonadism).

~~Post hoc analyses~~Current Status

We have initiated the LiFT Phase 2 clinical study in confirmed non-cirrhotic NASH subjects. The LiFT clinical study is a prospective, multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal or eugonadal male NASH subjects with grade F1/F3 fibrosis and a 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 ~~our existing~~three arms (Treatment A is a twice daily oral dose of 142 mg testosterone equivalent, Treatment B is a twice daily oral dose of 142 mg testosterone equivalent formulated with 217 mg of d-alpha tocopherol equivalent, and the third arm is twice daily matching placebo). We currently expect 36-week biopsy data in August 2021.

The primary endpoint of the LiFT clinical ~~trials~~study is 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 include assessment of histological change for NASH resolution and/or fibrosis improvement as well as liver fat data. Other important endpoints include the following: change in liver injury markers, anthropomorphic measurements, lipids, insulin resistance and inflammatory/fibrosis markers; as well as patient reported outcomes.

Additionally, subjects will have access to LPCN 1144 through an open label extension study. The extension study will enable the collection of additional data on LPCN 1144 for up to a total of 72 weeks of therapy.

Treatments with LPCN 1144 post 12 weeks of treatment resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver injury markers with no observed tolerability issues. Inclusion of d-alpha tocopherol formulated with the testosterone prodrug resulted in additional liver benefits, notably improved key liver markers without compromising tolerability.

Key results are presented in the following tables:

Table 1. Mean absolute liver fat using MRI-PDFF in all subjects (n=56)* at Week 12.

	Change from baseline (CBL)		Placebo-adjusted CBL
Treatment	%	p-value	%	p value
A (n = 18)	-7.7	<0.0001	-6.1	0.0001
B (n = 19)	-9.2	<0.0001	-7.5	<0.0001
Placebo (n = 19)	-1.7	NS	n/a	n/a

* Missing data was obtained using Multiple Imputation

NS: Not significant (p > 0.05)

Table 2. Mean relative liver fat using MRI-PDFF at Week 12 in subjects (n=52) with ~~comorbidities typically associated~~liver fat ≥ 5% at baseline.*

	Change from baseline (CBL)		Placebo-adjusted CBL
Treatment	%	p value	%	p value
A (n = 17)	-40.0	<0.0001	-30.0	0.0002
B (n = 17)	-46.9	<0.0001	-37.0	<0.0001
Placebo (n = 18)	-9.9	NS	n/a	n/a

* Based on available data.

Table 3. Responders with ~~NASH comorbidities indicate that testosterone therapy significantly and consistently reduced elevated levels of~~> 30% Relative Reduction in Liver Fat at Week 12, Intent to Treat Dataset (n=56)*.

Treatment	Responder (% of subjects)	p value vs Placebo
A (n = 18)	66.7	0.0058
B (n = 19)	63.2	0.0026
Placebo (n = 19)	15.8

* Subjects with missing data are considered non-responders

Table 4. Average changes in key serum ~~biomarkers (liver function enzymes~~liver injury markers ALT and ~~serum triglyceride) generally associated with NAFLD/NASH.~~AST at Week 12 (n=52)*.

~~Current Status~~

ALT (U/L)

AST (U/L)

Absolute

Placebo-Adjusted Absolute

Absolute

Placebo-Adjusted Absolute

Treatment

CBL

p value

vs BL

CBL

p value

vs Placebo

CBL

p value

vs BL

CBL

p value

vs Placebo

A (n = 16)

-9.4

0.0054

-11.1

0.0164

-4.9

0.0402

-7.7

0.0216

B (n = 19)

-22.4

<0.0001

-24.1

<0.0001

-10.4

<0.0001

-13.2

0.0001

Placebo (n = 17)

1.8

n/a

2.8

n/a

* All available data

During the 12 weeks of treatment, the observed rate and severity of Treatment Emergent Adverse Events (“TEAEs”) in both the LPCN 1144 treatment arms were comparable to the placebo arm. Three subjects in the placebo group and one subject in the combined treatment arms discontinued study drug due to TEAEs. We ~~have~~currently expect 36-week biopsy data in August 2021.

Previous to the LiFT clinical study, we completed a 16-week POC liver imaging clinical study to assess liver fat changes in hypogonadal men at risk of developing NASH using MRI-PDFF technique. Treatment results from the POC liver imaging study demonstrated that 48% of the treated NAFLD subjects, defined as baseline liver fat of at least 5%, had NAFLD resolution, defined as liver fat <5% post treatment. Additionally, 100% of the subjects experiencing NAFLD resolution had at least a 35% relative liver fat reduction from baseline with a relative mean liver fat reduction of 55% in this group. ~~Further results from the POC liver fat clinical study after 16 weeks of treatment are as follows:~~

Baseline Liver Fat % Mean Liver Fat % at Relative Reductions at EOS Responder Rate** at
Category, n Baseline Mean % Median % EOS, %
At least 10%, n=8 20.5 40 39 75
At least 8%, n=10 18.3 42 42 80
At least 5%, n=21 12.1 33 41 71

**Based on subjects who experienced at least a 30% reduction in liver fat from baseline.

We have also investigated the pharmacological effect of LPCN 1144 in a validated, non-genomic, multiple arm, 12-week high fat diet (“HFD”)-induced, rabbit animal model of NASH and hepatic fibrosis. NASH, induced by the HFD, lowered circulating T and free T levels. The results from this pre-clinical model demonstrate that LPCN 1144 treatment restores circulating T and free T levels. Additionally, the histological and biomarker results suggest LPCN 1144 decreases liver inflammation, ballooning, fibrosis, and visceral fat that were all increased due to the HFD, while normalizing insulin sensitivity, prostate and seminal vesicle weight.

~~Additionally, we have initiated the~~ ~~LiFT~~ (“Liver Fat intervention with oral Testosterone”) Phase 2 clinical study, a paired-biopsy study in confirmed pre-cirrhotic NASH subjects with the first subject being dosed in the third quarter of 2019. The formulations being studied in the Phase 2 clinical trial are differentiated from TLANDO. The ~~LiFT~~ Phase 2 clinical study is a prospective, multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal or eugonadal male NASH subjects with grade F2/F3 fibrosis and a NAFLD Activity Score (“NAS”) ≥ 4 with a 36-week treatment period. The ~~LiFT~~ clinical study has completed enrollment of 56 biopsy confirmed NASH male subjects, randomized into one of three arms (two test arms and one placebo arm) with a 1:1:1 randomization ratio. We currently expect top-line liver fat reduction data in January 2021 as measured by MRI-PDFF at 12 weeks, followed by 36-week biopsy data which is expected in mid-2021. Due to COVID-19, we believe that subject drop-out rates and the number of subjects that ultimately complete the clinical study could be negatively impacted.

TLANDO XR: A Next-Generation Long-Acting Oral Product Candidate for TRT

TLANDO XR is a next-generation, novel ester prodrug of testosterone comprised of TT which uses the Lip’ral 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 TLANDO XR along with safety and tolerability of TLANDO XR and its metabolites following oral administration of single and multiple doses in hypogonadal men. The Phase 2b clinical trial was a randomized, open label, two-period, multi-dose PK study that enrolled hypogonadal males into five treatment groups. Each of the 12 subjects in a group received treatment for 14 days. Results of the Phase 2b study suggest that the primary objectives were met, including identifying the dose expected to be tested in a Phase 3 study. 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, TLANDO XR was well tolerated with no drug-related severe or serious adverse events reported in the Phase 2b study.

Additionally in October 2014, we completed a Phase 2a ~~proof-of-concept~~proof -of-concept (“POC”) study in hypogonadal men. The Phase 2a open-label, dose-escalating single and multiple dose study enrolled 12 males. Results from the Phase 2a clinical study demonstrated the feasibility of a once daily dosing with TLANDO XR in hypogonadal men and a good dose response. Additionally, the study confirmed that steady state is achieved by day 14 with consistent inter-day performance observed on day 14, 21 and 28. No subjects exceeded Cmax of 1500 ng/dL at any time during the 28-day dosing period on multi-dose exposure. Overall, TLANDO XR was well tolerated with no serious AE’s reported.

We have also completed a preclinical toxicology study with TLANDO XR in dogs.

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 TLANDO XR. Based on the results of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we have ~~designed~~proposed a Phase 3 protocol for TLANDO XR 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 will include a three-month efficacy treatment period and a one-year safety component for up to 100 subjects. 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 study needs to be completed, and that ~~ABPM~~ambulatory blood pressure monitoring (“ABPM”) be included as part of the Phase 3 clinical study. ~~Based on our capital resources and the clinical status of our product candidates, we plan to primarily focus our efforts in 2020 on TLANDO and LPCN 1144.~~ We ~~do not~~ anticipate the ~~initiation of~~next steps in developing TLANDO XR will be to scale up the formulation and conduct a ~~Phase 3~~food effect study with TLANDO ~~XR to occur in 2020 unless and until additional capital is secured or the product candidate is out-licensed.~~XR. We are also exploring the possibility of licensing TLANDO XR to a third party, although no licensing agreement has been entered into by ~~the Company.~~us.

LPCN 1148: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the ~~Treatment~~Management of Cirrhosis

Cirrhosis is ~~an end stage~~end-stage NAFLD for which there is no FDA approved drug treatment. Liver cirrhosis is estimated to affect in excess of 600,000 Americans, with men affected at twice the rate of women, and results in approximately 45,000 deaths every year. Due to a lack of available organs, only a third of waitlisted patients are getting liver transplants, and patients that do receive a transplant are increasingly being described as frail. Low testosterone affects up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including ascites, hepatic encephalopathy, and clinically significant portal hypertension. We are targeting LPCN 1148 for the management of symptoms associated with liver 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 decompensation events and improvement in post liver transplant survival, including outcomes and costs.

We are currently ~~formulating plans~~planning to conduct a ~~proof-of-concept~~Phase 2 POC study (NCT04874350) in male cirrhotic subjects ~~through consultations with the FDA and key opinion leaders~~ to evaluate the therapeutic potential of LPCN 1148 for the ~~treatment~~management of cirrhotic subjects. On May 5, 2020 the FDA accepted our Investigational New Drug application ("IND") to initiate a Phase 2 proof-of-concept study to evaluate the therapeutic potential of LPCN 1148 for the treatment of liver cirrhosis in adult male cirrhotic patients. The planned Phase 2 ~~clinical~~POC study is a prospective, multi-center, randomized, placebo-controlled ~~52-week~~ study in approximately 48 to 60 male cirrhotic patients that are on the liver transplant list. ~~Based on our capital resources~~Subjects will be randomized 1:1 to one of two arms. The treatment arm is an oral dose of a testosterone ester and the ~~clinical status~~second arm is matching placebo. The primary endpoint is change in skeletal muscle index at week 24 with key secondary endpoints including change in liver frailty index and number of ~~our product candidates,~~waitlist events, including all-cause mortality. Total treatment is expected to be 52 weeks. We currently expect the first subject will be dosed in the fourth quarter of 2021.

LPCN 1154: An Oral Neuro-Steroid Candidate for the Treatment of Postpartum Depression

PPD is a major depressive disorder that is under diagnosed in the U.S., impacts approximately 1 in 7 women after giving birth. PPD can lead to devastating consequences for a woman, her newborn and her family. Currently, there is no oral therapy approved for the treatment of PPD. The active moiety in LPCN 1154 is an endogenous positive allosteric modulator of γ-aminobutyric acid (“GABA_A”) receptor. LPCN 1154 is expected to be an “at home” treatment with easier treatment access than the current standard of care invasive option that requires hospitalization with significant limitations. Moreover, LPCN 1154 is expected to provide the required level of privacy for a mother, avoiding bonding/breast feeding interruptions due to the required hospitalizations for the current option.

On June 14, 2021, we ~~plan~~announced that the FDA has cleared the Company’s Investigational New Drug Application (“IND”) to ~~primarily focus our efforts in 2020 on TLANDO and LPCN 1144. We do not anticipate the initiation of~~initiate a Phase 2 study to evaluate the therapeutic potential of LPCN 1154 for the treatment of PPD in adults. We recently initiated a pharmacokinetic (“PK”) study to assess dose proportionality with LPCN ~~1148~~11154 with top-line results expected in ~~2020 unless~~the third quarter of 2021. Following the PK study, we plan to conduct a proof-of-concept study to evaluate the safety, tolerability, and ~~until additional capital is secured or~~efficacy of LPCN 1154 in adult female subjects diagnosed with PPD. We expect the ~~product candidate is out-licensed. We are exploring~~first subject dosed will occur in the ~~possibility~~fourth quarter of ~~licensing LPCN 1148 to a third party, although no licensing agreement has been entered into by the Company~~2021.

LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth

We believe LPCN 1107 has the potential to become the first oral ~~hydroxyprogesterone caproate (“HPC”)~~HPC product indicated for the reduction of risk of ~~preterm birth~~PTB (delivery less than 37 weeks) ~~(“PTB”)~~ in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet need as approximately 11.7% of all U.S. pregnancies result in PTB, a leading cause of neonatal mortality and morbidity.

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, four-period, four-treatment, randomized, single and multiple dose, PK study in pregnant women of three dose levels of LPCN 1107 and the ~~injectable intramuscular ("IM")~~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 three treatment periods and then received five 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 three LPCN 1107 treatment periods and a washout period, all subjects received five weekly injections of HPC. Results from this study demonstrated that average steady state HPC levels (Cavg0-24) were comparable or higher for all three LPCN 1107 doses than for injectable HPC. Additionally, HPC levels as a function of daily dose were linear for the three LPCN 1107 doses. Also, unlike the injectable HPC, steady state exposure was achieved for all three LPCN 1107 doses within seven days. We have also completed a proof-of-concept Phase 1b clinical study of LPCN 1107 in healthy pregnant women in January 2015 and a ~~proof-of-concept~~POC Phase 1a clinical study of LPCN 1107 in healthy non-pregnant women in May 2014. These studies were designed to determine the PK and bioavailability of LPCN 1107 relative to an IM HPC, as well as safety and tolerability.

A traditional ~~pharmacokinetics/pharmacodynamics (“~~PK/~~PD”)~~PD based Phase 2 clinical study in the intended patient population is not expected to ~~occur~~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 will need to be updated based on recent developments with ~~AMAG Pharmaceuticals’ (“AMAG”) Makena.~~Covis’ Makena®. We plan to resume our interactions with the FDA to discuss our pivotal Phase 2b/3 clinical trial design and better understand next steps to advance LPCN 1107. Additionally, a pivotal Phase 2b/3 study will not occur until the results from a planned food-effect study with LPCN 1107 are reviewed by the FDA, though manufacturing scale-up work for LPCN 1107 has been completed.

~~Based on our capital resources and the clinical status of our product candidates, we plan to primarily focus our efforts in 2020 on TLANDO and LPCN 1144.~~ We do not anticipate the initiation of a pivotal Phase 2b/3 study with LPCN 1107 to occur ~~in 2020 unless and~~ until ~~additional capital~~the required food effect study is ~~secured or~~complete. We currently intend to proceed with plans to conduct the ~~product candidate is out-licensed.~~required food effect clinical study. We are exploring the possibility of licensing LPCN 1107 to a third party, although no licensing 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 acceptable terms.

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”)~~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.

CDER issued AMAG, the NDA holder at the time, a ~~notice~~Notice of ~~opportunity~~Opportunity for ~~a hearing~~Hearing (“NOOH”) to AMAG, the application holder of Makena. The FDA also sent the NOOH to the application holders for the approved generics to Makena for an opportunity to comment. The process that follows will depend, in part, on these companies’ decisions. AMAG could voluntarily agree to let the FDA withdraw approval of Makena, ~~and waive the opportunity~~ for which AMAG Pharmaceuticals responded by requesting a hearing ~~or it may request a~~and providing detail on the company’s position, recognizing clinicians’ decade-long use of Makena’s treatment and the public ~~hearing.~~health implications of withdrawing approval. The FDA Commissioner ~~would decide~~has not determined whether ~~to grant~~it will hold a ~~hearing, if requested by AMAG, would conduct the~~public hearing, and ~~ultimately decide on whether to allow Makena to be marketed or withdraw approval. The~~if one is granted, the process is expected to take ~~months and during~~months. During this time, Makena and the approved generics of Makena will remain on the market until the FDA makes a final decision about these products.

Currently, Makena and the approved generics of Makena are the only products approved for the prevention of recurrent preterm birth.

The FDA also indicated that it intends to hold a meeting with experts in obstetrics, neonatal care, and clinical trial design to discuss how to facilitate development of effective and safe therapies to treat preterm birth.

Financial Operations Overview

Revenue

To date, we have not generated any revenues from product sales and do not expect to do so 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~~June 30, ~~2020,~~2021, we have generated $28.1 million in revenue under our various license and collaboration arrangements and from government grants. We may never generate revenues from TLANDO or any of our other clinical or preclinical development programs or licensed products as 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, travel, 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 ~~$118.4~~$123.9 million in research and development expenses through ~~September~~June 30, ~~2020.~~2021.

~~As a result of the CRL~~On December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously granted to Clarus with respect to Jatenzo®, which expires on ~~TLANDO’s NDA,~~March 27, 2022. As a result, we are uncertain as to whether we will incur additional research and developments costs for TLANDO. On January 16, 2020, we met with the FDA in a Post Action Meeting to review our CRL, and based on these discussions, we do not expect to conduct any additional clinical trials with TLANDO for TRT. However, anyAny further expenditures, if needed, are subject to numerous uncertainties regarding timing and cost to completion.

We expect to continue to incur significant costs as we develop our other product candidates, including the ongoing LiFT Phase 2 clinical study with LPCN 1144.

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 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 for testosterone replacement therapies.

~~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 for testosterone replacement therapies.~~

We have also incurred significant manufacturing costs to prepare launch supplies for TLANDO and additional expenditures will be required to prepare for a commercial launch of TLANDO, should it be ~~approved.~~approved, if it is not out-licensed. However, future 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 TLANDO;~~

	●	the timing and outcome of regulatory filings and FDA reviews and actions for TLANDO;

	●	our dependence on third-party manufacturers for the production of satisfactory finished product for registration and launch should regulatory approval be obtained;

	●	the potential for future license or co-promote arrangements for TLANDO, 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.

~~our dependence on third-party manufacturers for the production of satisfactory finished product for registration and launch should regulatory approval be obtained;~~

the potential for future license or co-promote arrangements for TLANDO, 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.~~

A change of outcome for any of these variables with respect to the development of TLANDO and our other product development candidates could mean a substantial change in the costs and timing associated with these efforts, will 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 1144, TLANDO XR, LPCN 1148, LPCN 1154, 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 1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 or other 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 preclinical 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.

Summary of Research and Development Expense

We are conducting on-going clinical and regulatory activities with most of our product candidates. Additionally, we incur costs for our other research programs. The following table summarizes our research and development expenses:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
External service provider costs:
TLANDO	$	471,874	$	193,826	$	679,351	$	2,350,409	$	22,528	$	122,544	$	109,251	$	207,477
LPCN 1144		1,223,863		943,865		4,284,302		1,354,800		554,042		1,330,886		1,317,272		3,060,439
TLANDO XR		-		600		71,898		118,242		-		1,490		-		71,898
LPCN 1154										94,642		-		102,073		-
LPCN 1107		1,500		15,715		3,860		55,175		54,381		1,360		55,381		2,360
Total external service provider costs		1,697,237		1,154,006		5,039,411		3,878,626		725,593		1,456,280		1,583,977		3,342,174
Internal personnel costs		561,461		400,999		1,736,167		1,305,822		514,705		682,334		1,084,972		1,174,705
Other research and development costs		229,163		158,412		493,021		442,935		224,389		130,370		376,279		263,860
Total research and development	$	2,487,861	$	1,713,417	$	7,268,599	$	5,627,383	$	1,464,687	$	2,268,984	$	3,045,228	$	4,780,739

We expect research and development expenses to increase in the future as we complete on-going clinical studies, including the LiFT Phase 2 clinical study with LPCN 1144, as we conduct future clinical studies ~~including when and if we conduct Phase 2 clinical studies~~ with LPCN 1148, ~~and Phase 3 clinical studies with TLANDO XR~~LPCN 1154 and LPCN 1107, and as we manufacture commercial supplies of TLANDO ~~pre-approval.~~pre-approval if it is not out-licensed. However, if we are unable to raise additional capital, 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, business development, marketing, sales and support functions. Other general and administrative expenses include rent and utilities, travel expenses, professional fees for auditing, tax and legal services, litigation settlement and market research and market analytics.

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, including ~~our on-going~~the patent interference and patent infringement lawsuits against Clarus.

We expect that general and administrative expenses will ~~increase~~decrease in the future as we expect to incur ~~additional~~decreased legal fees indue to the ~~on-going court cases~~global settlement agreement (“Global Agreement”) with Clarus. ~~Additional areas~~We expect that ~~may see~~such decreases will be offset by other increases as we mature as a public company, ~~include~~including legal and consulting fees, accounting and audit fees, director fees, increased directors’ and officers’ insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation costs, professional fees and other costs. If TLANDO is approved by the FDA and it is not out-licensed, we expect we will incur significant additional expenses relating to the commercialization of TLANDO, including, among other things, expenses relating to building out sales and marketing teams, manufacturing expenses, expenses relating to licensing TLANDO to third parties, and other expenses. However, if we are unable to raise additional capital, we may need to further reduce general and administrative expenses in order to extend our ability to continue as a going concern. If we are unable to raise additional capital, we may be unable to effectively commercialize TLANDO if not out-licensed after receiving FDA approval.

Other Expense (Income), Net

Other expense (income), net consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities and interest expense incurred on our outstanding Loan and Security Agreement, ~~and~~ losses (gains) on our warrant ~~liability.~~liability and litigation settlement accruals.

Results of Operations

Comparison of the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

The following table summarizes our results of operations for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

	Three Months Ended September 30,									Three Months Ended June 30,
	2020			2019			Variance			2021			2020			Variance
License revenue	$	-		$	(164,990	)	$	(164,990	)
Research and development expenses		2,487,861			1,713,417			774,444		$	1,464,687		$	2,268,984			(804,297	)
General and administrative expenses		1,887,195			1,427,261			459,934			1,525,592			1,953,535			(427,943	)
Interest and investment income		(5,614	)		(98,988	)		(93,374	)		(17,344	)		(7,177	)		10,167
Interest expense		84,293			183,500			(99,207	)		57,428			87,847			(30,419	)
Gain on warrant liability		(140,477	)		-			(140,477	)
Loss (gain) on warrant liability											(221,322	)		2,066,445			(2,287,767	)
Litigation settlement											4,000,000			—			4,000,000

~~Revenue~~

We recognized no license revenue during the three months ended September 30, 2020 compared to $165,000 of license revenue during the three months ended September 30, 2019. License revenue in 2019 relates to royalty payments received from Spriaso, LLC (“Spriaso”) under a licensing agreement in the cough and cold field.

Research and Development Expenses

The ~~increase~~decrease in research and development expenses during the three months ended ~~September~~June 30, ~~2020~~2021 was primarily due to a ~~$280,000 increase~~$777,000 decrease in contract research organization expense and outside consulting ~~and manufacturing~~ costs related to the LPCN 1144 LiFT Phase 2 clinical study in NASH subjects, a ~~$278,000~~$100,000 decrease in costs associated with TLANDO and a $168,000 decrease in personnel expense which was mainly due to a decrease in stock compensation and bonus expense. The decreases were offset by a $95,000 increase in ~~commercial manufacturing~~ costs related to ~~TLANDO,~~LPCN 1154 and a ~~$160,000~~$53,000 increase in ~~personnel expense mainly due to stock compensation expense on performance based RSU’s and increased bonus expense,~~costs for LPCN 1107, as well as net increases in other R&D expenses of ~~$56,000.~~$94,000.

General and Administrative Expenses

The ~~increase~~decrease in general and administrative expenses during the three months ended ~~September~~June 30, ~~2020~~2021 was primarily due to a ~~$259,000 increase~~$273,000 decrease in personnel costs, which was mainly due to a decrease in stock compensation and bonus expense, and a $239,000 decrease in legal costs ~~associated with~~in 2021 as compared to 2020 relating to a decrease the following legal activities: lawsuit filed against Clarus Therapeutics Inc. for patent infringement in April 2019 ~~patent interference cases filed against Clarus~~ and the on-going class action lawsuit defense. ~~In addition, there was~~These decreases were offset by a ~~$240,000~~$49,000 increase in ~~personnel costs mainly due to stock compensation expense on performance based RSU’s and increased bonus expense,~~corporate insurance expenses and a ~~$6,000~~$35,000 increase in other general and administrative expenses. ~~These increases were offset by a $28,000 decrease marketing expense and a $17,000 decrease in administrative travel expenses.~~

Interest and Investment Income

The ~~decrease~~increase in interest and investment income during the three months ended ~~September~~June 30, ~~2020~~2021 was due to ~~lower interest rates~~higher cash and ~~lower average~~marketable investment securities balances ~~of marketable securities~~ in ~~2020~~2021 compared to ~~2019.~~2020.

Interest Expense

The decrease in interest expense during the three months ended ~~September~~June 30, ~~2020~~2021 was due to a decrease in interest expense on our Loan and Security Agreement with SVB, as a result of lower principal balances and lower interest rates in ~~2020~~2021 compared to ~~2019.~~2020.

~~Gain~~Loss (Gain) on Warrant Liability

We recorded a ~~$140,000~~ gain of $221,000 and a loss of $2.1 million, respectively, on warrant liability during the three months ended ~~September~~June 30, 2021 and 2020 related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. ~~We did not record a similar change during the three months ended September 30, 2019 as there were no similar warrants outstanding during this period.~~ The gain ~~during the three months ended September 30, 2020~~in 2021 was ~~mainly~~ attributable to ana decrease in the value of warrants ~~exercised during the period offset by~~outstanding as of June 30, 2021 as compared to March 31, 2021 due to a decrease in our stock price. The loss in 2020 was mainly due to an increase in the value of warrants outstanding as of ~~September~~June 30, 2020 as compared to ~~June 30,~~March 31, 2020 due to an increase in our stock price. There were ~~769,000~~zero and 10,006,000 common stock warrants from the November 2019 Offering exercised during the three months ended ~~September~~June 30, ~~2020.~~2021 and 2020, respectively. 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

We recorded an expense of $4.0 million and zero, respectively, on litigation settlement during the three months ended June 30, 2021 and 2020 related to the Global Agreement with Clarus to resolve all outstanding claims in the on-going intellectual property litigation between the two companies as well as the on-going interference proceeding between the two companies. Under the terms of the settlement, we agreed to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July 13, 2023. No future royalties are owing from either party. Under the terms of the Global Agreement, Lipocine and Clarus have agreed to dismiss the Lipocine Inc. v Clarus Therapeutics, Inc., No 19-cv-622 (WCB) litigation in the U.S. District Court for the District of Delaware. Also, both parties have reached an agreement on the interference proceedings captioned Clarus Therapeutics, Inc. v. Lipocine Inc., Interference No. 106,128 in the U.S. Patent and Trademark Office.

Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

The following table summarizes our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

	Nine months ended September 30,									Six months ended June 30,
	2020			2019			Variance			2021			2020			Variance
License revenue	$	-		$	(164,990	)	$	(164,990	)
Research and development expenses		7,268,599			5,627,383			1,641,216		$	3,045,228		$	4,780,739			(1,735,511	)
General and administrative expenses		5,925,991			3,989,645			1,936,346			3,059,544			4,038,795			(979,251	)
Interest and investment income		(72,729	)		(348,833	)		(276,104	)		(27,993	)		(67,115	)		(39,122	)
Interest expense		305,485			611,864			(306,379	)		126,401			221,192			(94,791	)
Loss on warrant liability		3,025,997			-			3,025,997
Loss (gain) on warrant liability											(26,257	)		3,166,474			(3,192,731	)
Litigation settlement											4,000,000			—			4,000,000
Income tax expense		200			200			-			200			200			-

~~Revenue~~

We recognized no license revenue during the nine months ended September 30, 2020 compared to $165,000 of license revenue during the nine months ended September 30, 2019. License revenue in 2019 relates to royalty payments received from Spriaso, LLC (“Spriaso”) under a licensing agreement in the cough and cold field.

Research and Development Expenses

The ~~increase~~decrease in research and development expenses during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily due to a ~~$2.9~~$1.7 million ~~increase~~decrease in contract research organization expense and outside consulting ~~and manufacturing~~ costs related to the LPCN 1144 LiFT Phase 2 clinical study in NASH subjects, a ~~$430,000 increase~~$98,000 decrease in costs associated with TLANDO and a $90,000 net decrease in personnel expense which was mainly due to a decrease in stock compensation expense ~~on performance based RSU’s and increased bonus expense, and a $50,000 increase~~offset by increases in ~~other research and development expenses.~~salaries partially due to headcount increases. These ~~increases~~decreases were offset by a ~~$1.7 million decrease~~$102,000 increase in costs ~~incurred~~related to LPCN 1154 and a $53,000 increase in ~~conjunction with TLANDO with the completion of the ABPM study in the first half of 2019, a $51,000 decrease in contract manufacturing~~ costs for LPCN 1107, ~~and a $46,000 decrease~~as well as increases in ~~costs for TLANDO XR.~~other R&D expenses of $41,000.

General and Administrative Expenses

The ~~increase~~decrease in general and administrative expenses during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily due to a ~~$1.9 million increase~~$847,000 decrease in legal costs ~~associated with~~in 2021 as compared to 2020 relating to a decrease the ~~with the~~ following legal activities: lawsuit filed against Clarus Therapeutics Inc. for patent infringement in April 2019 ~~interference cases filed against Clarus~~ and the on-going class action lawsuit defense, and a ~~$228,000 increase~~decrease of $288,000 in personnel costs mainly due toa reduction in stock compensation ~~expense on performance based RSU’s and increased bonus~~ expense. These ~~increases~~decreases were offset by a ~~$77,000 decrease~~$99,000 increase in ~~administrative travel expense, a $68,000 decrease in marketing expense~~corporate insurance expenses and a ~~$43,000 decrease~~$57,000 increase in other general and administrative expenses.

Interest and Investment Income

The decrease in interest and investment income during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was due to lower ~~average balances of marketable securities and lower~~ interest rates in ~~2020~~2021 compared to ~~2019.~~2020, despite higher cash and marketable investment securities balances.

Interest Expense

The decrease in interest expense during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was due to a decrease in interest expense on our Loan and Security Agreement with SVB, mainly as a result of lower principal balances ~~and lower interest rates in 2020~~2021 compared to ~~2019.~~2020.

Loss (Gain) on Warrant Liability

We recorded a ~~$3.0~~gain of $26,000 and a loss of $3.2 million, ~~loss~~respectively, on warrant liability during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. ~~We did not record~~The gain in 2021 was attributable to a ~~similar change during~~decrease in the ~~nine months ended September 30, 2019 as there were no similar~~value of warrants outstanding ~~during this period. The~~as of June 30, 2021 as compared to December 31, 2020 due to a small decrease in the number of warrants outstanding, a decrease in our volatility and the shorter term remaining on the outstanding warrants and the loss in 2020 was mainly ~~attributable~~due to an increase in the value of ~~both warrants exercised during the period and~~ warrants outstanding as of ~~September~~June 30, 2020 as compared to December 31, 2019 due to an increase in our stock price. There were ~~10,895,970~~10,000 and 10,127,000 common stock warrants from the November 2019 Offering exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021 and 2020, respectively. 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

We recorded an expense of $4.0 million and zero, respectively, on litigation settlement during the six months ended June 30, 2021 and 2020 related to the Global Agreement with Clarus to resolve all outstanding claims in the on-going intellectual property litigation between the two companies as well as the on-going interference proceeding between the two companies. Under the terms of the settlement, we agreed to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July 13, 2023.

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, preclinical 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 evaluate our options related to TLANDO should it receive final approval and it’s not out-licensed and as we advance clinical development of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 and any other product candidate, including continued research efforts.

As of ~~September~~June 30, ~~2020,~~2021, we had ~~$18.8~~$46.6 million of unrestricted cash, cash equivalents and marketable investment securities compared to ~~$14.1~~$19.7 million at December 31, ~~2019.~~2020. Additionally, as of ~~September 30, 2020 and~~ December 31, ~~2019~~2020 we had $5.0 million of restricted cash, which iswas required to be maintained as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved by the FDA. However on February 16, 2021, we amended the Loan and Security Agreement with SVB (as defined below) to, among other things, remove the cash collateral requirement.

On January 28, 2021, we completed a public offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“January 2021 Offering”). The gross proceeds from the January 2021 Offering were approximately $28.7 million, before deducting underwriter fees and other offering expenses of $1.9 million. In the January 2021 Offering, we sold 16,428,571 shares of our common stock.

On April 21, 2020, we entered into a loan (the “Loan”) from ~~Silicon Valley Bank (“SVB”)~~SVB in the aggregate amount of $234,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a note dated April 21, 2020, ~~issued by us, matures~~originally matured on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020. The Loan may be prepaid by us at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. We intend to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. ~~We have submitted the application to have the PPP Loan forgiven and are waiting for approval from~~On November 2, 2020, we were notified by the Small Business ~~Administration.~~Administration that our PPP Loan had been forgiven.

On February 27, 2020, we completed a registered direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“February 2020 Offering”). The gross proceeds from the February 2020 Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of ~~approximately~~ $347,000. In the February 2020 Offering, the Company sold 10,084,034 Class A Units, with each Class A Unit consisting of one share of common stock and a one-half of one common warrant to purchase one share of common stock, at a price of $0.595 per Class A Unit. The common stock warrants were immediately exercisable at an exercise price of $0.53 per share, subject to adjustment, and expire on February 27, 2025. By their terms, however, the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

As of September 30, 2020, 4,201,681 common warrants to purchase an equivalent number of shares of our common stock from the February 2020 Offering have been exercised resulting in proceeds to us of approximately $2.2 million.

On November 18, 2019, we completed ~~a public offering of securities registered under an effective registration statement filed pursuant to~~ the ~~Securities Act of 1933, as amended (“~~November 2019 ~~Offering”).~~Offering. The gross proceeds from the November 2019 Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $404,000. In the November 2019 Offering, the Company sold (i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of common stock and a common warrant to purchase one share of common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of common stock and one common warrant to purchase one share of common stock, at a price of $0.50 per Class A Unit and $0.4999 per Class B Unit. The pre-funded warrants, which were exercised for common stock in December 2019, were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of $.0001 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of $0.50 per share, subject to adjustment, and expire on November 17, 2024. By their terms, however, neither the pre-funded warrants nor the common stock warrants can be exercised at any time that the pre-funded warrant holder or the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

As of September 30, 2020, 10,895,970 common warrants to purchase an equivalent number of shares of our common stock from the November 2019 Offering have been exercised resulting in proceeds to us of approximately $5.4 million.

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 bears 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 is payable monthly. Additionally on April 1, 2020, we ~~and SVB~~ entered into a Deferral ~~Agreement.~~Agreement with SVB. Under the Deferral Agreement, principal repayments ~~are~~were deferred by six months and we ~~are~~were only required to make monthly interest payments during the deferral period. The ~~loan~~Loan matures on June 1, 2022. Previously, we were only required to make monthly interest payments until December 31, 2018, following which we also made equal monthly payments of principal and interest until the signing of the Deferral Agreement. We will also be required to pay an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”). At our option, we may prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge). In connection with the Loan and Security Agreement, we granted to SVB a security interest in substantially all of our assets now owned or hereafter acquired, excluding intellectual property and certain other assets. In addition, as TLANDO was not approved by the FDA by May 31, 2018, we ~~are~~were required to maintain $5.0 million of cash collateral at SVB until such time as TLANDO is approved by the FDA. However on February 16, 2021, we amended the Loan and Security Agreement with SVB to, among other things, remove the financial trigger and financial trigger release event provisions requiring us to maintain a minimum cash collateral value and collateral pledge thereof. While any amounts are outstanding under the Loan and Security Agreement, we are subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. The credit facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent, with the right to exercise remedies against us and the collateral securing the credit facility, including foreclosure against the property securing the credit facilities, including ~~its~~our cash. These events of default include, among other things, any failure by us to pay principal or interest due under the credit facility, a breach of certain covenants under the credit facility, the Company’s insolvency, a material adverse change, and one or more judgments against us in an amount greater than $100,000 individually or in the aggregate.

On March 6, 2017, we entered into the Sales Agreement with 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 ~~$25.0~~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), through Cantor as our sales ~~agent which was subsequently increased on August 21, 2020 to $63.0 million.~~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, including sales made directly on or through the ~~Nasdaq~~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 (File No. ~~333-220942)~~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.

We are not obligated to make any sales of our common stock under the 2020 Sales Agreement. The offering of our common stock pursuant to the 2020 Sales Agreement will terminate upon the termination of the 2020 Sales Agreement as permitted therein. We and Cantor may each terminate the 2020 Sales Agreement at any time upon ten days’ prior notice.

~~As of September~~During the three months ended June 30, ~~2020,~~2021, we ~~have sold 9,465,535~~did not sell any shares of our common stock ~~resulting in net proceeds~~our current Registration Statement on Form S-3 (File No. 333-250072). As of ~~approximately $23.2~~June 30, 2021, we had $41.2 million available for sale under the Sales ~~Agreement which is net of $872,000 in expenses consisting of commissions paid to Cantor in connection with these sales and other offering and accounting costs.~~Agreement.

We believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements through at least ~~September~~June 30, ~~2021~~2022 which includes an on-going clinical study for LPCN 1144, future clinical studies for LPCN 1148 and LPCN 1154, compliance with regulatory requirements, satisfaction of our obligations under the settlement agreement with Clarus, and on-going litigation activities. 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 pre-commercial and commercial activities for TLANDO if not out-licensed and new clinical studies for LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107. While we believe we have sufficient liquidity and capital resources to fund our projected operating requirements through at least ~~September~~June 30, ~~2021,~~2022, we will need to raise additional capital at some point through the equity or debt markets or through out-licensing activities, either before or after ~~September~~June 30, ~~2021,~~2022, to support our operations, including, if FDA approval is received, potential commercialization activities for TLANDO. If we are unsuccessful in raising additional capital, 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 1144, TLANDO XR, LPCN 1148, LPCN 1154 and 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 or intellectual property litigation, or if we terminate or settle any on-going litigation activities.~~

studies. We can raise capital pursuant to the Sales Agreement ~~in the ATM~~ when not restricted due to terms of previous financings 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 and pre-commercialization 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:

	·●	further clinical development requirements or other requirements of the FDA related to approval of TLANDO;

	·●	the cost and timing of pre-commercialization and commercialization activities in support of TLANDO;

	·●	the scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities for all of our product candidates, including LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107;

	·●	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 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 ~~ATM.~~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 ~~ATM,~~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 ~~terms, or at all.~~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.

Sources and Uses of Cash

The following table provides a summary of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~ 2020:

	Nine Months Ended September 30,						Six Months Ended June 30,
	2020			2019			2021			2020
Cash used in operating activities	$	(11,619,069	)	$	(8,358,175	)	$	(6,425,056	)	$	(7,455,510	)
Cash provided by (used in) investing activities		(1,515,297	)		2,440,822
Cash used in investing activities								(35,426,211	)		(116,811	)
Cash provided by financing activities		16,344,029			4,504,322			28,601,598			11,681,616

Net Cash ~~Used in~~From Operating Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, net cash used in operating activities was ~~$11.6~~$6.4 million and ~~$8.4~~$7.5 million, respectively.

Net cash used in operating activities during the ~~nine~~six months ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 was primarily attributable to cash outlays to support ongoing operations, including research and development expenses and general and administrative expenses. During 2021 and 2020, we were performing activities related to the LPCN 1144 LiFT Phase 2 paired biopsy clinical study ~~and~~as well as preparing for future trials with LPCN 1154 in 2021. During 2020, we also were performing activities around the submission of the TLANDO NDA. ~~During 2019, we were performing activities related to the ABPM study for TLANDO and the POC liver imaging study for LPCN 1144.~~

Net Cash ~~Provided by~~From Investing Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, net cash used in investing activities was ~~$1.5~~$35.4 million ~~compared to net cash provided by of $2.4 million,~~and $117,000, respectively.

Net cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, was primarily the result of purchasing marketable investment securities, net, of ~~$1.5 million. Net cash provided by investing activities during the nine months ended September 30, 2019 was primarily the result of utilizing marketable investment securities, net, of $2.4~~$35.4 million ~~to fund operations.~~and $117,000, respectively. There were no capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

Net Cash ~~Provided by~~From Financing Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 net cash provided by financing activities was ~~$16.3~~$28.6 million and ~~$4.5~~$11.7 million, respectively.

Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, 2021 was attributable to the net proceeds from the sale of 16,428,571 shares of common stock pursuant to January 2021 Offering resulting in net proceeds of $26.8 million and $3.4 million in proceeds from the sale of 1,811,238 shares of common stock pursuant to the Sales Agreement with Cantor, offset by $1.7 million in debt principal repayments under the SVB Loan and Security Agreement.

Net cash provided by financing activities during the six months ended June 30, 2020 was attributable to the net proceeds from the sale of 10,084,034 shares of common stock pursuant to February 2020 Offering resulting in net proceeds of $5.7 million, to ~~$7.7~~$6.9 million in proceeds from the exercise of warrants ~~$3.9 million in proceeds from the sale of 2,830,000 shares of common stock pursuant~~and to ~~the ATM and~~ $234,000 in loan proceeds under the Payment Protection Program offset by $1.1 million in debt principal repayments under the SVB Loan and Security Agreement.

Net cash provided by financing activities during the nine months ended September 30, 2019 was primarily attributable to the net proceeds from the sale of 3,276,286 shares of common stock pursuant to the ATM resulting in net proceeds of $6.9 million, offset by $2.5 million in debt principal repayments under the SVB Loan and Security Agreement.

Contractual Commitments and Contingencies

Long-Term Debt Obligations and Interest on Debt

On January 5, 2018, we entered into a Loan and Security Agreement ~~(the “Loan and Security Agreement”)~~ with ~~Silicon Valley Bank (“SVB”)~~SVB pursuant to which SVB agreed to lend us $10.0 million. The principal borrowed under the Loan and Security Agreement bears interest at a rate equal to the Prime Rate plus one percent per annum, which interest is payable monthly. The loan matures on June 1, 2022 and we are required to make equal monthly payments of principal and interest for the remaining term of the loan beginning on November 1, 2020 although there was a principal deferment period of six months beginning on April 1, 2020 due to COVID-19. We will also be required to pay ~~an additional final payment equal to $650,000 (the “Final~~the Final Payment ~~Charge”)~~Charge at maturity.

On April 21, 2020, we were granted a ~~loan~~Loan from SVB in the aggregate amount of approximately $234,000, pursuant to the ~~Paycheck Protection Program (the “PPP”)~~PPP under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP ~~loan,~~Loan, which was in the form of a Note dated April 21, 2020, ~~issued by us, matures~~originally matured on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020. The PPP loan may be prepaid by us at any time prior to maturity with no prepayment penalties. Funds from the PPP loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. We intend to use the entire loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP ~~loan~~Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. ~~We have submitted the application to have the PPP Loan forgiven and are waiting for approval from~~On November 2, 2020, we were notified by the Small Business ~~Administration.~~Administration that our PPP Loan had been forgiven.

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 preclinical 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 ~~February 24, 2020,~~March 3, 2021, we modified and extended the lease through February 28, ~~2021.~~2022.

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~~six months ended ~~September~~June 30, ~~2020,~~2021, 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 ~~13, 2020.~~11, 2021.

New Accounting Standards

Refer to Note 12, in “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of accounting standards not yet adopted.

Off-Balance Sheet Arrangements

None.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, which include potential losses arising from adverse changes in market rates and prices, such as interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk. Our interest rate risk exposure results from our investment portfolio. Our primary objectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. The securities we hold in our investment portfolio are subject to interest rate risk. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings. After a review of our marketable investment securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair value of our marketable investment securities would be insignificant to the consolidated financial statements. Currently, we do not hedge these interest rate exposures. We have established policies and procedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. We invest in highly liquid, investment-grade securities and money market funds of various issues, types and maturities. These securities are classified as available-for-sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as accumulated other comprehensive income as a separate component in ~~stockholders'~~stockholders’ deficit unless a loss is deemed other than temporary, in which case the loss is recognized in earnings.

Additionally in January 2018, we entered into the Loan and Security Agreement with SVB for $10.0 million. A one percent increase in the prime rate would result in a ~~$50,000~~$17,000 increase in interest expense, while a one percent decrease in the prime rate would result in a ~~$56,000~~$19,000 decrease in interest expense.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain ~~"disclosure~~“disclosure controls and ~~procedures"~~procedures” within the meaning of Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures, or Disclosure Controls, are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange ~~Commission's~~Commission’s rules and forms. Our Disclosure Controls include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we evaluated the effectiveness of the design and operation of our Disclosure Controls, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our Disclosure Controls were effective as of ~~September~~June 30, ~~2020.~~2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the most recent fiscal quarter covered by this report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

~~On February 15, 2019, a purported shareholder filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware,~~ ~~John Wajda, derivatively on behalf of Lipocine Inc. v. Mahesh Patel, et al.,~~ against certain of our current and former officers and directors as well as the Company as a nominal defendant. The complaint asserts claims for alleged breaches of fiduciary duty and unjust enrichment arising out of our dissemination of purportedly false and misleading statements relating to the filing of the New Drug Application (“NDA”) for TLANDO. The relief sought in the complaint includes unspecified damages, changes to our corporate governance procedures, equitable and/or injunctive relief, restitution, and attorneys’ fees. On August 16, 2019, defendants filed a motion to dismiss the complaint. In response, the plaintiff’s filed an amended stockholder derivative complaint. Defendants’ motion to dismiss the amended complaint was filed on December 12, 2019; plaintiff’s response was filed on January 27, 2020 and defendants’ reply was filed on February 26, 2020. Oral arguments on the motion to dismiss were held on July 28, 2020. On July 30, 2020, the court entered an order dismissing the complaint in its entirety.ITEM 1.LEGAL PROCEEDINGS

On April 2, 2019, we 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, we 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 has answered the complaint and asserted counterclaims of non-infringement and invalidity. We 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 ~~scheduled~~ a ~~five-day jury trial beginning~~summary judgment hearing on ~~February 8,~~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 ~~February 11, 2020, we voluntarily dismissed allegations~~July 13, 2021, Clarus and Lipocine entered into a global settlement agreement (“Global Agreement”) which resolved all outstanding claims of ~~patent infringement for expired U.S.~~this litigation as well as the on-going United States Patent ~~Nos. 6,569,463~~ and ~~6,923,988 in an effort to streamline~~Trademark Office (“USPTO”) Interference No. 106,128 between the ~~issues and associated costs for dispute. The parties are currently engaged in~~parties. Under the ~~fact discovery and expert testimony phase~~terms of the ~~lawsuit.~~Global Agreement, Lipocine 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. No future royalties are owing from either party. On July 15, 2021, the Court dismissed with prejudice Lipocine’s claims and Clarus’ counterclaims.

On November 14, 2019, ~~the Company~~we and certain of ~~its~~our officers were named as defendants in a purported shareholder class action lawsuit, Solomon Abady v. Lipocine Inc. et al., 2:19-cv-00906-PMW, filed in the United District Court for the District of Utah. The complaint alleges that the defendants made false and/or misleading statements and/or failed to disclose that our filing of the NDA for TLANDO to the FDA contained deficiencies and as a result the defendants’ statements about our business and operations were false and misleading and/or lacked a reasonable basis in violation of federal securities laws. The lawsuit seeks certification as a class action (for a purported class of purchasers of the Company’s securities from March 27, 2019 through November 8, 2019), compensatory damages in an unspecified amount, and unspecified equitable or injunctive relief. We have insurance that covers claims of this nature. The retention amount payable by us under our policy is $1.25 million. We filed a motion to dismiss this class action lawsuit on July 24, 2020. In response, the ~~plaintiff’s~~plaintiffs filed their response to the motion to dismiss the class action lawsuit on September 22, 2020 and we filed our reply to our motion to dismiss on October 22, 2020. ~~Further, we~~We intend to vigorously defend ourselves ~~and our current and former officers and directors~~ against these allegations and have not recorded a liability related to this shareholder class action lawsuit as the outcome is not probable nor can an estimate be made of loss, if any.

On March 13, 2020, we filed U.S. patent application serial number 16/818,779 (“the Lipocine ‘779 Application”) with the USPTO. On October 16 and November 3, 2020, we filed suggestions for interference with the USPTO requesting that a patent interference be declared between the Lipocine ‘779 Application and US patent application serial number 16/656,178 to Clarus Therapeutics, Inc. (“the Clarus ‘178 Application”). Pursuant to our request, the Patent Trial and Appeal Board (“PTAB”) at the USPTO declared the interference on January 4, 2021 to ultimately determine, as between us and Clarus, who is entitled to the claimed subject matter. The interference number is 106,128, and we were initially declared Senior Party. A conference call with the PTAB was held on January 25, 2021 to discuss proposed motions. On February 1, 2021, the PTAB issued an order authorizing certain motions and setting the schedule for the preliminary motions phase. On July 13, 2021, we entered into the Global Agreement with Clarus to resolve interference No. 106,128 among other items. On July 26, 2021, the PTAB granted our request for adverse judgment in interference No. 106,128 in accordance with the Global Agreement.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this Report, consider the risk factors discussed in Part 1, ~~"Item~~“Item 1A. Risk ~~Factors"~~Factors” in the ~~Company's~~Company’s Annual Report filed on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on March ~~13, 2020,~~11, 2021, risk factors discussed in Item 1A of the Form 10-Q for the quarter ended March 31, ~~2020~~2021 filed with the SEC on May ~~7, 2020, risk factors discussed in Item 1A of the Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August~~ 6, ~~2020~~2021 and the risk factors discussed in Item 1A of this Form 10-Q, which could materially affect our business, financial condition or future results. The risks described in the aforementioned report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be not material also may materially adversely affect the ~~Company's~~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, ~~2019~~2020 filed with the SEC on March ~~13, 2020,~~11, 2021 and from our risk factors included in our Form 10-Q for the quarter ended March 31, ~~2020~~2021 filed with the SEC on May ~~7, 2020 and from our risk factors included in our Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August~~ 6, ~~2020:~~2021:

Risks Relating to Our Business and Industry

Our research and development programs and processes are at an early stage of development, which makes it difficult to evaluate our business and prospects, or predict if or when we will successfully commercialize our product candidates.

Our operations to date have primarily been limited to conducting research and development activities under license and collaboration agreements. Our current portfolio consists of our most advanced product candidate TLANDO as well as five additional earlier stage clinical candidates, LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107. We have never marketed or commercialized a drug product. Consequently, any predictions about our future performance may not be as accurate as they could be if we were further along our commercialization path. In addition, as a pre-commercial stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors.

Our clinical product candidates are at an early stage of development and will require significant further investment and regulatory approvals prior to marketing and commercialization. As such, our product development processes for TLANDO, LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107 are very risky and uncertain, and our product candidates may fail to advance beyond the current study. Even if we obtain ~~FDA~~required financing, we cannot ensure successful product development or that we will obtain regulatory approval ~~for TLANDO,~~or successfully commercialize any of our product candidates and generate product revenues.

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

As of June 30, 2021, we had 13 employees. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects. If our management is unable to effectively manage our future growth, our expenses may increase more than expected, our ability to generate revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize ~~TLANDO may be limited.~~

Our ability to commercialize TLANDO, should it receive approval, is uncertain. Our ability to commercially launch TLANDO is contingent upon numerous factors including FDA approval, the availability of commercial launch supplies, the impact of COVID-19, our ~~financial resources,~~product candidates and compete effectively will depend, in part, on our ability to license TLANDO to a third party or build out a commercial sales and marketing team/organization. If we are unable to launch TLANDO commercially at scale, our business and operations will be adversely affected. As an alternative to launching TLANDO directly, we are exploring the possibility of licensing TLANDO to a third party, although no licensing agreement has been entered into by us yet. We are unable to estimate whether or when we will be able to out-license TLANDO, should it be approved.effectively manage any future growth.

~~The ongoing outbreak of coronavirus around the world could adversely impact our business and operating results.~~

In December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease COVID-19, has spread to multiple countries, including the United States and all of the primary markets where we conduct business. On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S. government imposed travel restrictions on travel between the United States and Europe for a 30-day period. Further, on March 13, 2020, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. Almost all U.S. states and many local jurisdictions have issued, and others in the future may issue, "shelter-in-place" orders, quarantines, executive orders and similar government orders, restrictions and recommendations for their residents to control the spread of COVID-19. Such orders, restrictions and recommendations, and the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,” work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, as well as record declines in stock prices, among other effects.

The duration and extent of COVID-19's impact on our business may be difficult to assess or predict. The widespread pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, reducing our ability to access capital, which would negatively affect our liquidity. Further, quarantines or government reaction or shutdowns for COVID-19 could disrupt our operations and harm our business, financial condition and results of operations. Our key personnel and other employees could also be affected by COVID-19, potentially reducing their availability, and an outbreak such as COVID-19 or the procedures we take to mitigate its effect on our workforce could reduce the efficiency of our operations or prove insufficient. We may delay or reduce certain capital spending and certain projects until the travel and logistical impacts of COVID-19 are lifted, which will delay the completion of such projects.

In addition, the conduct of clinical trials and studies required to obtain regulatory approvals for our products have been and we expect may continue to be affected by the COVID-19 pandemic. As hospital resources are prioritized for the COVID-19 outbreak and quarantines impede patient movement or interrupt healthcare services, clinical studies may continue to be disrupted. If we are unable to successfully complete our clinical studies, our business and operating results will be harmed. Further, we believe that subject drop-out rates and the number of subjects that ultimately complete the clinical study could be negatively impacted by COVID-19. Interruptions caused by COVID-19 may also limit our ability to collect data from clinical studies. If we are unable to complete or effectively collect data from clinical studies, our business and operating results will be harmed.

The global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole. However, these effects have harmed our business, financial condition and results of operations in the near term and could have a continuing material impact on our operations, sales and ability to continue as a going concern.

We may have to dedicate resources to the defense and resolution of litigation.

Securities legislation in the United States makes it relatively easy for stockholders to sue. This can lead to frivolous ~~law suits~~lawsuits which take substantial time, money, resources and attention or force us to settle such claims rather than seek adequate judicial remedy or dismissal of such claims. Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. Biotechnology and pharmaceutical companies, including the Company, have experienced significant stock price volatility in recent years, increasing the risk of such litigation. As we defend the class action lawsuits or future patent infringement actions should they be filed, or if we are required to defend additional actions brought by other shareholders, we may be required to pay substantial litigation costs and managerial attention and financial resources may be diverted from business operations even if the outcome is in our favor. In addition, while our insurance carrier may cover the costs of settling claims, the Company’s capital resources are critical to its continued operations, and the payment of litigation settlements and associated legal fees diverts these capital resources away from our operations, even if such amounts do not have a material impact on our financial statements.

Defendants intend to vigorously defend themselves against these allegations, but doing so may result in substantial litigation costs and managerial attention and financial resources may be diverted from business operations even if outcome is in favor of our current and former officers and directors and the Company.

On April 2, 2019, we filed a lawsuit against Clarus in the United States District Court in Delaware alleging that Clarus’s JATENZO® product infringes six of Lipocine’s issued U.S. patents: 9,034,858; 9,205,057; 9,480,690; 9,757,390; 6,569,463; and 6,923,988. Clarus has answered the complaint and asserted counterclaims of non-infringement and invalidity. We answered Clarus’s counterclaims on April 29, 2019. ~~The Court held a scheduling conference on August 15, 2019 and a claim construction hearing on February 11, 2020 and scheduled a five-day jury trial beginning on February 8, 2021.~~ On February 11, 2020, we ~~also~~ 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. The ~~parties are currently engaged in~~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 ~~fact discovery~~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 ~~expert witness phase~~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, we entered into a Global Agreement with Clarus which resolved all outstanding claims of this litigation. Under the terms of the ~~lawsuit.~~ settlement, we agreed to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July 13, 2023. The payment of this and other settlement payments diverts capital resources away from our operations, which may adversely affect our business.

Risks Related to Ownership of Our Common Stock

The value of our warrants outstanding from the November 2019 Offering is subject to potentially material increases and decreases based on fluctuations in the price of our common stock.

In November 2019, we completed a public offering of common stock and warrants to purchase common stock (the “November 2019 Offering”). Gross proceeds from the November 2019 Offering were approximately $6.0 million. In the November 2019 Offering, the Company sold (i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of common stock and a common stock warrant to purchase one share of common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of a common stock and one common stock warrant to purchase one share of common stock at a price of $0.50 per Class A Unit and $0.4999 per Class B Unit. The pre-funded warrants were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of $.0001 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of $0.50 per share and expire on November 17, 2024.

We account for the common stock warrants as a derivative instrument, and changes in the fair value of the warrants are included under other income (expense) in the Company’s statements of operations for each reporting period. At ~~September~~June 30, ~~2020,~~2021, the aggregate fair value of the warrant liability included in the Company’s consolidated balance sheet was ~~$1.3~~$1.1 million. We use the Black-Scholes option pricing model to determine the fair value of the warrants. As a result, the option-pricing model requires the input of several assumptions, including the stock price volatility, share price and risk-free interest rate. Changes in these assumptions can materially affect the fair value estimate. While the liability may only result from a change of control at that point in time, we ultimately may incur amounts significantly different than the carrying value.

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

As of ~~September~~June 30, ~~2020,~~2021, our executive officers and directors beneficially owned approximately ~~5.5%~~4.9% of our common stock. These stockholders, if they act together, may be able to influence our management and affairs and all matters requiring stockholder approval, including significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might affect the market price of our common stock.

~~Our~~The market price of our common stock ~~is thinly traded,~~has been volatile over the past year and may continue to be ~~thinly~~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 $1.17 and as high as $2.28 per share. We cannot predict the price at which our common stock will trade in the future and ~~our stockholders~~it may ~~be unable to sell~~decline. The price at ~~or near asking prices or at all if they need to sell their shares.~~

~~Currently, we have a low volume of daily trades in~~which our common stock ~~on NASDAQ. For example,~~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; the ~~average daily trading volume~~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 ~~common stock on NASDAQ during~~Annual Report. In addition, changes in the ~~third quarter~~trading price of 2020 was approximately 4.2 million shares per day. Our stockholders may be unable to sell their common stock at or near their asking prices or at all, which may result in substantial losses to our stockholders.

~~The market for~~ our common stock may be ~~characterized by significant~~inconsistent with our operating results and outlook. The volatility of the market price ~~volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. As noted above,~~of our common stock may adversely affect investors’ ability to purchase or sell shares of our common stock.

Risks Relating to Our Intellectual Property

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may be ~~sporadically and/~~unable to protect our rights to our products and technology.

If we or ~~thinly traded.~~our collaborators choose to go to court to stop a third party from using the inventions claimed in our owned or licensed patents, that third party may ask a court to rule that the patents are invalid and should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources, including financial resources, even if we were successful in stopping the infringement of these patents. In addition, there is a risk that a court will decide that these patents are not valid or not enforceable and that we do not have the right to stop others from using the inventions.

There is also the risk that, even if the validity of these patents is not challenged or is upheld, the court will refuse to stop the third party on the ground that such third-party’s activities do not infringe on our owned or licensed patents. In addition, the U.S. Supreme Court has changed some standards relating to the granting of patents and assessing the validity of patents. As a consequence, issued patents may be found to contain invalid claims according to the newly revised standards. Some of our owned or licensed patents may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a reexamination or other proceeding before the USPTO, or during litigation, under the revised criteria which make it more difficult to obtain or maintain patents.

While our in-licensed patents and applications are not currently used in our product candidates, should we develop other product candidates that are covered by this ~~lack~~intellectual property, we will rely on our licensor to file and prosecute patent applications and maintain patents and otherwise protect the intellectual property we license from them. Our licensor has retained the first right, but not the obligation to initiate an infringement proceeding against a third-party infringer of ~~liquidity,~~ the ~~trading~~intellectual property licensed to us, and enforcement of ~~relatively small quantities~~our in-licensed patents or defense of ~~shares~~any claims asserting the invalidity or unenforceability of these patents would also be subject to the control or cooperation of our licensor. It is possible that our licensor’s defense activities may be less vigorous than had we conducted the defense ourselves.

We also license our patent portfolio, including U.S. and foreign patents and patent applications that cover our TLANDO and our other product candidates, to third parties for their respective products and product candidates. Under our agreements with our licensees, we have the right, but not the obligation, to enforce our current and future licensed patents against infringers of our licensees. In certain cases, our licensees may have primary enforcement rights and we have the obligation to cooperate. In the event of an enforcement action against infringers of our licensees, our licensees might not have the interest or resources to successfully preserve the patents, the infringers may countersue, and as a result our patents may be found invalid or unenforceable or of a narrower scope of coverage and leave us with no patent protection for TLANDO and our other product candidates.

We may be subject to a third-party pre-issuance submission of prior art to the PTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our owned or licensed patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our owned or licensed patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our ~~stockholders~~patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates and impair our ability to raise needed capital.

If we are required to defend patent infringement actions brought by other third parties, or if we sue to protect our own patent rights or otherwise to protect our proprietary information and to prevent its disclosure, we may ~~disproportionately influence~~be required to pay substantial litigation costs and managerial attention and financial resources may be diverted from business operations even if the ~~price~~outcome is in our favor.

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 ~~those~~our efforts on developing TLANDO and more recently on LPCN 1144. We have funded our operations to date through sales of our equity securities, debt and payments received under our license and collaboration arrangements. We have incurred losses in most years since our inception. As of June 30, 2021, we had an accumulated deficit of $182.2 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to significantly increase in connection with clinical trials associated with LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107, if initiated. In addition, if we eventually obtain final marketing approval for TLANDO and its not out-licensed, we may incur significant sales, marketing and commercialization expenses. As a result, we expect to continue to incur significant operating losses for the foreseeable future as we evaluate our options with TLANDO and further clinical development of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 and our other programs and continued research efforts. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We have limited shares ~~in either direction. The price~~available for issuance to raise capital to fund our ~~shares could, for example, decline significantly in~~operations and grant stock-based incentive awards to employees, directors, and consultants. If we are unable to increase the ~~event that a large~~ number of shares of ~~our~~ common stock available for issuance, our business will be adversely affected.

Currently, we have 100,000,000 authorized shares of common stock. As of June 30, 2021, we had 88,290,650 shares of common stock outstanding. After taking into account the 3,915,790 shares reserved for issuance upon the exercise of outstanding options and 1,934,366 reserved for issuance upon the exercise of outstanding warrants, as of June 30, 2021, we have a limited number of shares available for issuance. If we are ~~sold~~not able to increase the number of shares of common stock available for issuance, including, for example, through an amendment to our certificate of incorporation or a reverse stock split, we will have limited shares available for issuance to raise capital to fund our operations, make grants of stock-based incentive awards, or take such other actions requiring available capital stock needed to operate our business. Further delays in securing, or the failure to secure, shareholder approval of such actions, if needed, may prevent us from executing a capital raising transaction, which may have a material adverse effect on ~~the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.~~our business and financial condition.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

~~None.~~ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

None.

~~ITEM 5.~~

~~OTHER INFORMATION~~41

~~None.~~

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 6.EXHIBITS

INDEX TO ~~EXHIBITS~~ EXHIBITS

Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
31.1*
31.1^*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* 31.2^*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1* 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* 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* 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* 101.SCH^*	Inline XBRL Taxonomy Extension Schema Document

101.CAL* 101.CAL^*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* 101.DEF^*	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* 101.LAB^*	Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE* 101.PRE^*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

^*104	~~Filed herewith~~Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~(1)~~^*	Filed herewith

(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.

~~SIGNATURES~~

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: ~~November 10, 2020~~August 5, 2021	/s/ Mahesh V. Patel
	Mahesh V. Patel, President and Chief Executive Officer (Principal Executive Officer)

Dated: ~~November 10, 2020~~August 5, 2021	/s/ Morgan R. Brown
	Morgan R. Brown, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Delaware		99-0370688
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

675 Arapeen Drive, Suite 202, Salt Lake City, Utah		84108
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share	~~LPCN~~	LPCN		The NASDAQ Stock Market LLC

Large accelerated filer	¨☐
Accelerated filer	¨☐
Non-accelerated filer	x☒
Smaller reporting company	x☒
Emerging growth company	¨☐

		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2220

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	4036

Item 4.	Controls and Procedures	4037

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	4137

Item 1A.	Risk Factors	4238

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4441

Item 3.	Defaults Upon Senior Securities	4441

Item 4.	Mine Safety Disclosures	4441

Item 5.	Other Information	4441

Item 6.	Exhibits	42

September 30, 2020	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses		Aggregate fair value
Government treasury bills	$	1,999,426	$	274	$	-	$	1,999,700
Corporate bonds, notes and commercial paper		3,861,896		201		-		3,862,097
	$	5,861,322	$	475	$	-	$	5,861,797

December 31, 2019	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses			Aggregate fair value
Corporate bonds, notes and commercial paper		4,340,079		-		(38	)		4,340,041
	$	4,340,079	$	-	$	(38	)	$	4,340,041

	September 30, 2020
Cash and cash equivalents	$	12,938,186
Restricted cash		5,000,000
Cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	17,938,186

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development	$	150,435	$	27,072	$	484,876	$	313,247
General and administrative		201,188		31,041		653,718		468,143
	$	351,623	$	58,113	$	1,138,594	$	781,390

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
2,958,485		6.26	$	3.77	$	627,210		2,070,073		5.02	$	5.04	$	9,084

Warrants outstanding
Number exercisable	Weighted average remaining contractual life (Years)		Weighted average exercise price		Aggregate intrinsic value
1,944,366	4.25	$	0.51	$	1,744,163

Baseline Liver Fat %	Mean Liver Fat % at	Relative Reductions at EOS		Responder Rate** at
Category, n	Baseline	Mean %	Median %	EOS, %
At least 10%, n=8	20.5	40	39	75
At least 8%, n=10	18.3	42	42	80
At least 5%, n=21	12.1	33	41	71