10-Q 1 v465087_10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarterly Period ended March 31, 2017

Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act.

For the transition period from to .

Commission File Number: 001-36357

LIPOCINE INC.

(Exact name of registrant as specified in its charter)

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)

801-994-7383

(Registrant’s telephone number, including area code)

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: x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§220.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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):

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

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 ¨ No x

Outstanding Shares

As of May 5, 2016, the registrant had 19,267,452 shares of common stock outstanding.

TABLE OF CONTENTS

		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	28

Item 4.	Controls and Procedures	28

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	34

PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS (UNAUDITED)

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	6,936,511		$	5,560,716
Marketable investment securities		19,860,549			21,279,570
Accrued interest income		35,946			38,943
Prepaid and other current assets		262,039			329,548
Total current assets		27,095,045			27,208,777

Property and equipment, net of accumulated depreciation of $1,099,803 and $1,092,710, respectively		96,347			103,440
Other assets		30,753			30,753
Total assets	$	27,222,145		$	27,342,970


Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	853,510		$	245,915
Accrued expenses		1,491,448			1,080,254
Total current liabilities		2,344,958			1,326,169
Total liabilities		2,344,958			1,326,169


Commitments and contingencies (notes 7 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; 19,267,452 and 18,462,325 issued and 19,261,742 and 18,456,615 outstanding		1,927			1,846
Additional paid-in capital		135,199,981			131,481,123
Treasury stock at cost, 5,710 shares		(40,712	)		(40,712	)
Accumulated other comprehensive loss		(5,786	)		(8,493	)
Accumulated deficit		(110,278,223	)		(105,416,963	)
Total stockholders' equity		24,877,187			26,016,801

Total liabilities and stockholders' equity	$	27,222,145		$	27,342,970

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ending March 31,
	2017			2016

Operating expenses:
Research and development	$	3,083,739		$	2,673,391
General and administrative		1,825,176			4,397,013
Total operating expenses		4,908,915			7,070,404
Operating loss		(4,908,915	)		(7,070,404	)
Other income, net		48,355			61,659
Loss before income tax expense		(4,860,560	)		(7,008,745	)
Income tax expense		(700	)		(700	)
Net loss	$	(4,861,260	)	$	(7,009,445	)

Basic loss per share attributable to common stock	$	(0.26	)	$	(0.38	)
Weighted average common shares outstanding, basic		18,711,239			18,251,905

Diluted loss per share attributable to common stock	$	(0.26	)	$	(0.38	)
Weighted average common shares outstanding, diluted		18,711,239			18,251,905

Comprehensive loss:
Net loss	$	(4,861,260	)	$	(7,009,445	)
Net unrealized gain on available-for-sale securities		2,707			35,795

Comprehensive loss	$	(4,858,553	)	$	(6,973,650	)

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ending March 31,
	2017			2016

Cash flows from operating activities:

Net loss	$	(4,861,260	)	$	(7,009,445	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation expense		7,093			6,654
Stock-based compensation expense		632,290			733,502
Accretion (amortization) of premium / discount on marketable investment securities		(6,169	)		91,566
Changes in operating assets and liabilities:
Accrued interest income		2,997			(15,303	)
Prepaid and other current assets		67,509			81,303
Accounts payable		607,595			570,093
Accrued expenses		411,194			(968,190	)
Income taxes payable		-			700
Cash used in operating activities		(3,138,751	)		(6,509,120	)

Cash flows from investing activities:

Purchases of property and equipment		-			(39,202	)
Purchases of marketable investment securities		(6,972,103	)		(3,178,734	)
Maturities of marketable investment securities		8,400,000			3,800,000
Cash provided by investing activities		1,427,897			582,064

Cash flows from financing activities:

Proceeds from stock option exercises		388,551			34,249
Net proceeds from common stock offering		2,698,098			-

Cash provided by financing activities		3,086,649			34,249

Net increase (decrease) in cash and cash equivalents		1,375,795			(5,892,807	)

Cash and cash equivalents at beginning of period		5,560,716			20,007,659

Cash and cash equivalents at end of period	$	6,936,511		$	14,114,852

Supplemental disclosure of cash flow information:

Net unrealized gain on available-for-sale securities	$	2,707		$	35,795
Cash paid for income taxes		700			-

See accompanying notes to unaudited consolidated financial statements

LIPOCINE INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared by Lipocine Inc. (“Lipocine” or the “Company”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements are comprised of the financial statements of Lipocine and its subsidiaries collectively referred to as the Company. In management's opinion, the interim financial data presented includes all adjustments (consisting solely of normal recurring items) necessary for fair presentation. All intercompany accounts and transactions have been eliminated. Certain information required by U.S. generally accepted accounting principles has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2017.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the year ended December 31, 2016.

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.

(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. Net income (loss) available to common shareholders for the three months ended March 31, 2017 and 2016 was calculated using the two-class method, which is an earnings (loss) allocation method for computing earnings (loss) per share when an entity’s capital structure includes common stock and participating securities. The two-class method determines earnings (losses) per share based on dividends declared on common stock and participating securities (i.e., distributed earnings) and participation rights of participating securities in any undistributed earnings (loss). The application of the two-class method was required since the Company’s historical unvested restricted stock contained non-forfeitable rights to dividends or dividend equivalents. However, unvested restricted stock grants were not included in computing basic earnings (loss) per share for periods where the Company has losses as these securities are not contractually obligated to share in losses of the Company.

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 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 months ended March 31, 2017 and 2016:

	Three Months Ended March 31,
	2017			2016
Basic loss per share attributable to common stock:
Numerator
Net loss	$	(4,861,260	)	$	(7,009,445	)

Denominator
Weighted avg. common shares outstanding		18,711,239			18,251,905

Basic loss per share attributable to common stock	$	(0.26	)	$	(0.38	)

Diluted loss per share attributable to common stock:
Numerator
Net loss	$	(4,861,260	)	$	(7,009,445	)

Denominator
Weighted avg. common shares outstanding		18,711,239			18,251,905

Diluted loss per share attributable to common stock	$	(0.26	)	$	(0.38	)

The computation of diluted loss per share for the three months ended March 31, 2017 and 2016 does not include the following stock options and unvested restricted stock to purchase shares in the computation of diluted loss per share because these instruments were antidilutive:

	March 31,
	2017		2016
Stock options		2,070,076		2,251,107
Unvested restricted stock		-		2,000
Unvested restricted stock units		287,000		-

(3)

Marketable Investment Securities

The Company has classified its marketable investment securities as available-for-sale 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 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 March 31, 2017 and December 31, 2016 were as follows:

March 31, 2017	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses			Aggregate fair value

Government bonds and notes	$	8,668,998	$	-	$	(3,029	)	$	8,665,969
Corporate bonds, notes and commercial paper		11,197,337		-		(2,757	)		11,194,580

	$	19,866,335	$	-	$	(5,786	)	$	19,860,549

December 31, 2016	Amortized Cost		Gross unrealized holding gains		Gross unrealized holding losses			Aggregate fair value

Government bonds and notes	$	7,473,273	$	-	$	(2,219	)	$	7,471,054
Corporate bonds, notes and commercial paper		13,814,790		-		(6,274	)		13,808,516

	$	21,288,063	$	-	$	(8,493	)	$	21,279,570

Maturities of debt securities classified as available-for-sale securities at March 31, 2017 are as follows:

March 31, 2017	Amortized Cost		Aggregate fair value
Due within one year	$	19,866,335	$	19,860,549
	$	19,866,335	$	19,860,549

There were no sales of marketable investment securities during the three months ended March 31, 2017 and 2016 and therefore no realized gains or losses. Additionally, $8.4 million and $3.8 million of marketable investment securities matured during the three months ended March 31, 2017 and 2016, respectively. The Company determined there were no other-than-temporary impairments for the three months ended March 31, 2017 and 2016.

(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.

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 March 31, 2017 and December 31, 2016:

			Fair value measurements at reporting date using
	March 31, 2017		Level 1 inputs		Level 2 inputs		Level 3 inputs

Assets:
Cash equivalents - money market funds	$	3,387,125	$	3,387,125	$	-	$	-
Government bonds and notes		8,665,969		4,950,105		3,715,864		-
Corporate bonds, notes and commercial paper		11,194,580		-		11,194,580		-
	$	23,247,674	$	8,337,230	$	14,910,444	$	-

			Fair value measurements at reporting date using
	December 31, 2016		Level 1 inputs		Level 2 inputs		Level 3 inputs

Assets:
Cash equivalents - money market funds	$	2,920,577	$	2,920,577	$	-	$	-
Government bonds and notes		7,471,054		3,752,350		3,718,704		-
Corporate bonds, notes and commercial paper		13,808,516		-		13,808,516		-
	$	24,200,147	$	6,672,927	$	17,527,220	$	-

The following methods and assumptions were used to determine the fair value of each class of assets and liabilities recorded at fair value in the balance sheets:

Cash equivalents: Cash equivalents primarily consist of highly rated money market funds and commercial paper 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 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 bonds and notes: The Company uses a third-party pricing service to value these investments. United States Treasury bonds and notes 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. Other United States government agency bonds 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.

Corporate bonds, notes, and commercial paper: The Company uses a third-party pricing service to value these investments. The pricing service utilizes broker/dealer quotes, bids and offers, benchmark yields and credit spreads and other observable inputs.

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 or Level 2 for the three months ended March 31, 2017.

(5)

Restructuring Charges

Restructuring charges relate to our initiative to restructure operations which was approved by the board of directors on July 13, 2016. Under the July 2016 restructuring, the Company reduced its workforce by eight positions, constituting 33% of the Company’s workforce. The reduction in workforce involved all functional disciplines including general and administrative employees, sales and marketing and research and development personnel. Additionally, the Board approved a further restructuring in October 2016 whereby the Company reduced its workforce by an additional two positions in the sales and marketing functions. The restructurings that occurred in 2016 are jointly referred to as the 2016 Restructuring Plan.

The Company did not recognize any charges related to the 2016 Restructuring Plan during the three months ended March 31, 2017 and 2016. The activity for the three months ended March 31, 2017 for restructuring charges is as follows:

	March 31,
	2017
Accrued restructuring charges payable at December 31, 2016	$	239,573
Restructuring expenses during quarter		-
Restructuring payments during quarter		(73,754	)
Accrued restructuring charges payable at March 31, 2017	$	165,819

(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 March 31, 2017 and December 31, 2016, 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.

On March 29, 2012, the Company terminated its collaborative agreement with Solvay Pharmaceuticals, Inc. (later acquired by Abbott Products, Inc.) for TLANDO. As part of the termination, the Company reacquired the rights to the intellectual property from Abbott. All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales. Such royalties are limited to $1.0 million in the first two calendar years following product launch, after which period there is not a cap on royalties and no maximum aggregate amount. If generic versions of any such product are introduced, then royalties are reduced by 50%. The Company did not incur any royalties during the three months ended March 31, 2017 and 2016.

(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, primarily clinical researchers, who serve as advisors to the Company. The Company incurred expenses of $2.4 million and $1.8 million for the three months ended March 31, 2017 and 2016 under these agreements and has recorded these expenses in research and development expenses.

(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. Additionally, on December 28, 2015, the Company entered into an operating lease for office space in Lawrenceville, New Jersey through January 31, 2018. Future minimum lease payments under non-cancellable operating leases (with initial or remaining lease terms in excess of one year) as of March 31, 2017 are:

	Operating
	leases
Year ending December 31:
2017		290,528
2018		58,903
Total minimum lease payments	$	349,431

The Company’s rent expense was $95,000 and $95,000 for the three months ended March 31, 2017 and 2016.

(9)

Stockholders’ Equity

(a)

Issuance of Common Stock

In March 2017, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), to 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. As of March 31, 2017, the Company had sold an aggregate of 666,853 shares at a weighted-average sales price of $4.33 per share under the ATM for aggregate gross proceeds of $2.9 million and $2.7 million in net proceeds, after deducting sales agent commission and discounts and other offering costs.

(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 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 per Right at any time prior to the time an Acquiring Person becomes such. The terms of the Rights are set forth in the Rights Agreement, which is summarized in the Company's Current Report on Form 8-K dated November 13, 2015. The rights plan will expire on November 12, 2018, unless the rights are earlier redeemed or exchanged by the Company.

(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 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 stock options to nonemployee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to nonemployees are subject to periodic revaluation over their vesting terms.

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 $632,000 and $734,000 for the three months ended March 31, 2017 and 2016, allocated as follows:

	Three Months Ended March 31,
	2017		2016

Research and development	$	207,380	$	184,424
General and administrative		424,910		549,078
	$	632,290	$	733,502

The Company did not issue any stock options for the three months ended March 31, 2017 and issued 547,000 stock options during the three months ended March 31, 2016. Additionally, the Company issued 287,000 restricted stock units during the three months ended March 31, 2017 and did not issue any restricted stock units during the three months ended March 31, 2016.

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

Expected Term: The expected term represents the period that the stock-based awards are expected to be outstanding. 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: Since the Company did not have sufficient trading history, the volatility factor was based on the average of similar public companies through August 2014. When selecting similar companies, the Company considered the industry, stage of life cycle, size, and financial leverage. Beginning in August 2014, the volatility factor was based on a combination of the Company's trading history since March 2014 and the average of similar public companies.

For options granted during the three months ended March 31, 2016, the Company calculated the fair value of each option grant on the respective dates of grant using the following weighted average assumptions:

	2016
Expected term		5.85 years
Risk-free interest rate		1.73	%
Expected dividend yield		0.00	%
Expected volatility		82.70	%

The Company did not grant any stock options during the three months ended March 31, 2017.

FASB ASC 718, Stock Compensation, requires the Company to recognize compensation expense for the portion of options that are expected to vest. Therefore, the Company applied estimated forfeiture rates that were derived from historical employee termination behavior. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

As of March 31, 2017, there was $3.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock plans. That cost is expected to be recognized over a weighted average period of 1.85 years and will be adjusted for subsequent changes in estimated forfeitures.

(d)

Stock Option Plan

In April 2014, the board of directors adopted the 2014 Stock and Incentive Plan ("2014 Plan") subject to shareholder approval which was received in June 2014. The 2014 Plan provides for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units, restricted stock and dividend equivalents. An aggregate of 1,000,000 shares are authorized for issuance under the 2014 Plan. Additionally, 271,906 remaining authorized shares under the 2011 Equity Incentive Plan ("2011 Plan") were issuable under the 2014 Plan at the time of the 2014 Plan adoption. Upon receiving shareholder approval in June 2016, the 2014 Plan was amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 1,271,906 to 2,471,906. The board of directors, on an option-by-option basis, determines the number of shares, exercise price, term, and vesting period. Options granted generally have a ten-year contractual life. The Company issues shares of common stock upon the exercise of options with the source of those shares of common stock being either newly issued shares or shares held in treasury. An aggregate of 2,471,906 shares are authorized for issuance under the 2014 Plan, with 946,020 shares remaining available for grant as of March 31, 2017.

A summary of stock option activity is as follows:

	Outstanding stock options
	Number of shares			Weighted average exercise price
Balance at December 31, 2016		2,225,850		$	6.12
Options granted		-			-
Options exercised		(138,274	)		2.81
Options forfeited		-			-
Options cancelled		(17,500	)		13.84
Balance at March 31, 2017		2,070,076			6.28

Options exercisable at March 31, 2017		1,315,533			5.76

The following table summarizes information about stock options outstanding and exercisable at March 31, 2017:

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

	2,070,076		7.35	$	6.28	$	847,022		1,315,533		6.30	$	5.76	$	734,502

The intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The total intrinsic value of stock options exercised during the three months ended March 31, 2017 and 2016 was $131,000 and $22,000. There were 138,274 and 5,445 stock options exercised during the three months ended March 31, 2017 and 2016.

(e)

Restricted Stock Units

A summary of restricted common stock activity is as follows:

	Number of unvested restricted shares

Balance at December 31, 2016		-
Granted		287,000
Vested		-
Cancelled		-
Balance at March 31, 2017		287,000

(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. The Company has not accrued for any contingency at March 31, 2017 as the Company does not consider any contingency to be probable nor estimable. While complete assurance cannot be given to the outcome of these proceedings, management does not currently believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations.

Guarantees and Indemnifications

In the ordinary course of business, the Company enters into agreements, such as lease agreements, licensing agreements, clinical trial agreements, and certain services agreements, containing standard guarantee and / or indemnifications 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

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 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/hour for a period of six months. The agreement was further amended on July 23, 2015, on January 23, 2016, on July 23, 2016, and again on January 23, 2017 to extend the term of the agreement for an additional six months. The agreement may be extended upon written agreement of Spriaso and the Company. The Company did not receive any reimbursements for the three months ended March 31, 2017 and 2016. Spriaso filed its first NDA and as an affiliated entity of the Company, it used up the one-time waiver for user fees for a small business submitting its first human drug application to the FDA. Spriaso is considered a variable interest entity under the FASB ASC Topic 810-10, Consolidations, however the Company is not the primary beneficiary and has therefore not consolidated Spriaso.

(12)

Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses how certain cash inflows and outflows are classified in the statement of cash flows to eliminate existing diversity in practice. This update is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company plans to adopt this pronouncement effective January 1, 2018 and does not believe it will have a material effect on the Company's financial position or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company plans to adopt this pronouncement effective January 1, 2019 and does not believe it will have a material effect on the Company's financial position or results of operations.

In February 2016, FASB issued ASU 2016-02, Leases, which provides new guidance for lease accounting including recognizing most leases on-balance sheet. The standard becomes effective for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method for all entities. The Company currently does not have any lease that extends beyond December 31, 2018 but will continue to evaluate the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures if we enter into new leases that extend beyond December 31, 2018. The Company plans to adopt this pronouncement effective January 1, 2019 and does not believe it will have a material effect on the Company's financial position or results of operations.

In January 2016, FASB issued ASU 2016-01, Financial Instruments, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides new guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The standard becomes effective for the Company beginning in the first quarter of our fiscal year ended December 31, 2018 and early adoption is permitted. The Company plans to adopt this pronouncement effective January 1, 2018 and does not believe it will have a material effect on the Company's financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) with amendments in 2015 (ASU 2015-14) and 2016 (ASU 2016-8, ASU 2016-10, ASU 2016-12 and ASU 2016-20). The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB voted to approve the deferral of the effective date of ASU 2014-09 by one year. Therefore, ASU 2014-09 will become effective for the Company in the first quarter of our fiscal year ending December 31, 2018. Early adoption is permitted, but not earlier than the first quarter of the Company's fiscal year ending December 31, 2017. The Company adopted this pronouncement effective January 1, 2017 and it did not any effect on the Company's financial position or results of operations as no revenue was recognized during the three months ended March 31, 2016.

Accounting Pronouncements Recently Adopted

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). The pronouncement was issued to simplify several aspects of the accounting for share-based payment transactions, including immediate recognition of all excess tax benefits and deficiencies in the income statement, classification of awards as either equity or liabilities and classification on the statement of cash flows, and application for forfeitures. The Company adopted ASU 2016-09 on January 1, 2017 prospectively (prior periods have not been restated). There was no impact of adoption of this pronouncement as the Company did not have any excess tax benefits as of January 1, 2017. The Company elected to apply the change in classification for excess tax benefits in the statement of cash flows on a prospective basis, and elected to continue estimating stock-based compensation award forfeitures in determining the amount of compensation cost to be recognized each period. No other provisions of ASU 2016-09 had a material impact on the Company’s financial statements or disclosures.

All other issued and effective accounting standards during 2017 were not relevant to the Company.

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 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 6, 2017 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, expected product benefits, pre-clinical and clinical development timelines, results and timelines of ongoing or future studies, clinical and regulatory expectations and plans, anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance, future expectations for liquidity and capital resources needs and similar matters. Such words as “may”, “will”, “expect”, “continue”, “estimate”, “project”, “potential”, and “intend” and similar terms and expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A (Risk Factors) of this Form 10-Q or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 6, 2017. 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 specialty pharmaceutical company focused on applying our oral drug delivery technology for the development of pharmaceutical products in the area of men’s and women’s health. 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”) characteristics and facilitate lower dosing requirements, bypass first-pass metabolism in certain cases, reduce side effects, and eliminate gastrointestinal interactions that limit bioavailability. Our lead product candidate, LPCN 1021, is an oral testosterone replacement therapy (“TRT”) that received a Complete Response Letter (“CRL”) from the U.S. Food and Drug Administration ("FDA") on June 28, 2016, after filing a New Drug Application (“NDA”). We completed a Post Action meeting with the FDA relating to the CRL for LPCN 1021 and announced the on-going conduct of two new clinical studies, the Dosing Validation (“DV”) clinical study and the Dosing Flexibility (“DF”) clinical study. Additional pipeline candidates include LPCN 1111, a next generation oral testosterone therapy product with the potential for once daily dosing, that is currently in Phase 2 testing, and LPCN 1107, which has the potential to become the first oral hydroxyprogesterone caproate product indicated for the prevention of recurrent preterm birth, and has completed an End-of-Phase 2 meeting with the FDA.

To date, we have funded our operations primarily through the sale of equity securities and convertible debt and through up-front payments, research funding 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 LPCN 1021 or other products.

We have incurred losses in most years since our inception. As of March 31, 2017, we had an accumulated deficit of $110.3 million. Income and losses fluctuate year to year, primarily depending on the timing of recognition of revenues from our license and collaboration agreements. Our net loss was $4.9 million for the three months ended March 31, 2017, compared to $7.0 million for the three months ended March 31, 2016. 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 associated with our operations.

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

•

conduct the DV study and DF study for LPCN 1021;

•

conduct further development of our other product candidates, including LPCN 1111 and LPCN 1107;

•

continue our research efforts;

•

maintain, expand and protect our intellectual property portfolio; and

•

provide general and administrative support for our operations.

To fund future long-term operations, 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 LPCN 1021 including our dosing validation and dosing flexibility clinical studies, regulatory requirements related to our other development programs, the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs, 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. In March 2017, we entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $20.0 million through Cantor as our sales agent (the “ATM Offering”). However, even with the commencement of the ATM Offering, we cannot be certain that anticipated additional financing will be available to us on favorable terms, 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, shown below, includes our lead product candidate, LPCN 1021, an oral testosterone replacement therapy, that received a CRL from the FDA on June 28, 2016 and announced the on-going conduct of two new clinical studies to address the issue identified in the CRL. Additionally, we are in the process of establishing our pipeline of other clinical candidates including a next generation potential once daily oral testosterone replacement therapy, LPCN 1111, and an oral therapy for the prevention of preterm birth, LPCN 1107.

Our Development Pipeline

Product Candidate	Indication	Status	Next Expected Milestone(s)
Men’s Health

LPCN 1021	Testosterone Replacement	Phase 3	Top-line efficacy results from the DV Study and the DF Study (June 2017) Resubmission of NDA (3Q 2017)

LPCN 1111	Testosterone Replacement	Phase 2	End of Phase 2 meeting with FDA (4Q 2017)

Women’s Health

LPCN 1107	Prevention of Preterm Birth	Phase 2	Submit Phase 3 protocol to FDA via SPA (2Q 2017)

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

LPCN 1021: An Oral Product Candidate for Testosterone Replacement Therapy

Our lead product, LPCN 1021, is an oral formulation of the chemical, testosterone undecanoate ("TU"), an eleven carbon side chain attached to testosterone. TU is an ester prodrug of testosterone. An ester is chemically formed by bonding an acid and an alcohol. Upon the cleavage, or breaking, of the ester bond, testosterone 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 recently TU has received regulatory approval in the United States for delivery via intra-muscular injection. We are using our Lip’ral technology to facilitate steady gastrointestinal solubilization and absorption of TU. Proof of concept was initially established in 2006, and subsequently LPCN 1021 was licensed in 2009 to Solvay Pharmaceuticals, Inc. which was then acquired by Abbott Products, Inc. ("Abbott"). Following a portfolio review associated with the spin-off of AbbVie by Abbott in 2011, the rights to LPCN 1021 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%.

We are currently conducting two on-going Phase 3 clinical studies with LPCN 1021, the DV Study and the DF Study. The DV study will assess the impact of LPCN 1021 in hypogonadal males (testosterone < 300 ng/dL) on a fixed daily dose of 450 mg divided into two equal doses whereas the DF study will assess LPCN 1021 in hypogonadal males on a fixed daily dose of 450 mg divided into three equal doses. Both of the DV and DF studies are an open-label, fixed dose, no titration, single treatment arm study of LPCN 1021 and are expected to enroll up to 100 hypogonadal males in each study. Efficacy will be assessed via responder analysis at the end of the dosing period which is 24 days. The pre-specified primary endpoint is the percentage of subjects with an average 24-hour serum testosterone concentration (“Cavg”) within the normal range, with secondary endpoints based on maximum serum testosterone concentrations (“Cmax”). Enrollment in both the DV study and the DF study is complete and we currently expect top-line results from the DV study and DF study in June 2017 once the data is analyzed subsequent to the last patient last visit in each study. Additionally, we currently expect that resubmission of the NDA will be in the third quarter of 2017 and we currently believe that the most likely FDA review timeline will be six months. However, the exact FDA review timeline will not be known until the FDA accepts the NDA resubmission once filed. We cannot give any assurances that our current timing estimates for top-line results, resubmission of the NDA or FDA review will be realized. Actual timing will depend on various factors, some of which are beyond our control.

Prior to conducting the DV study and the DF study, we completed our Study of Oral Androgen Replacement ("SOAR") pivotal Phase 3 clinical study evaluating efficacy and safety of LPCN 1021 and have received efficacy results and 52-week safety results.

Results from SOAR

SOAR was a randomized, open-label, parallel-group, active-controlled, Phase 3 clinical study of LPCN 1021 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 LPCN 1021 and 105 were randomized to the active control, Androgel 1.62%®, for 52 weeks of treatment. The active control is included for safety assessment. LPCN 1021 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.

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 safety set (“SS”) (any subject that was randomized into the study and took at least one dose, N=210).

Efficacy

The primary efficacy endpoint is the percentage of subjects with Cavg within the normal range, which is defined as 300-1140 ng/dL, after 13 weeks of treatment. 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% confidence interval (“CI”) must be greater than or equal to 65%.

LPCN 1021 met the FDA primary efficacy guideline. In the EPS analysis, 87% of the subjects on active treatment achieved testosterone Cavg within the normal range with lower bound CI of 82%. Additionally, sensitivity analysis using the FAS and SS reaffirmed the finding that LPCN 1021 met the FDA primary efficacy guideline as 87% and 80%, respectively, of the subjects on active treatment achieved testosterone Cavg within the normal range with lower bound CI of 82% and 74%, respectively.

Secondary efficacy endpoints are based on subjects Cmax levels. 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.

In the EPS analysis, Cmax ≤1500 ng/dL was 83%, Cmax between 1800 and 2500 ng/dL was 4.6% and Cmax > 2500 ng/dL was 2%. Three patients had a Cmax >2500 ng/dL which were transient, isolated and sporadic. Moreover, none of these subjects reported any adverse events ("AEs") through the efficacy readout at week 13. Results were generally consistent with those of approved TRT products.

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. LPCN 1021 treatment was well tolerated in that there were no hepatic, cardiac or drug related SAEs.

LPCN 1021 safety highlights include:

LPCN 1021 was well tolerated during 52 weeks of dosing;

Overall AE profile for LPCN 1021 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 LPCN 1021 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 LPCN 1021 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 or any additional safety studies prior to the potential approval of our NDA for LPCN 1021. We may, however, be required to conduct a heart attack and stroke risk study on our own or with a consortium of sponsors that have an approved TRT product subsequent to the potential approval of LPCN 1021.

NDA Submission

We submitted our NDA to the FDA in September 2015 based on data from our SOAR trial. The FDA accepted our NDA in October 2015 and assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of June 28, 2016 for completion of the review. On June 28, 2016, we received a CRL from the FDA. A CRL is a communication from the FDA that informs companies that an application cannot be approved in its present form. The CRL identified deficiencies related to the dosing algorithm for the label. Specifically, the proposed titration scheme for clinical practice was significantly different from the titration scheme used in the Phase 3 trial leading to discordance in titration decisions between the Phase 3 trial and real-world clinical practice. In response to the CRL, we met with the FDA in a Post Action meeting, and proposed a dosing regimen to the FDA based on analyses of existing data. The FDA noted that while the proposed dosing regimen might be acceptable, validation in a clinical trial would be needed prior to resubmission. The on-going DV study is in response to the FDA’s request. Prior to initiating the DV study, the FDA reviewed the DV study protocol through a Special Protocol Assessment (“SPA”). Lipocine received the FDA’s initial feedback on the protocol submitted via SPA prior to initiating the DV study in December 2016. We also initiated the DF study to assess LPCN 1021 in hypogonadal males on a fixed daily dose of 450 mg divided into three equal doses. There is no guarantee of approval of LPCN 1021, even if the DV study and/or DF study achieve the FDA responder analysis targets.

LPCN 1111: A Next-Generation Oral Product Candidate for TRT

LPCN 1111 is a next-generation, novel ester prodrug of testosterone 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 LPCN 1111 along with safety and tolerability of LPCN 1111 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, LPCN 1111 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 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 LPCN 1111 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, LPCN 1111 was well tolerated with no serious AE’s reported.

We have initiated a preclinical toxicology study with LPCN 1111 and once complete we plan to meet with the FDA for an End of Phase 2 meeting. We anticipate the End of Phase 2 meeting will occur in the fourth quarter of 2017.

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”) product indicated for the reduction of risk of preterm birth (“PTB”) in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet need as ~11.7% of all U.S. pregnancies result in PTB (delivery less than 37 weeks), 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") 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 (C_avg0-24) 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 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”) based Phase 2 clinical study in the intended patient population is not expected to be required prior to entering into Phase 3. Therefore, based on the results of our multi-dose PK study we had an End-of-Phase 2 meeting with the FDA as well as other guidance meetings with the FDA to define a Phase 3 development plan for LPCN 1107. During the End-of-Phase 2 meeting and subsequent guidance meetings, the FDA agreed to a randomized, open-label, two-arm clinical study to include a LPCN 1107 arm and a comparator IM arm with treatment up to 23 weeks. The FDA also provided feedback on other critical Phase 3 study design considerations including: positive feedback on the proposed 800 mg BID Phase 3 dose and dosing regimen; confirmation of the use of a surrogate primary endpoint focusing on rate of delivery less than 37 weeks gestation rather on clinical infant outcomes; acknowledged that the use of a gestational age endpoint would likely lead to any FDA approval, if granted, being a Subpart H approval as opposed to a full approval; and, recommended a non-inferiority study margin of 7% with interim analyses. A standard statistical design for a NI study based on the FDA feedback, a NI margin of 7% for the primary endpoint may require ~1,100 subjects per treatment arm with a 90% power. However, based on the FDA’s suggestion of including an interim analysis in the NI design, an adaptive study design is under consideration that may allow for fewer subjects. Lipocine plans to submit the LPCN 1107 Phase 3 protocol to the FDA via a SPA in the second quarter of 2017. Additionally, manufacturing scale-up work for LPCN 1107 is on-going and must occur before the start of the Phase 3 clinical study for LPCN 1107. A planned food-effect study will also need to be conducted either before or in parallel with the Phase 3 clinical study.

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.

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, milestone payments and research support from our licensees. Since our inception through March 31, 2017, we have generated $27.5 million in revenue under our various license and collaboration arrangements and from government grants. We may never generate revenues from LPCN 1021 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 $89.2 million in research and development expenses through March 31, 2017.

We expect to incur approximately $6.4 million in additional research and developments costs for LPCN 1021 as we conduct the DV and DF studies and as we complete on-going manufacturing activities. However, these expenditures are subject to numerous uncertainties regarding timing and cost to completion.

Approval, if ever, of LPCN 1021 will require at least completion of the DV and DF studies and will take longer and be more costly than originally estimated. The cost of clinical trials may vary significantly over the life of a project as a result of uncertainties in clinical development, including, among others:

•

the number of sites included in the trials;

•

the length of time required to enroll suitable subjects;

•

the duration of subject follow-ups;

•

the length of time required to collect, analyze and report trial results;

•

the cost, timing and outcome of regulatory review; and

•

potential changes by the FDA in clinical trial and NDA filing requirements for testosterone replacement therapies.

We also incurred significant manufacturing costs to prepare launch supplies for LPCN 1021, and expect to incur additional manufacturing costs related to LPCN 1021. However, these expenditures are subject to numerous uncertainties regarding timing and cost to completion, including, among others:

•

the timing and outcome of our DV and DF studies, regulatory filings, and FDA reviews and actions for LPCN 1021;

•

our dependence on third-party manufacturers for the production of clinical trial materials and satisfactory finished product for registration;

•

the potential for future license or co-promote arrangements for LPCN 1021, 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 LPCN 1021 could mean a substantial change in the costs and timing associated with these efforts.

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 1111, LPCN 1107 and other product candidates. Clinical development timelines, the probability of success and development costs can differ materially from expectations and results from our clinical trials may not be favorable. If we are successful in progressing LPCN 1111, 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 trials with all three 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 March 31,
	2017			2016
External service provider costs:
LPCN 1021	$	2,431,357		$	898,087
LPCN 1111		(24,129	)		741,399
LPCN 1107		26,121			148,490
Other product candidates		-			7,500
Total external service provider costs		2,433,349			1,795,476
Internal personnel costs		544,184			733,503
Other research and development costs		106,206			144,412
Total research and development	$	3,083,739		$	2,673,391

We expect research and development expenses to increase in the future as we complete the DV and DF clinical studies and prepare the NDA for resubmission for LPCN 1021 and as we perform development work on our other two product candidates.

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, market research and market analytics.

They also include expenses for the cost of preparing, filling and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims.

We expect that general and administrative expenses will increase materially as we mature as a public company. These increases will likely include 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. However, these increases will be offset by decreases in general and administrative fees related to decreased marketing, sales and finance salaries and related expenses associated with a restructuring and reduction in force plan implemented in July 2016 and October 2016. Additionally, outside spend on sales and marketing pre-commercialization activities will decrease until we receive clarity on the regulatory path forward with LPCN 1021. Finally, legal fees associated with the Clarus litigation will decrease as the suit was dismissed by the District Judge in Delaware in October 2016.

Other Income, Net

Other income, net consists primarily of interest earned on our cash, cash equivalents and marketable investment securities.

Results of Operations

Comparison of the Three Months Ended March 31, 2017 and 2016

The following table summarizes our results of operations for the three months ended March 31, 2017 and 2016:

	Three Months Ended March 31,
	2017			2016			Variance
Research and development expenses	$	3,083,739		$	2,673,391			410,348
General and administrative expenses		1,825,176			4,397,013			(2,571,837	)
Other income, net		(48,355	)		(61,659	)		(13,304	)
Income tax expense		700			700			-

Research and Development Expenses

The increase in research and development expenses in the three months ended March 31, 2017 was primarily due to an increase in contract research organization costs of $1.4 million for LPCN 1021 offset by a decrease in technical batch manufacturing costs for LPCN 1021 of $808,000 and decreased personnel costs of $189,000. Personnel costs decreased as a result of the restructurings that took place in July 2016 and October 2016.

General and Administrative Expenses

The decrease in general and administrative expenses in the three months ended March 31, 2017 was primarily due to a decrease of $1.8 million for business development, market research and pre-commercialization activities related to LPCN 1021 and a decrease of $711,000 in personnel costs. Personnel costs decreased as a result of the restructurings that took place in July 2016 and October 2016.

Other Income, Net

The decrease in other income, net, primarily reflects decreased interest earned on lower average balances in cash, cash equivalents and marketable investment securities in 2017 as compared to 2016.

Liquidity and Capital Resources

Since our inception, our operations have been primarily financed through sales of our equity 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 seek to advance our lead product candidate, LPCN 1021, and further clinical development of LPCN 1111, LPCN 1107 and our other programs and continued research efforts.

As of March 31, 2017, we had $26.8 million of cash, cash equivalents and marketable investment securities compared to $26.8 million at December 31, 2016.

On March 6, 2017, we entered into 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 $20.0 million through Cantor as our sales agent. Cantor may sell our common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, 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.

The shares of our common stock to be sold under the Sales Agreement will be sold and issued pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-199093), which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. Cantor will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell these shares. We will 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.

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

As of March 31, 2017, we sold 666,853 shares of our common stock resulting in net proceeds of approximately $2.7 million under the Sales Agreement. We paid commissions of $87,000 to Cantor in connection with these sales.

We believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements through March 31, 2018. While we believe we have sufficient liquidity and capital resources to fund our projected operating requirements through March 31, 2018, we will need to raise additional capital at some point, either before or after March 31, 2018, to support our operations, long-term research and development and commercialization of our product candidates if they receive approval from the FDA. 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. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development, regulatory compliance, clinical trials and pre-commercialization sooner than planned. We may consume our capital resources more rapidly if the costs of the DV and DF clinical studies for LPCN 1021 exceed our expectations, FDA approval for LPCN 1021 is delayed or denied, or if we elect to pursue the build out of an internal sales force as part of our commercialization launch plan if our product candidates receive approval from the FDA. Conversely, our capital resources could last longer if we reduce expenses and the number of activities currently contemplated under our operating plan.

We currently have no credit facility or committed sources of debt capital. We can raise capital pursuant to the Sales Agreement in the ATM Offering 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:

•

the timing, cost and outcome of our DV and DF clinical studies;

•

further clinical development requirements, if any, or other requirements of the FDA related to approval of LPCN 1021;

•

the scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities;

•

the scope of clinical and other work required to obtain approval of LCPN 1021 and our other product candidates;

•

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;

•

the terms and timing of any collaborative, licensing 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 acceptable 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 Offering. 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 Offering, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. These arrangements may not be available to us or available on terms favorable to us. To the extent that we raise additional capital through marketing and distribution arrangements, other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences, warrants or other terms that adversely affect our stockholders’ rights or further complicate raising additional capital in the future. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable, for any reason, to raise needed capital, we will have to reduce costs, delay research and development programs, liquidate assets, dispose of rights, commercialize products or product candidates earlier than planned or on less favorable terms than desired or reduce or cease operations.

Sources and Uses of Cash

The following table provides a summary of our cash flows for the three months ended March 31, 2017 and 2016:

	Three Months Ended March 31,
	2017			2016
Cash used in operating activities	$	(3,138,751	)	$	(6,509,120	)
Cash provided by investing activities		1,427,897			582,064
Cash provided by financing activities		3,086,649			34,249

Net Cash Used in Operating Activities

During the three months ended March 31, 2017 and 2016, net cash used in operating activities was $3.1 million and $6.5 million, respectively.

Net cash used in operating activities during the three months ended March 31, 2017 and 2016 was primarily attributable to cash outlays to support on-going operations, including research and development expenses and general and administrative expenses. During 2017, we were conducting our DV study and DF study for LPCN 1021 and we were drafting our protocol for LPCN 1107. During 2016, we had our LPCN 1021 NDA under review with the FDA, we were building out our commercial infrastructure and capabilities leading up to our PDUFA date of June 28, 2016 with LPCN 1021, we were analyzing data from a multi-dose PK study with LPCN 1107 and we were conducting a Phase 2b clinical study with LPCN 1111.

Net Cash Provided by Investing Activities

During the three months ended March 31, 2017 and 2016, net cash provided by investing activities was $1.4 million and $582,000, respectively.

Net cash provided by investing activities during 2017 and 2016 was primarily the result of utilizing marketable investment securities, net, of $1.4 million and $621,000, respectively, to fund current operations. There were no capital expenditures for the three months ended March 31, 2017 and capital expenditures for the three months ended March 31, 2016 were $39,000.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2017 and 2016 net cash provided by financing activities was $3.1 million and $34,000, respectively.

Net cash provided by financing activities during 2017 was primarily attributable to the net proceeds from the sale of 666,853 shares of common stock pursuant to the ATM Offering resulting in net proceeds of $2.7 million as well as proceeds from the exercise of stock options.

Net cash provided by financing activities during 2016 was primarily attributable to proceeds from the exercise of stock options.

Employee stock option exercises provided approximately $389,000 and $34,000 of cash during the three months ended March 31, 2017 and 2016, respectively. Proceeds from the exercise of employee stock options vary from period to period based upon, among other factors, fluctuations in the market price of our common stock relative to the exercise price of such options.

Contractual Commitments and Contingencies

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 May 6, 2014, we modified and extended the lease through February 28, 2018. Our remaining commitment through 2018 under this lease is $279,000. Additionally, on December 28, 2015, we entered into an agreement to lease office space in Lawrenceville, New Jersey which has an occupancy date of February 1, 2016 and an end date of January 31, 2018. Our remaining commitment through 2018 under this lease is $70,000.

Other Contractual Obligations

We enter into contracts in the normal course of business with clinical research organizations for clinical trials and clinical 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.

JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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 three months ended March 31, 2017, 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 6, 2017.

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

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 one percent increase in interest rates, the resulting decrease in fair value of our marketable investment securities would be insignificant to the consolidated financial statements. In addition, in the event of a hypothetical one percent decrease in interest rates, the resulting increase 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' deficit unless a loss is deemed other than temporary, in which case the loss is recognized in earnings.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and 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 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, as of the date of their evaluation, our Disclosure Controls were effective as of March 31, 2017.

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 May 15, 2015, we filed a patent application with the PTO, and our application requests that the PTO declare an interference between our patent application and the Clarus 428 Patent. Pursuant to Lipocine's request, on December 4, 2015, the Patent Trial and Appeal Board (“PTAB”) declared an interference between the Clarus 428 Patent and Lipocine's application to determine, as between Clarus and Lipocine, who was the first to invent the subject matter of the claimed invention. Lipocine was declared the Senior Party in the interference. We are awaiting the patent Judge’s decisions based on the motions, oppositions and replies filed by both parties.

On November 2, 2015, Clarus filed a complaint against us in the United States District Court for the District of Delaware alleging that LPCN 1021 will infringe the Clarus 428 Patent, and the complaint sought damages, declaratory and injunctive relief. On October 6, 2016, United States District Court of the District of Delaware granted our motion to dismiss the lawsuit filed by Clarus, because at the time there was no actionable infringement on Clarus’ 428 patent. While the Clarus complaint has been dismissed, the possibility remains that Clarus could submit its claim again if LPCN 1021 is approved by the FDA and enters the marketplace.

On July 1, 2016, the Company and certain of its officers were named as defendants in a purported shareholder class action lawsuit, David Lewis v. Lipocine Inc., et al., 3:16-cv-04009-BRM-LHG, filed in the United States District Court for the District of New Jersey. This initial action was followed by additional lawsuits also filed in the District of New Jersey. The lawsuits contain substantially identical allegations and allege that the defendants made false and/or misleading statements and/or failed to disclose that our filing of the NDA for LPCN 1021 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 lawsuits seek certification as a class action, compensatory damages in an unspecified amount, and unspecified equitable relief. On December 2, 2016, the court granted plaintiff’s motion to consolidate the various lawsuits and appointed Pomerantz LLP as lead counsel and Lipocine Investor Group as lead plaintiff. The court also stated that all filings shall bear the caption In re Lipocine Inc. Securities Litigation. On March 14, 2017, the court granted our motion to transfer the action to the United States District Court for the District of Utah. On April 27, 2017, Plaintiff filed an Amended Complaint against the Company and certain of its officers and/or directors in the United States District Court for the District of Utah. This is a purported class action seeking relief for violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b5 promulgated thereunder. The allegations in the Amended Complaint are substantially similar to those in the complaint filed on July 1, 2016. Plaintiff seeks certification as a class action, compensatory damages of an unspecified amount, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees, and unspecified other costs, as well as any further relief the court deems just and proper. We anticipate filing a motion to dismiss the Amended Complaint by June 12, 2017, in compliance with the scheduling order entered by the court on December 20, 2016. We believe that the claims in the lawsuits are without merit and will defend against them vigorously. We maintain insurance for claims of this nature, which management believes is adequate. Moreover, we believe, based on information currently available, that the filing and ultimate outcome of the lawsuits will not have a material impact on our financial position, although we will have to pay the insurance retention amount in connection with the lawsuit.

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this Report, consider the risk factors discussed in Part 1, "Item 1A. Risk Factors" in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 6, 2017, 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 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, 2016 filed with the SEC on March 6, 2017:

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

We depend primarily on the success of our lead product candidate, LPCN 1021, for which we recently received a Complete Response Letter from the FDA and which may not receive regulatory approval or be successfully commercialized.

LPCN 1021 is currently our only product candidate that has completed Phase 3 clinical trials, and our business currently depends primarily on its successful development, regulatory approval and commercialization if approved. We submitted an NDA to the FDA but have not submitted comparable applications to other regulatory authorities. We do not control whether or when we may receive approval of LPCN 1021 from the FDA. We are not permitted to market LPCN 1021 in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries.

Although we have completed a pivotal Phase 3 trial of LPCN 1021, approval from the FDA is not guaranteed. On June 29, 2016, we announced that we had received a CRL from the FDA. A CRL is a communication from the FDA that informs companies that an application cannot be approved in its present form. The CRL identified deficiencies related to the dosing algorithm for the label. Specifically, the proposed titration scheme for clinical practice was significantly different from the titration scheme used in the Phase 3 trial leading to discordance in titration decisions between the Phase 3 trial and real-world clinical practice. In response to the CRL, we met with the FDA in a Post Action meeting and proposed a dosing regimen to the FDA based on analyses of existing data. The FDA noted that while the proposed dosing regimen might be acceptable, validation in a clinical trial would be needed prior to resubmission. As a result, we initiated the DV study in response to the FDA’s request in December 2016. The DV study is assessing LPCN 1021 in 100 hypogonadal males on a fixed daily dose (no titration) of 450 mg divided into two equal doses. We also initiated the DF study to assess LPCN 1021 in 100 hypogonadal males on a fixed daily dose (no titration) of 450 mg divided into three equal doses. Enrollment in the DV study and the DF study was completed in April 2017. These additional clinical trials for LPCN 1021 have required capital and may not result in approval of LPCN 1021 by the FDA. Performing these additional studies does not guarantee FDA approval of LPCN 1021. There is no guarantee of approval of LPCN 1021, even if these additional activities are performed. If the FDA denies or further delays approval of LPCN 1021, our business would be materially and adversely harmed. If the FDA does approve LPCN 1021, but we are unsuccessful in commercializing LPCN 1021, our business will be materially and adversely harmed.

The FDA may also require the addition of labeling statements or other warnings or contraindications, require us to perform additional clinical trials or studies or provide additional information in order to secure approval. Any such requirement or any required FDA Advisory Committee meeting would increase our costs and delay approval and commercialization of LPCN 1021 and would have a material adverse effect on our business and financial condition.

Even if LPCN 1021 is approved, the FDA may limit the indications for which it may be used, include extensive warnings on the product labeling, or require costly ongoing requirements for post-marketing clinical studies including participation in a long-term TRT consortium cardiovascular study and surveillance or other risk management measures to monitor the safety or efficacy of LPCN 1021. Further, in the event that we seek regulatory approval of LPCN 1021 outside the United States, such markets also have requirements for approval of drug candidates with which we must comply prior to marketing. Obtaining regulatory approval for marketing of LPCN 1021 in one country does not ensure we will be able to obtain regulatory approval in other countries but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries.

Any regulatory approval of LPCN 1021, once obtained, may be withdrawn. Ultimately, the failure to obtain and maintain regulatory approvals would prevent LPCN 1021 from being marketed and would have a material adverse effect on our business.

If we fail to obtain adequate healthcare reimbursement for our products, our revenue-generating ability will be diminished and there is no assurance that the anticipated market for our products will be sustained.

We believe that there could be many different applications for products successfully derived from our technologies and that the anticipated market for products under development could continue to expand. However, due to competition from existing or new products, potential changes to the class TRT label by the FDA and the yet to be established commercial viability of our products, no assurance can be given that these beliefs will prove to be correct. Physicians, patients, formularies, payors or the medical community in general may not accept or utilize any products that we or our collaborative partners may develop. Other drugs may be approved during our clinical testing which could change the accepted treatments for the disease targeted and make our compound obsolete.

Our ability to commercialize our products with success may depend, in part, on the extent to which coverage and adequate reimbursement to patients for the cost of such products and related treatment will be available from governmental health administration authorities, private health coverage insurers and other organizations, as well as the ability of private payors to pay for or afford our drugs. Adequate third party coverage may not be available to patients to allow us to maintain price levels sufficient for us to realize an appropriate return on our investment in product development.

Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payers can be critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Additionally, current manufacturers of drug products may have agreements with payors that may limit the ability of new products to get on formulary or require a step edit with an existing product before reimbursement or a new product will occur. Even if we obtain coverage for our products, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are less likely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Payers may require a more arduous prior authorization process as a condition to payment for TRT therapy. This could adversely affect the market for TRT products.

In the United States and in many other countries, pricing and/or profitability of some or all prescription pharmaceuticals and biopharmaceuticals are subject to varying degrees of government control. Healthcare reform and controls on healthcare spending may limit the price we charge for any products and the amounts thereof that we can sell. In particular, in the United States, the federal government and private insurers have changed and have considered ways to change, the manner in which healthcare services are provided. In March 2010, the Patient Protection and Affordable Care Act (“ACA”), as amended by the Healthcare and Education Affordability Reconciliation Act, became law in the United States. ACA substantially changes the way healthcare is financed by both governmental and private insurers and significantly affects the healthcare industry. The provisions of ACA of importance to our potential product candidates include the following:

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals beginning in 2014 and by adding new mandatory eligibility categories for certain individuals with specified income levels, thereby potentially increasing manufacturers’ Medicaid rebate liability;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

new requirements to report annually certain financial arrangements with physicians, certain other healthcare professionals, and teaching hospitals;

a new requirement to annually report drug samples that manufacturers and distributors provide to licensed practitioners, pharmacies of hospitals and other healthcare entities; and

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted since ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, created, among other things, measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. The Bipartisan Budget Act was enacted on November 2, 2015, and among provisions, restricts the types of facilities that may receive hospital reimbursement under Medicare. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

We anticipate that ACA will result in additional downward pressure on the reimbursement we may receive for any approved and covered product, and could seriously harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payers. In the future, the U.S. government may institute further controls and different reimbursement schemes and limits on Medicare and Medicaid spending or reimbursement that may affect the payments we could collect from sales of any products in the United States.

Moreover, on his first day in office, US President Donald Trump issued an Executive Order to begin the process of dismantling the ACA. The Order affirmatively states the new administration’s intent to seek repeal of the ACA. In early 2017, leaders in the 115^th United States Congress proposed legislation to replace the ACA. However, the legislation did not receive the requisite votes to move forward. The implementation of further cost containment measures or the repeal of ACA or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Approximately 20 million previously uninsured Americans now have coverage because of the ACA. The discussion surrounding the overhaul of the ACA is creating uncertainty for patients, providers, payers and pharmaceutical manufacturers. In the event that millions of people lose their health insurance with repeal and replace, there will be less spending on pharmaceuticals which could have a material adverse effect on our financial operations.

We face substantial competition in the TRT market, which may result in others discovering, developing or commercializing products before or more successfully than we do.

We expect to face significant competition for any of our product candidates, if approved. In particular, if approved, LPCN 1021 would compete in the T-replacement therapies market, which is highly competitive and currently dominated by the sale of T-gels in terms of sales dollars, which accounted for approximately 81% of U.S. sales in the T-replacement therapies market in 2016 according to IMS Health data. Our success will depend, in large part, on our ability to obtain an adequate share of the market. Potential competitors in North America, Europe and elsewhere include major pharmaceutical companies, specialty pharmaceutical companies, biotechnology firms, universities and other research institutions and government agencies. Other pharmaceutical companies may develop oral T-replacement therapies that compete with LPCN 1021. For example, because TU is not a patented compound and is commercially available to third parties, it is possible that competitors may design methods of TU administration that would be outside the scope of the claims of either our issued patents or our patent applications. This would enable their products to effectively compete with LPCN 1021, which could have a negative effect on our business.

The following T-replacement therapies currently on the market in the United States would compete with LPCN 1021:

T-gels, such as AndroGel (marketed by Abbvie) and Perrigo's AB-rated 1% generic of Androgel, Testim (marketed by Endo Health Solutions, or Endo), Fortesta (marketed by Endo); and, additionally TEVA has a FDA approval for a T-gel but has not yet launched the product;

T-topical solutions, such as Axiron, a metered dose lotion marketed by Eli Lilly and Co., and Perrigo’s generic Axiron solution;

T-injectables;

Branded longer-acting injectables, such as Aveed (marketed by Endo);

T-nasals, such as Natesto (marketed by Aytu);

methyl-T, such as Methitest (marketed by Impax) and Testred (marketed by Valeant);

transdermal patches, such a Androderm (marketed by Allergan);

buccal patches, such as Striant (marketed by Endo);

generic testosterone enanthate intra-muscular injectables;

authorized generic T-gels; and

subcutaneous injectable pellets, such as Testopel (marketed by Endo).

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 LPCN 1021 are in varying stages of development, some of which may be approved, marketed and/or commercialized prior to LPCN 1021. 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.

In light of the competitive landscape above, LPCN 1021 may not be the first oral testosterone replacement therapy to market, which may significantly affect the market acceptance and commercial success of LPCN 1021.

Furthermore, many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, obtaining FDA and other marketing approvals of products and the commercialization of those products. These competitors have the economic power to acquire and maintain market share, limiting our ability to penetrate the TRT market with our LPCN 1021 product. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than our products and may render our products obsolete or non-competitive before we can recover the expenses of developing and commercializing them. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Failure to successfully compete in this market would materially and negatively impact our business and operations.

Risks Related to Ownership of Our Common Stock

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

As of March 31, 2017, our executive officers and directors beneficially owned approximately 11% 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 common stock is thinly traded, may continue to be thinly traded in the future, and our stockholders may be unable to sell at or near asking prices or at all if they need to sell their shares.

To date, we have a low volume of daily trades in our common stock on NASDAQ. For example, the average daily trading volume in our common stock on NASDAQ during the first quarter of 2017 was approximately 133,000 shares per day with volumes continuing to decrease in 2017. 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 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, our common stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline significantly in the event that a large number of shares of our common stock are sold 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.

RISKS RELATING TO OUR FINANCIAL POSITION AND CAPITAL REQUIREMENTS

We have incurred significant operating losses in most years since our inception, and anticipate that we will incur continued losses for the foreseeable future.

We have focused a significant portion of our efforts on developing LPCN 1021. We have funded our operations to date through proceeds from sales of common stock, preferred stock and convertible debt and from license and milestone revenues and research revenue from license and collaboration agreements with corporate partners. We have incurred losses in most years since our inception. As of March 31, 2017, we had an accumulated deficit of $110.3 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to significantly increase in connection with clinical trials associated with LPCN 1021, LPCN 1111 and LPCN 1107, if initiated. In addition, if we obtain marketing approval for LPCN 1021, we will 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 advance our lead product candidate, LPCN 1021, and further clinical development of LPCN 1111, 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 are currently using the reduced disclosure requirements afforded emerging growth companies and we cannot be certain if the reduced disclosure requirements will make our common stock less attractive to investors.

We are currently using the reduced disclosure requirements afforded “emerging growth companies”. “Emerging growth companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings. We will continue to be an “emerging growth company” until December 31, 2017. Decreased disclosures in our SEC filings may make it harder for investors to analyze our results of operations and financial prospects.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

See the Exhibit Index immediately following the signature page of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Lipocine Inc.
	(Registrant)

Dated: May 8, 2017	/s/ Mahesh V. Patel
	Mahesh V. Patel, President and Chief Executive Officer (Principal Executive Officer)

Dated: May 8, 2017	/s/ Morgan R. Brown
	Morgan R. Brown, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date

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

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

32.1^*	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1)

32.2^*	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1)

101.INS*	XBRL Instance Document

101.SCH^*	XBRL Taxonomy Extension Schema Document

101.CAL^*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF^*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB^*	XBRL Taxonomy Extension Labels Linkbase Document

101.PRE^*	XBRL Taxonomy Extension Presentation Linkbase Document

^*	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.