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Stockholders’ Equity | 12 Months Ended
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Dec. 31, 2021
Equity [Abstract] |
Stockholders’ Equity | (9) Stockholders’ Equity
| (a) | Issuance of Common Stock
On January 28, 2021, the Company completed a public offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“January 2021 Offering”). The gross proceeds from the January 2021 Offering were approximately $28.7 million, before deducting underwriter fees and other offering expenses of $1.9 million. In the January 2021 Offering, the Company sold 16,428,571 shares of its common stock. On February 27, 2020, the Company completed a registered direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“February 2020 Offering”). The gross proceeds from the February 2020 Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $347,000. In the February 2020 Offering, the Company sold 10,084,034 Class A Units at an offering price of $0.595 per unit, with each Class A Unit consisting of one share of its common stock and one-half of a common warrant to purchase one share of common stock at an exercise price of $0.53 per share of common stock. Additionally, the common stock warrants were immediately exercisable and expire on February 27, 2025. By their terms, however, the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise. On November 18, 2019, the Company completed a public offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“November 2019 Offering”). The gross proceeds from the November 2019 Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $404,000. In the November 2019 Offering, the Company sold (i) 10,450,000 Class A Units, with each Class A Unit consisting of one share of its common stock and a common warrant to purchase one share of its common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of its common stock and a common warrant to purchase one share of its common stock, at a price of $0.50 per Class A Unit and $0.4999 per Class B Unit. The pre-funded warrants, which were exercised for common stock in December 2019, were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of $.0001 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of $0.50 per share, subject to adjustment, and expire on November 17, 2024. By their terms, however, neither the pre-funded warrants nor the common stock warrants can be exercised at any time that the pre-funded warrant holder or the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise. On the date of the November 2019 Offering, the Company allocated approximately $768,000 and $4.8 million to common stock/additional paid-in capital and warrant liability, respectively. LIPOCINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020
(9) | Stockholders’ Equity – (continued)
On March 6, 2017, the Company entered into the Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to the amount the Company registered on an effective registration statement pursuant to which the offering is being made. The Company currently has registered up to $50.0 million for sale under the Sales Agreement, pursuant to the Registration Statement on Form S-3 (File No. 333-250072) through Cantor as the Company’s sales agent. Cantor may sell the Company’s common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Capital Market or any other existing trade market for our common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. Cantor uses its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell these shares. The Company pays Cantor 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. In addition, the Company has also provided Cantor with customary indemnification rights. The shares of the Company’s common stock sold under the Sales Agreement are sold and issued pursuant to the Registration Statement on Form S-3 (File No. 333-250072) (the “Form S-3”), which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. The Company is not obligated to make any sales of its common stock under the Sales Agreement. The offering of common stock pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement as permitted therein. The Company and Cantor may each terminate the Sales Agreement at any time upon ten days’ prior notice. As of December 31, 2021, we had sold an aggregate of 15,023,073 shares at a weighted-average sales price of $2.19 per share under the Sales Agreement for aggregate gross proceeds of $32.9 million and net proceeds of $31.7 million, after deducting sales agent commission and discounts and our other offering costs. During the year ended December 31, 2021, the Company sold 1,811,238 shares of our common stock pursuant to the current Registration Statement on Form S-3 (File No. 333-250072) at a weighted-average sales price of $1.95 per share, resulting in net proceeds of approximately $3.4 million under the Sales Agreement which is net of $112,000 in expenses. During the year ended December 31, 2020, the Company sold 3,746,300 shares of our common stock pursuant to the current Registration Statement on Form S-3 (File No. 333-250072) at a weighted average sales price of $1.41 per share, in net proceeds of approximately $5.1 million under the Sales Agreement which is net of $148,000 in expenses. Additionally, during the year ended December 31, 2020, the Company sold 2,830,000 shares of our common stock pursuant to the prior Registration Statement on Form S-3 (File No. 333-220942) at a weighted average sales price of $1.43 per share under the ATM for aggregate gross proceeds of $3.9 million which is net of $165,000 in expenses. As of December 31, 2021, the Company had $41.2 million available for sale under the Sales Agreement.
| (b) | Rights Agreement
On November 13, 2015, the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent, entered into a Rights Agreement. Also on November 12, 2015, the board of directors of the Company authorized and the Company declared a dividend of one preferred stock purchase right (each a “Right” and collectively, the “Rights”) for each outstanding share of common stock of the Company. The dividend was payable to stockholders of record as of the close of business on November 30, 2015 and entitles the registered holder to purchase from the Company one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock of the Company at a price of $63.96 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. LIPOCINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020
(9) | Stockholders’ Equity – (continued)
In general, in the event a person becomes an Acquiring Person, then each Right not owned by such Acquiring Person will entitle its holder to purchase from the Company, at the Right’s then current exercise price, in lieu of shares of Series A Junior Participating Preferred Stock, common stock of the Company with a market value of twice the Purchase Price. In addition, if after any person has become an Acquiring Person, (a) the Company is acquired in a merger or other business combination, or (b) 50% or more of the Company’s assets, or assets accounting for 50% or more of its earning power, are sold, leased, exchanged or otherwise transferred (in one or more transactions), proper provision shall be made so that each holder of a Right (other than the Acquiring Person, its affiliates and associates and certain transferees thereof, whose Rights became void) shall thereafter have the right to purchase from the acquiring corporation, for the Purchase Price, that number of shares of common stock of the acquiring corporation which at the time of such transaction would have a market value of twice the Purchase Price. The Company will be entitled to redeem the Rights at $0.001 per Right at any time prior to the time an Acquiring Person becomes such. The terms of the Rights are set forth in the Rights Agreement, which is summarized in the Company’s Current Report on Form 8-K dated November 13, 2015. The rights plan was originally set to expire on November 12, 2018; however, on November 5, 2018 our Board of Directors approved an Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 5, 2021 and again on November 1, 2021, the Company adopted a Second Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 1, 2024, unless the rights are earlier redeemed or exchanged by the Company.
| (c) | 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. Additionally, upon receiving shareholder approval in June 2018, the 2014 Plan was further amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 2,471,906 to 3,221,906. Finally, upon receiving shareholder approval in June 2020, the 2014 Plan was further amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 3,221,906 to 5,721,906. 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 5,721,906 shares are authorized for issuance under the 2014 Plan, with 857,459 shares remaining available for grant as of December 31, 2021. LIPOCINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020
(9) | Stockholders’ Equity – (continued)
A summary of stock option activity is as follows: Schedule of Stock Option Activity
|  | Outstanding stock options |
|  | Number of shares |  |  | Weighted average exercise price |
Balance at December 31, 2020 |  |  | 3,564,458 |  |  | $ | 3.36 |
Options granted |  |  | 1,105,500 |  |  |  | 1.23 |
Options exercised |  |  | (4,584 | ) |  |  | 1.46 |
Options forfeited |  |  | - |  |  |  | - |
Options cancelled |  |  | (114,169 | ) |  |  | 4.51 |
Balance at December 31, 2021 |  |  | 4,551,205 |  |  |  | 2.82 |
Options exercisable at December 31, 2021 |  |  | 2,799,979 |  |  |  | 3.84 |
The following table summarizes information about stock options outstanding and exercisable at December 31, 2021: Schedule of Share-based Compensation of Stock Options Outstanding and Exercisable
Options outstanding |  | Options exercisable |
Number outstanding |  | Weighted average remaining contractual life (Years) |  |  | Weighted average exercise price |  |  | Aggregate intrinsic value |  |  | Number exerciseable |  |  | Weighted average remaining contractual life (Years) |  |  | Weighted average exercise price |  |  | Aggregate intrinsic value |
4,551,205 |  |  | 6.66 |  |  | $ | 2.82 |  |  | $ | 315,330 |  |  |  | 2,799,979 |  |  |  | 5.01 |  |  | $ | 3.84 |  |  | $ | 201,966 |
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 years ended December 31, 2021 and 2020 was $2,000 and zero. There were 4,584 and zero stock options exercised during the years ended December 31, 2021 and 2020, respectively. LIPOCINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020
(9) | Stockholders’ Equity – (continued)
| (d) | Common Stock Warrants
The Company accounts for its common stock warrants under ASC 480, Distinguishing Liabilities from Equity, which requires any financial instrument, other than an outstanding share, that, at inception, embodies an obligation to repurchase the issuer’s equity shares, or is indexed to such an obligation, and requires or may require the issuer to settle the obligation by transferring assets, to be classified as a liability. In accordance with ASC 480, the Company’s outstanding warrants from the November 2019 Offering are classified as a liability. The liability is adjusted to fair value at each reporting period, with the changes in fair value recognized as gain (loss) on change in fair value of warranty liability in the Company’s consolidated statements of operations. The warrants issued in the November 2019 Offering allow the warrant holder, if certain change in control events occur, the option to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a fundamental transaction. As of December 31, 2021, the Company had 1,094,030 warrants outstanding from the November 2019 Offering to purchase an equal number of shares of common stock. The fair value of these warrants on November 18, 2019 (closing date of November 19 Offering) and December 31, 2021 and 2020 was determined using the Black-Scholes option pricing model with the following Level 3 inputs (as defined in the November 2019 Offering): Schedule of Fair Value of Warrants
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |  |  | November 18, 2019 |
Expected life in years |  |  | 2.88 |  |  |  | 3.88 |  |  |  | 4.88 |  |  |  | 5.00 |
Risk-free interest rate |  |  | 0.97 | % |  |  | 0.27 | % |  |  | 1.69 | % |  |  | 1.63 | %
Dividend yield |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Volatility |  |  | 100.00 | % |  |  | 100.00 | % |  |  | 225.93 | % |  |  | 224.47 | %
Stock price |  | $ | 0.99 |  |  | $ | 1.36 |  |  | $ | 0.39 |  |  | $ | 0.41 |
During the year ended December 31, 2021, the Company recorded a non-cash gain of $356,000 from the change in fair value of the November 2019 Offering warrants and during the year ended December 31, 2020, the Company recorded a non-cash loss of $2.9 million from the change in fair value of the November 2019 Offering warrants. The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs: Schedule of Reconciliation of Warrant Liability
|  | Warrant Liability |
Balance at December 31, 2020 |  | $ | 1,170,051 |
Settlement of liabilty on warrant exercise |  |  | (18,365 | )
Change in fair value of common stock warrants |  |  | (355,890 | )
Balance at December 31, 2021 |  | $ | 795,796 |
Additionally, in the February 2020 Offering, the Company issued 5,042,017 common stock warrants. However, the February 2020 Offering warrants do not provide the warrant holder the option to receive an amount of cash equal to the Black-Scholes value of the warrants upon a fundamental transaction. Therefore, the Company has not recorded a warrant liability with respect to the warrants issued in the February 2020 Offering. LIPOCINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020
(9) | Stockholders’ Equity – (continued)
The following table summarizes the number of common stock warrants outstanding and the weighted average exercise price: Schedule of Number of Warrants Outstanding and the Weighted Average Exercise Price
|  | Warrants |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2020 |  |  | 1,944,366 |  |  | $ | 0.51 |
Issued |  |  | - |  |  |  | - |
Exercised |  |  | (10,000 | ) |  |  | 0.50 |
Expired |  |  | - |  |  |  | - |
Cancelled |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |
Balance at December 31, 2021 |  |  | 1,934,366 |  |  | $ | 0.51 |
During the years ended December 31, 2021 and 2020, 10,000 and 15.1 million common stock warrants to purchase one share of our common stock were exercised, respectively, resulting in proceeds of approximately $5,000 and $7.7 million, respectively. The following table summarizes information about common stock warrants outstanding at December 31, 2021:
Warrants outstanding
Number exercisable |  | Weighted average remaining contractual life (Years) |  |  | Weighted average exercise price |  |  | Aggregate intrinsic value |
1,934,366 |  |  | 3.00 |  |  | $ | 0.51 |  |  | $ | 922,629 |

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