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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
OR
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 000-54556
TROVAGENE, INC.
(Exact Name of small business issuer as specified in its charter)
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Delaware |
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27-2004382 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
11055 Flintkote Avenue, Suite A, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Issuer’s telephone Number: (858) 952-7570
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for 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 o
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 (§232.405 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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company x |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 9, 2013 the issuer had 18,846,294 shares of Common Stock issued and outstanding.
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Page |
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3 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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28 |
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28 |
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29 |
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INDEX TO FINANCIAL STATEMENTS
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Page |
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Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012 |
4 |
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5 |
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6 |
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14 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
16 |
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
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June 30, |
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December 31, |
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2013 |
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2012 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
8,302,290 |
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$ |
10,819,781 |
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Accounts receivable |
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56,501 |
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168,381 |
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Prepaid expenses and other assets |
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164,716 |
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60,041 |
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Total current assets |
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8,523,507 |
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11,048,203 |
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Property and equipment, net |
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570,947 |
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254,742 |
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Other assets |
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530,612 |
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362,081 |
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Total assets |
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$ |
9,625,066 |
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$ |
11,665,026 |
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Liabilities and Stockholders’ (Deficiency) Equity |
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Current liabilities: |
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Accounts payable |
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$ |
297,825 |
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$ |
175,679 |
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Accrued expenses |
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1,101,412 |
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554,691 |
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Current portion of long-term debt |
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62,993 |
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— |
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Total current liabilities |
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1,462,230 |
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730,370 |
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Long-term debt, less current portion |
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252,175 |
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— |
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Derivative financial instruments |
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10,381,796 |
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8,765,628 |
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Total liabilities |
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12,096,201 |
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9,495,998 |
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Commitments and contingencies (Note 9) |
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Stockholders’ (deficiency) equity: |
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Preferred stock, $0.001 par value, 20,000,000 shares authorized, 78,100 and 95,600 shares outstanding at June 30, 2013 and December 31, 2012, respectively, designated as Series A Convertible Preferred Stock with liquidation preference of $780,100 and $956,000 at June 30, 2013 and December 31, 2012, respectively |
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78 |
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96 |
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Common stock, $0.0001 par value, 150,000,000 shares authorized, 15,729,524 and 15,478,177 issued and outstanding at June 30, 2013 and December 31, 2012, respectively |
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1,573 |
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1,547 |
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Additional paid-in capital |
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59,125,903 |
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57,370,017 |
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Deficit accumulated during development stage |
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(61,598,689 |
) |
(55,202,632 |
) |
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Total stockholders’ (deficiency) equity |
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(2,471,135 |
) |
2,169,028 |
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Total liabilities and stockholders’ (deficiency) equity |
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$ |
9,625,066 |
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$ |
11,665,026 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
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(Unaudited) |
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(Unaudited) |
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(Unaudited) |
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August 4, 1999 |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(Inception) to |
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2013 |
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2012 |
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2013 |
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2012 |
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June 30, 2013 |
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Royalty income |
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$ |
49,000 |
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$ |
41,500 |
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$ |
168,123 |
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$ |
75,653 |
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$ |
1,093,597 |
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License fees |
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— |
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— |
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— |
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— |
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1,383,175 |
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Milestone fees |
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— |
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— |
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— |
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— |
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150,000 |
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Total revenues |
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49,000 |
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41,500 |
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168,123 |
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75,653 |
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2,626,772 |
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Costs and expenses: |
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Research and development |
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943,849 |
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477,151 |
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1,746,094 |
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814,558 |
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19,195,545 |
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Purchased in process research and development |
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— |
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— |
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— |
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— |
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2,666,869 |
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General and administrative |
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1,479,263 |
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809,868 |
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3,185,980 |
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1,636,830 |
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29,106,096 |
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Total operating expenses |
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2,423,112 |
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1,287,019 |
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4,932,074 |
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2,451,388 |
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50,968,510 |
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Loss from operations |
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(2,374,112 |
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(1,245,519 |
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(4,763,951 |
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(2,375,735 |
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(48,341,738 |
) |
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Interest income |
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— |
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— |
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— |
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— |
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266,883 |
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Interest expense |
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(668 |
) |
— |
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(668 |
) |
— |
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(1,326,040 |
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Gain on sale of equipment |
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— |
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— |
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— |
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— |
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4,000 |
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Amortization of deferred debt costs and original issue discount |
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— |
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— |
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— |
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— |
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(2,346,330 |
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Change in fair value of derivative instruments—warrants |
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(2,895,310 |
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(2,180,891 |
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(1,616,168 |
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(2,213,315 |
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(7,110,967 |
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Gain on extinguishment of debt |
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— |
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— |
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— |
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— |
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623,383 |
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Liquidated damages and other forbearance agreement settlement costs |
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— |
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— |
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— |
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— |
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(1,758,111 |
) |
|||||
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Net loss and comprehensive loss |
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(5,270,090 |
) |
(3,426,410 |
) |
(6,380,787 |
) |
(4,589,050 |
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(59,988,920 |
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Preferred stock dividend |
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(9,385 |
) |
(9,560 |
) |
(15,270 |
) |
(19,120 |
) |
(361,428 |
) |
|||||
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Series A Convertible Preferred stock conversion rate change accreted as a dividend |
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— |
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— |
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— |
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— |
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(455,385 |
) |
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Cumulative effect of early adopting ASC Topic 815-40 |
|
— |
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— |
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— |
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— |
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(792,956 |
) |
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Net loss and comprehensive loss available to common stockholders |
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$ |
(5,279,475 |
) |
$ |
(3,435,970 |
) |
$ |
(6,396,057 |
) |
$ |
(4,608,170 |
) |
$ |
(61,598,689 |
) |
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Net loss per common share-basic and diluted |
|
$ |
(0.34 |
) |
$ |
(0.28 |
) |
$ |
(0.41 |
) |
$ |
(0.40 |
) |
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Weighted average shares outstanding- basic and diluted |
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15,583,957 |
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12,086,528 |
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15,547,352 |
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11,544,112 |
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|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
|
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Common Stock |
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Treasury Shares |
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Additional
|
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Deferred
|
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Deficit
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Total
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||||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Compensation |
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Stage |
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(Deficiency) |
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||||||
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Balance, August 4, 1999 (Inception) |
|
0 |
|
$ |
0 |
|
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
Issuance of common stock to founders for cash at $0.0012 per share |
|
37,000,000 |
|
3,700 |
|
|
|
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|
38,300 |
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|
|
|
|
42,000 |
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||||||
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Net loss |
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(14,760 |
) |
(14,760 |
) |
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Balance, January 31, 2000 |
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37,000,000 |
|
$ |
3,700 |
|
0 |
|
$ |
0 |
|
$ |
38,300 |
|
0 |
|
(14,760 |
) |
27,240 |
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|||
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Net loss |
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|
|
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(267,599 |
) |
(267,599 |
) |
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Balance, January 31, 2001 |
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37,000,000 |
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$ |
3,700 |
|
0 |
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$ |
0 |
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$ |
38,300 |
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0 |
|
(282,359 |
) |
(240,359 |
) |
|||
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Capital contribution of cash |
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|
45,188 |
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|
45,188 |
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||||||
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Net loss |
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(524,224 |
) |
(524,224 |
) |
||||||
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Balance, January 31, 2002 |
|
37,000,000 |
|
$ |
3,700 |
|
0 |
|
$ |
0 |
|
$ |
83,488 |
|
0 |
|
(806,583 |
) |
(719,395 |
) |
|||
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Issuance of common stock for cash at $0.003 per share |
|
1,258,000 |
|
126 |
|
|
|
|
|
3,274 |
|
|
|
|
|
3,400 |
|
||||||
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Capital contribution of cash |
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0 |
|
0 |
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|
|
|
|
2,500 |
|
|
|
|
|
2,500 |
|
||||||
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Net loss |
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|
|
|
|
|
|
|
|
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|
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(481,609 |
) |
(481,609 |
) |
||||||
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Balance, January 31, 2003 |
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38,258,000 |
|
$ |
3,826 |
|
0 |
|
$ |
0 |
|
$ |
89,262 |
|
0 |
|
(1,288,192 |
) |
(1,195,104 |
) |
|||
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Net loss |
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|
|
|
|
|
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|
|
(383,021 |
) |
(383,021 |
) |
||||||
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Balance, January 31, 2004 |
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38,258,000 |
|
$ |
3,826 |
|
0 |
|
$ |
0 |
|
$ |
89,262 |
|
0 |
|
(1,671,213 |
) |
(1,578,125 |
) |
|||
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Waiver of founders’ deferred compensation |
|
0 |
|
0 |
|
|
|
|
|
1,655,031 |
|
|
|
|
|
1,655,031 |
|
||||||
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Private placement of common stock |
|
440,868 |
|
44 |
|
|
|
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|
2,512,906 |
|
|
|
|
|
2,512,950 |
|
||||||
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Redemption of shares held by Panetta Partners, Inc. |
|
(36,477,079 |
) |
(3,648 |
) |
|
|
|
|
(496,352 |
) |
|
|
|
|
(500,000 |
) |
||||||
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Costs associated with recapitalization |
|
|
|
|
|
|
|
|
|
(301,499 |
) |
|
|
|
|
(301,499 |
) |
||||||
|
Share exchange with founders |
|
376,334 |
|
38 |
|
|
|
|
|
(38 |
) |
|
|
|
|
0 |
|
||||||
|
Issuance of treasury shares |
|
|
|
|
|
58,333 |
|
6 |
|
(6 |
) |
|
|
|
|
0 |
|
||||||
|
Issuance of treasury shares to escrow |
|
58,333 |
|
6 |
|
(58,333 |
) |
(6 |
) |
0 |
|
|
|
|
|
0 |
|
||||||
|
Issuance of common stock and warrants for cash at $11.70 per share |
|
228,026 |
|
23 |
|
|
|
|
|
2,667,877 |
|
|
|
|
|
2,667,900 |
|
||||||
|
Issuance of 20,610 warrants to selling agents |
|
|
|
|
|
|
|
|
|
403,038 |
|
|
|
|
|
403,038 |
|
||||||
|
Finders warrants charged to cost of capital |
|
|
|
|
|
|
|
|
|
(403,038 |
) |
|
|
|
|
(403,038 |
) |
||||||
|
Deferred stock-based compensation |
|
|
|
|
|
|
|
|
|
1,937,500 |
|
(1,937,500 |
) |
|
|
0 |
|
||||||
|
Amortization of deferred stock-based compensation |
|
|
|
|
|
|
|
|
|
0 |
|
245,697 |
|
|
|
245,697 |
|
||||||
|
Options issued to consultants |
|
|
|
|
|
|
|
|
|
1,229,568 |
|
|
|
|
|
1,229,568 |
|
||||||
|
Warrants issued to consultants |
|
|
|
|
|
|
|
|
|
2,630,440 |
|
|
|
|
|
2,630,440 |
|
||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,371,027 |
) |
(5,371,027 |
) |
||||||
|
Balance, January 31, 2005 |
|
2,884,482 |
|
$ |
289 |
|
0 |
|
$ |
0 |
|
$ |
11,924,689 |
|
$ |
(1,691,803 |
) |
$ |
(7,042,240 |
) |
$ |
3,190,935 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred Stock |
|
Common Stock |
|
Treasury Shares |
|
Additional
|
|
Deferred
|
|
Deficit
|
|
Total
|
|
|||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Compensation |
|
Stage |
|
(Deficiency) |
|
|||||||
|
Balance, January 31, 2005 |
|
0 |
|
$ |
0 |
|
2,884,482 |
|
$ |
289 |
|
0 |
|
$ |
0 |
|
$ |
11,924,689 |
|
$ |
(1,691,803 |
) |
$ |
(7,042,240 |
) |
$ |
3,190,935 |
|
|
Private placement of common stock |
|
|
|
|
|
17,094 |
|
2 |
|
0 |
|
$ |
0 |
|
$ |
199,998 |
|
|
|
|
|
200,000 |
|
|||||
|
Payment of selling agents fees and expenses in cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
(179,600 |
) |
|
|
|
|
(179,600 |
) |
|||||||
|
Common stock issued to selling agents |
|
|
|
|
|
4,077 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
0 |
|
|||||||
|
Private placement of common stock |
|
|
|
|
|
252,564 |
|
25 |
|
|
|
|
|
2,954,974 |
|
|
|
|
|
2,954,999 |
|
|||||||
|
Payment of selling agents fees and expenses in cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
(298,000 |
) |
|
|
|
|
(298,000 |
) |
|||||||
|
Issuance of 20,205 warrants issued to selling agents |
|
|
|
|
|
|
|
|
|
|
|
|
|
222,188 |
|
|
|
|
|
222,188 |
|
|||||||
|
Selling agents warrants charged to cost of capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
(222,188 |
) |
|
|
|
|
(222,188 |
) |
|||||||
|
Private placement of preferred stock and warrants for cash at $10.00 per share (restated) |
|
277,100 |
|
277 |
|
|
|
|
|
|
|
|
|
2,770,723 |
|
|
|
|
|
2,771,000 |
|
|||||||
|
Accretion of preferred stock dividends (restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
792,956 |
|
|
|
(792,956 |
) |
0 |
|
|||||||
|
Value of warrants reclassified to derivative financial instrument liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
(567,085 |
) |
|
|
|
|
(567,085 |
) |
|||||||
|
Payment of selling agents fees and expenses in cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
(277,102 |
) |
|
|
|
|
(277,102 |
) |
|||||||
|
Issuance of 17,572 warrants issued to selling agents |
|
|
|
|
|
|
|
|
|
|
|
|
|
167,397 |
|
|
|
|
|
167,397 |
|
|||||||
|
Selling agents warrants charged to cost of capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
(167,397 |
) |
|
|
|
|
(167,397 |
) |
|||||||
|
Return of treasury shares from escrow |
|
|
|
|
|
(58,333 |
) |
(6 |
) |
58,333 |
|
6 |
|
0 |
|
|
|
|
|
0 |
|
|||||||
|
Retirement of treasury shares |
|
|
|
|
|
|
|
|
|
(58,333 |
) |
(6 |
) |
6 |
|
|
|
|
|
0 |
|
|||||||
|
Common stock issued for services |
|
|
|
|
|
833 |
|
|
|
|
|
|
|
16,500 |
|
|
|
|
|
16,500 |
|
|||||||
|
Stock-based compensation expense for non-employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,928,298 |
|
|
|
|
|
2,928,298 |
|
|||||||
|
Amortization of deferred stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
645,832 |
|
|
|
645,832 |
|
|||||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
(60,741 |
) |
(60,741 |
) |
|||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,844,326 |
) |
(7,844,326 |
) |
|||||||
|
Balance, January 31, 2006 |
|
277,100 |
|
$ |
277 |
|
3,100,717 |
|
$ |
310 |
|
0 |
|
$ |
0 |
|
$ |
20,266,357 |
|
$ |
(1,045,971 |
) |
$ |
(15,740,263 |
) |
$ |
3,480,710 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional
|
|
Deferred
|
|
Deficit
|
|
Total
|
|
Temporary
|
|
|||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Compensation |
|
Stage |
|
(Deficiency) |
|
Shares |
|
Amount |
|
|||||||
|
Balance, January 31, 2006 |
|
277,100 |
|
$ |
277 |
|
3,100,717 |
|
$ |
310 |
|
$ |
20,266,357 |
|
$ |
(1,045,971 |
) |
$ |
(15,740,263 |
) |
$ |
3,480,710 |
|
— |
|
$ |
— |
|
|
Conversion of Series A preferred stock and issuance of common stock |
|
(174,000 |
) |
(174 |
) |
137,739 |
|
14 |
|
160 |
|
|
|
|
|
— |
|
— |
|
— |
|
|||||||
|
Implementation of ASC 718 |
|
|
|
|
|
|
|
|
|
(1,045,971 |
) |
1,045,971 |
|
|
|
— |
|
|
|
|
|
|||||||
|
Private placement of common stock |
|
|
|
|
|
125,787 |
|
13 |
|
943,388 |
|
|
|
|
|
943,401 |
|
|
|
|
|
|||||||
|
Payment of selling agents fees and expenses in cash |
|
|
|
|
|
|
|
|
|
(118,341 |
) |
|
|
|
|
(118,341 |
) |
|
|
|
|
|||||||
|
Issuance of 15,779 warrants to selling agents |
|
|
|
|
|
|
|
|
|
55,568 |
|
|
|
|
|
55,568 |
|
|
|
|
|
|||||||
|
Selling agents warrants charged to cost of capital |
|
|
|
|
|
|
|
|
|
(55,568 |
) |
|
|
|
|
(55,568 |
) |
|
|
|
|
|||||||
|
Issuance of common stock and warrants for cash at $6.00 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,667 |
|
1,000,000 |
|
|||||||
|
Payment of finder’s fees and expenses in cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80,000 |
) |
|||||||
|
Value of warrants classified as derivative financial instrument liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,000 |
) |
|||||||
|
Issuance of 27,425 units to finder |
|
|
|
|
|
|
|
|
|
167,856 |
|
|
|
|
|
167,856 |
|
|
|
|
|
|||||||
|
Common Stock issued for services |
|
|
|
|
|
1,449 |
|
— |
|
9,566 |
|
|
|
|
|
9,566 |
|
|
|
|
|
|||||||
|
Value attributed to warrants issued with 6% convertible debentures |
|
|
|
|
|
|
|
|
|
1,991,822 |
|
|
|
|
|
1,991,822 |
|
|
|
|
|
|||||||
|
Reclassification of derivative financial instruments to stockholders’ equity upon adoption of ASC 815-40 |
|
|
|
|
|
|
|
|
|
567,085 |
|
|
|
(455,385 |
) |
111,700 |
|
|
|
|
|
|||||||
|
Warrants issued for services |
|
|
|
|
|
|
|
|
|
101,131 |
|
|
|
|
|
101,131 |
|
|
|
|
|
|||||||
|
Donated services |
|
|
|
|
|
|
|
|
|
62,500 |
|
|
|
|
|
62,500 |
|
|
|
|
|
|||||||
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
1,572,545 |
|
|
|
|
|
1,572,545 |
|
|
|
|
|
|||||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,164 |
) |
(59,164 |
) |
|
|
|
|
|||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,134,067 |
) |
(7,134,067 |
) |
|
|
|
|
|||||||
|
Balance, January 31, 2007 |
|
103,100 |
|
$ |
103 |
|
3,365,692 |
|
$ |
337 |
|
$ |
24,518,098 |
|
$ |
— |
|
$ |
(23,388,879 |
) |
$ |
1,129,659 |
|
166,667 |
|
$ |
905,000 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional
|
|
Deficit
|
|
Total
|
|
Temporary Equity—
|
|
||||||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Stage |
|
(Deficiency) |
|
Shares |
|
Amount |
|
||||||
|
Balance, January 31, 2007 |
|
103,100 |
|
$ |
103 |
|
3,365,692 |
|
$ |
337 |
|
$ |
24,518,098 |
|
$ |
(23,388,879 |
) |
1,129,659 |
|
166,667 |
|
$ |
905,000 |
|
|
|
Conversion of preferred stock to common stock |
|
(7,500 |
) |
(7 |
) |
7,813 |
|
1 |
|
6 |
|
|
|
— |
|
|
|
|
|
||||||
|
Private placement of common stock |
|
|
|
|
|
283,333 |
|
28 |
|
849,972 |
|
|
|
850,000 |
|
|
|
|
|
||||||
|
Payment of selling agent fees and expenses |
|
|
|
|
|
|
|
|
|
(51,733 |
) |
|
|
(51,733 |
) |
|
|
|
|
||||||
|
Issuance of warrants to selling agents |
|
|
|
|
|
|
|
|
|
45,403 |
|
|
|
45,403 |
|
|
|
|
|
||||||
|
Selling agent warrants charged to cost of capital |
|
|
|
|
|
|
|
|
|
(45,403 |
) |
|
|
(45,403 |
) |
|
|
|
|
||||||
|
Derivative liability—warrants at issuance |
|
|
|
|
|
|
|
|
|
(45,371 |
) |
|
|
(45,371 |
) |
|
|
|
|
||||||
|
Donated services |
|
|
|
|
|
|
|
|
|
275,000 |
|
|
|
275,000 |
|
|
|
|
|
||||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
914,847 |
|
|
|
914,847 |
|
|
|
|
|
||||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(35,054 |
) |
(35,054 |
) |
|
|
|
|
||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(4,683,141 |
) |
(4,683,141 |
) |
|
|
|
|
||||||
|
Balance, December 31, 2007 |
|
95,600 |
|
$ |
96 |
|
3,656,838 |
|
$ |
366 |
|
$ |
26,460,819 |
|
$ |
(28,107,074 |
) |
(1,645,793 |
) |
166,667 |
|
$ |
905,000 |
|
|
|
Reclassification of common stock initially recorded as temporary equity |
|
|
|
|
|
166,667 |
|
17 |
|
904,983 |
|
|
|
905,000 |
|
(166,667 |
) |
(905,000 |
) |
||||||
|
Private placement of common stock |
|
|
|
|
|
330,682 |
|
33 |
|
1,144,967 |
|
|
|
1,145,000 |
|
|
|
|
|
||||||
|
Payment of selling agents fees and expenses |
|
|
|
|
|
|
|
|
|
(74,500 |
) |
|
|
(74,500 |
) |
|
|
|
|
||||||
|
Conversion of debenture to common stock |
|
|
|
|
|
31,214 |
|
3 |
|
93,638 |
|
|
|
93,641 |
|
|
|
|
|
||||||
|
Derivative liability—warrants at issuance |
|
|
|
|
|
|
|
|
|
(201,122 |
) |
|
|
(201,122 |
) |
|
|
|
|
||||||
|
Donated services |
|
|
|
|
|
|
|
|
|
390,750 |
|
|
|
390,750 |
|
|
|
|
|
||||||
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
543,697 |
|
|
|
543,697 |
|
|
|
|
|
||||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(38,240 |
) |
(38,240 |
) |
|
|
|
|
||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(5,166,240 |
) |
(5,166,240 |
) |
|
|
|
|
||||||
|
Balance, December 31, 2008 |
|
95,600 |
|
$ |
96 |
|
4,185,401 |
|
$ |
419 |
|
$ |
29,263,232 |
|
$ |
(33,311,554 |
) |
$ |
(4,047,807 |
) |
— |
|
$ |
— |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional
|
|
Deficit
|
|
Total
|
|
|||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Stage |
|
(Deficiency) |
|
|||||
|
Balance December, 31, 2008 |
|
95,600 |
|
$ |
96 |
|
4,185,401 |
|
$ |
419 |
|
$ |
29,263,232 |
|
$ |
(33,311,554 |
) |
$ |
(4,047,807 |
) |
|
Issuance of shares of common stock in connection with convertible debenture forbearance agreement |
|
|
|
|
|
906,245 |
|
91 |
|
1,739,868 |
|
|
|
1,739,959 |
|
|||||
|
Issuance of shares of common stock in payment of convertible debenture interest |
|
|
|
|
|
60,147 |
|
6 |
|
112,285 |
|
|
|
112,291 |
|
|||||
|
Private placements of common stock |
|
|
|
|
|
488,333 |
|
49 |
|
1,464,951 |
|
|
|
1,465,000 |
|
|||||
|
Issuance of common stock pursuant to a non-exclusive selling agent’s agreement |
|
|
|
|
|
68,897 |
|
7 |
|
306,730 |
|
|
|
306,737 |
|
|||||
|
Issuance of shares of common stock re settlement for consulting services rendered |
|
|
|
|
|
159,630 |
|
16 |
|
478,874 |
|
|
|
478,890 |
|
|||||
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
177,836 |
|
|
|
177,836 |
|
|||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(38,240 |
) |
(38,240 |
) |
|||||
|
Derivative liability—warrants and price protected units upon issuance |
|
|
|
|
|
|
|
|
|
(1,497,568 |
) |
|
|
(1,497,568 |
) |
|||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(2,483,807 |
) |
(2,483,807 |
) |
|||||
|
Balance, December 31, 2009 |
|
95,600 |
|
$ |
96 |
|
5,868,653 |
|
$ |
588 |
|
$ |
32,046,208 |
|
$ |
(35,833,601 |
) |
$ |
(3,786,709 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional
|
|
Accumulated
|
|
Total
|
|
|||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Stage |
|
(Deficiency) |
|
|||||
|
Balance, December 31, 2009 |
|
95,600 |
|
$ |
96 |
|
5,868,653 |
|
$ |
588 |
|
$ |
32,046,208 |
|
(35,833,601 |
) |
$ |
(3,786,709 |
) |
|
|
Issuance of shares of common stock in payment of convertible debenture interest |
|
|
|
|
|
85,619 |
|
9 |
|
115,962 |
|
|
|
115,971 |
|
|||||
|
Issuance of common stock to selling agents |
|
|
|
|
|
79,333 |
|
8 |
|
(8 |
) |
|
|
— |
|
|||||
|
Private placement of units |
|
|
|
|
|
578,233 |
|
58 |
|
1,734,642 |
|
|
|
1,734,700 |
|
|||||
|
Derivative liability—price protected units upon issuance |
|
|
|
|
|
|
|
|
|
(1,010,114 |
) |
|
|
(1,010,114 |
) |
|||||
|
Consulting services settled via issuance of stock |
|
|
|
|
|
70,833 |
|
7 |
|
212,493 |
|
|
|
212,500 |
|
|||||
|
Shares issued in settlement of legal fees |
|
|
|
|
|
29,240 |
|
3 |
|
99,997 |
|
|
|
100,000 |
|
|||||
|
Stock issued in payment of deferred salary to former CEO |
|
|
|
|
|
12,745 |
|
1 |
|
28,345 |
|
|
|
28,346 |
|
|||||
|
Shares issued in connection with Agreement & Plan of Merger with Etherogen, Inc. |
|
|
|
|
|
2,043,797 |
|
204 |
|
2,771,185 |
|
|
|
2,771,389 |
|
|||||
|
Stock Based Compensation expense |
|
|
|
|
|
|
|
|
|
325,930 |
|
|
|
325,930 |
|
|||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(38,240 |
) |
(38,240 |
) |
|||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(5,449,138 |
) |
(5,449,138 |
) |
|||||
|
Balance, December 31, 2010 |
|
95,600 |
|
$ |
96 |
|
8,768,453 |
|
$ |
878 |
|
$ |
36,324,640 |
|
$ |
(41,320,979 |
) |
$ |
(4,995,365 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred
|
|
Preferred
|
|
Common
|
|
Common
|
|
Additional
|
|
Deficit
|
|
Total
|
|
|||||
|
Balance, December 31, 2010 |
|
95,600 |
|
$ |
96 |
|
8,768,453 |
|
$ |
878 |
|
$ |
36,324,640 |
|
$ |
(41,320,979 |
) |
$ |
(4,995,365 |
) |
|
Issuance of shares of common stock in payment of convertible debenture interest in accordance with Forbearance Agreement |
|
|
|
|
|
64,214 |
|
6 |
|
85,269 |
|
|
|
85,275 |
|
|||||
|
Private placement of units |
|
|
|
|
|
857,833 |
|
85 |
|
2,573,415 |
|
|
|
2,573,500 |
|
|||||
|
Derivative liability-fair value of warrants and price protected units issued |
|
|
|
|
|
|
|
|
|
(1,298,618 |
) |
|
|
(1,298,618 |
) |
|||||
|
Shares issued in connection with Board Compensation |
|
|
|
|
|
41,750 |
|
4 |
|
125,246 |
|
|
|
125,250 |
|
|||||
|
Issuance of common stock to shareholder as finder’s fees |
|
|
|
|
|
90,258 |
|
9 |
|
(9 |
) |
|
|
— |
|
|||||
|
Issuance of common stock in connection with consulting services |
|
|
|
|
|
58,333 |
|
6 |
|
174,994 |
|
|
|
175,000 |
|
|||||
|
Stock issued in connection with conversion of convertible debentures |
|
|
|
|
|
856,185 |
|
85 |
|
1,130,079 |
|
|
|
1,130,164 |
|
|||||
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
250,978 |
|
|
|
250,978 |
|
|||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(38,240 |
) |
(38,240 |
) |
|||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(2,239,212 |
) |
(2,239,212 |
) |
|||||
|
Balance, December 31, 2011 |
|
95,600 |
|
$ |
96 |
|
10,737,026 |
|
$ |
1,073 |
|
$ |
39,365,994 |
|
$ |
(43,598,431 |
) |
$ |
(4,231,268 |
) |
|
Units issued via registered underwritten direct public offering and private placement of units |
|
|
|
|
|
4,383,333 |
|
438 |
|
16,899,562 |
|
|
|
16,900,000 |
|
|||||
|
Fees and expenses related to financing transactions |
|
|
|
|
|
|
|
|
|
(1,576,452 |
) |
|
|
(1,576,452 |
) |
|||||
|
Derivative liability-fair value of warrants and price protected units issued |
|
|
|
|
|
|
|
|
|
(1,796,610 |
) |
|
|
(1,796,610 |
) |
|||||
|
Correction of error in derivative liability—fair value of warrants price protected units issued |
|
|
|
|
|
|
|
|
|
274,967 |
|
|
|
274,967 |
|
|||||
|
Warrants reclassified to additional paid in capital |
|
|
|
|
|
|
|
|
|
3,317,463 |
|
|
|
3,317,463 |
|
|||||
|
Issuance of common stock and warrant to shareholder as finder’s fees |
|
|
|
|
|
214,100 |
|
21 |
|
(21 |
) |
|
|
— |
|
|||||
|
Issuance of common stock in connection with Asset Purchase Agreement with MultiGen Diagnostics, Inc. |
|
|
|
|
|
125,000 |
|
13 |
|
187,487 |
|
|
|
187,500 |
|
|||||
|
Issuance of common stock in connection with consulting services |
|
|
|
|
|
9,916 |
|
1 |
|
22,380 |
|
|
|
22,381 |
|
|||||
|
Issuance of warrants in connection with advisory services |
|
|
|
|
|
|
|
|
|
142,508 |
|
|
|
142,508 |
|
|||||
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
532,140 |
|
|
|
532,140 |
|
|||||
|
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
200 |
|
— |
|
600 |
|
|
|
600 |
|
|||||
|
Issuance of common stock upon net exercise of warrant |
|
|
|
|
|
8,602 |
|
1 |
|
(1 |
) |
|
|
— |
|
|||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(38,240 |
) |
(38,240 |
) |
|||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(11,565,961 |
) |
(11,565,961 |
) |
|||||
|
Balance, December 31, 2012 |
|
95,600 |
|
$ |
96 |
|
15,478,177 |
|
$ |
1,547 |
|
$ |
57,370,017 |
|
$ |
(55,202,632 |
) |
$ |
2,169,028 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)
(continued)
|
|
|
Preferred
|
|
Preferred
|
|
Common
|
|
Common
|
|
Additional
|
|
Deficit
|
|
Total
|
|
|||||
|
Balance, December 31, 2012 |
|
95,600 |
|
$ |
96 |
|
15,478,177 |
|
$ |
1,547 |
|
$ |
57,370,017 |
|
$ |
(55,202,632 |
) |
$ |
2,169,028 |
|
|
Issuance of warrants in connection with services |
|
|
|
|
|
|
|
|
|
198,791 |
|
|
|
198,791 |
|
|||||
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
541,448 |
|
|
|
541,448 |
|
|||||
|
Reclassification of liability for out of plan options to additional paid in capital |
|
|
|
|
|
|
|
|
|
123,551 |
|
|
|
123,551 |
|
|||||
|
Issuance of common stock upon conversion of preferred stock |
|
(17,500 |
) |
(18 |
) |
18,229 |
|
2 |
|
16 |
|
|
|
— |
|
|||||
|
Issuance of common stock upon net exercise of warrant |
|
|
|
|
|
7,284 |
|
1 |
|
(1 |
) |
|
|
— |
|
|||||
|
Issuance of common stock upon exercise of warrants |
|
|
|
|
|
225,834 |
|
23 |
|
892,081 |
|
|
|
892,104 |
|
|||||
|
Preferred stock dividend |
|
|
|
|
|
|
|
|
|
|
|
(15,270 |
) |
(15,270 |
) |
|||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(6,380,787 |
) |
(6,380,787 |
) |
|||||
|
Balance, June 30, 2013 (unaudited) |
|
78,100 |
|
$ |
78 |
|
15,729,524 |
|
$ |
1,573 |
|
$ |
59,125,903 |
|
$ |
(61,598,689 |
) |
$ |
(2,471,135 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
|
|
|
Six Months
|
|
Six Months
|
|
For the period
|
|
|||
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Operating activities |
|
|
|
|
|
|
|
|||
|
Net loss |
|
$ |
(6,380,787 |
) |
$ |
(4,589,050 |
) |
$ |
(59,988,920 |
) |
|
|
|
|
|
|
|
|
|
|||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|||
|
Depreciation and amortization |
|
43,933 |
|
13,975 |
|
303,574 |
|
|||
|
Stock based compensation expense |
|
887,608 |
|
218,650 |
|
12,900,073 |
|
|||
|
Founders compensation contributed to equity |
|
— |
|
— |
|
1,655,031 |
|
|||
|
Donated services contributed to equity |
|
— |
|
— |
|
829,381 |
|
|||
|
Settlement of consulting services in stock |
|
— |
|
— |
|
478,890 |
|
|||
|
Amortization of deferred debt costs and original issue discount |
|
— |
|
— |
|
2,346,330 |
|
|||
|
Liquidated damages and other forbearance agreement settlement costs paid in stock |
|
— |
|
— |
|
1,758,111 |
|
|||
|
Interest expense on convertible debentures paid in stock |
|
— |
|
— |
|
757,198 |
|
|||
|
Change in fair value of financial instruments |
|
1,616,168 |
|
2,213,315 |
|
7,110,967 |
|
|||
|
Gain on extinguishment of debt |
|
— |
|
— |
|
(623,383 |
) |
|||
|
Purchased in process research and development expense-related party |
|
— |
|
— |
|
2,666,869 |
|
|||
|
Stock issued in connection with payment of deferred salary |
|
— |
|
— |
|
28,346 |
|
|||
|
Stock issued in connection with settlement of legal fees |
|
— |
|
— |
|
100,000 |
|
|||
|
Stock issued in connection with consulting services |
|
— |
|
148,883 |
|
452,389 |
|
|||
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|||
|
Increase in other assets |
|
(168,531 |
) |
— |
|
(238,412 |
) |
|||
|
Decrease (increase) in accounts receivable |
|
111,880 |
|
(6,887 |
) |
(56,502 |
) |
|||
|
(Increase) decrease in prepaid expenses |
|
(104,676 |
) |
12,920 |
|
(164,717 |
) |
|||
|
Increase (decrease) in accounts payable and accrued expenses |
|
629,780 |
|
(213,406 |
) |
1,308,399 |
|
|||
|
Net cash used in operating activities |
|
(3,364,625 |
) |
(2,201,600 |
) |
(28,376,376 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Investing activities: |
|
|
|
|
|
|
|
|||
|
Assets acquired in Etherogen, Inc. merger |
|
— |
|
— |
|
(104,700 |
) |
|||
|
Capital expenditures |
|
(360,138 |
) |
(140,969 |
) |
(874,521 |
) |
|||
|
Net cash used in investing activities |
|
(360,138 |
) |
(140,969 |
) |
(979,221 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Financing activities: |
|
|
|
|
|
|
|
|||
|
Proceeds from sale of 6% convertible debenture |
|
— |
|
— |
|
2,335,050 |
|
|||
|
Debt issuance costs |
|
— |
|
— |
|
(297,104 |
) |
|||
|
Borrowings on capital lease obligations |
|
315,168 |
|
— |
|
315,168 |
|
|||
|
Proceeds from sale of common stock, net of expenses |
|
— |
|
10,946,605 |
|
32,755,551 |
|
|||
|
Proceeds from exercise of warrants |
|
892,104 |
|
— |
|
892,104 |
|
|||
|
Proceeds from exercise of stock options |
|
— |
|
— |
|
600 |
|
|||
|
Proceeds from a non-exclusive selling agent’s agreement |
|
— |
|
— |
|
142,187 |
|
|||
|
Costs associated with recapitalization |
|
— |
|
— |
|
(362,849 |
) |
|||
|
Proceeds from sale of preferred stock |
|
— |
|
— |
|
2,771,000 |
|
|||
|
Payment of finders’ fee on preferred stock |
|
— |
|
— |
|
(277,102 |
) |
|||
|
Redemption of common stock |
|
— |
|
— |
|
(500,000 |
) |
|||
|
Payment of preferred stock dividends |
|
— |
|
— |
|
(116,718 |
) |
|||
|
Net cash provided by financing activities |
|
1,207,272 |
|
10,946,605 |
|
37,657,887 |
|
|||
|
Net change in cash and equivalent-(decrease)increase |
|
(2,517,491 |
) |
8,604,036 |
|
8,302,290 |
|
|||
|
Cash and cash equivalents—Beginning of period |
|
10,819,781 |
|
700,374 |
|
— |
|
|||
|
Cash and cash equivalents—End of period |
|
$ |
8,302,290 |
|
$ |
9,304,410 |
|
$ |
8,302,290 |
|
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
|
|
|
Six Months Ended
|
|
Six Months Ended
|
|
For the period
|
|
|||
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Supplementary disclosure of cash flow activity: |
|
|
|
|
|
|
|
|||
|
Cash paid for taxes |
|
$ |
7,650 |
|
$ |
— |
|
$ |
7,650 |
|
|
|
|
|
|
|
|
|
|
|||
|
Cash paid for interest |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|||
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|||
|
Conversion of preferred stock |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Issuance of common stock upon conversion of preferred stock |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Issuance of 41,750 shares of common stock for Board of Directors’ fees in lieu of cash payment |
|
$ |
— |
|
$ |
— |
|
$ |
125,250 |
|
|
Conversion of $2,335,050 of 6% debentures |
|
$ |
— |
|
$ |
— |
|
$ |
1,130,164 |
|
|
Issuance of 125,000 shares of common stock pursuant to Asset Purchase Agreement with MultiGen Diagnostics, Inc. |
|
$ |
— |
|
$ |
187,500 |
|
$ |
187,500 |
|
|
Issuance of 2,043,797 shares of common stock pursuant to Agreement and Plan of Merger with Etherogen, Inc. |
|
$ |
— |
|
$ |
— |
|
$ |
2,771,389 |
|
|
Reclassification of derivative financial instruments to additional paid in capital |
|
$ |
— |
|
$ |
(3,317,463 |
) |
$ |
(3,317,463 |
) |
|
Correction of error in derivative financial instruments |
|
$ |
— |
|
$ |
(274,967 |
) |
$ |
(274,967 |
) |
|
Series A Preferred beneficial conversion feature accreted as a dividend |
|
$ |
— |
|
$ |
— |
|
$ |
792,956 |
|
|
Issuance of common stock from net exercise of warrants |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Preferred stock dividends accrued |
|
$ |
15,270 |
|
$ |
19,120 |
|
$ |
197,085 |
|
|
Interest paid in common stock |
|
$ |
— |
|
$ |
— |
|
$ |
1,325,372 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Trovagene, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
1. Business Overview and Basis of Presentation
Business Overview
Trovagene, Inc (“Trovagene” or the “Company”) is a molecular diagnostics company leveraging innovative, non-invasive cancer monitoring technology to detect and quantify oncogene mutations and genetic variations in cancer patients. Trovagene’s technology applies ultra-sensitive droplet digital PCR and high-throughput next generation sequencing techniques to analyze cell-free nucleic acid specimens obtained from urine samples.
When medical professionals utilize targeted cancer therapies, it is crucial that they monitor patients for the presence or emergence of oncogene mutations that are indicative of either responsiveness or resistance to the respective treatment. Changes in oncogene mutation frequency can provide clinically actionable information about treatment response, disease progression, or disease recurrence. Monitoring patients throughout the course of their cancer may also reveal mutational changes that occur under the pressure of treatment, or if the tumor metastasizes.
For most patients, the presence or absence of clinically relevant mutations is determined at diagnosis through a tissue biopsy. However, a growing body of evidence suggests that, due to the heterogeneity of tumor tissue, a given biopsy sample is not necessarily representative of a patient’s oncogene mutation status. Cell-free nucleic acids overcome this limitation. While cell-free nucleic acids can be obtained from blood samples, oncogene mutations are often rare events and the volume and sampling frequency restrictions associated with blood samples represent practical limitations. In contrast, urine sampling does not require the assistance of a healthcare professional, and samples can be obtained frequently and in large volumes, overcoming the restrictions associated with blood and enabling better detection. Trovagene has pioneered the discovery of cell-free nucleic acids in urine and developed proprietary technologies to extract, purify, detect, and quantify such cell-free nucleic acids from urine samples. The Company operates a CLIA-certified (under the regulations of the State of California and accredited by the College of American Pathologists (CAP)) high complexity molecular diagnostic laboratory in San Diego, CA. The Company intends to offer physicians and their patients laboratory developed tests (LDTs) for cancer monitoring. Clinical studies are underway to establish the clinical utility of the Company’s platform for monitoring tumor dynamics as well as individual responses to both targeted and non-targeted treatments.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Trovagene, which include its wholly owned subsidiary Xenomics, Inc., a California corporation (“Xenomics Sub”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated. Certain items in the comparable prior period’s financial statements have been reclassified to conform to the current period’s presentation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of December 31, 2012 and December 31, 2011 and for each of the two years ended December 31, 2012 and from inception (August 4, 1999) to December 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2013. The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2013, and for all periods presented herein, have been made. The results of operations for the periods ended June 30, 2013 and 2012 are not necessarily indicative of the operating results for the full year.
On May 24, 2012, the Board of Directors approved a 1-for-6 reverse stock split of the Company’s issued and outstanding common stock effective on May 29, 2012. All the relevant information relating to number of shares and per share information contained in these consolidated financial statements has been retrospectively adjusted to reflect the reverse stock split for all periods presented.
2. Net Loss Per Share
Basic and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share , for all periods presented. In accordance with this guidance, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. In a period where there is
a net loss position, diluted weighted-average shares are the same as basic weighted-average shares. Shares used in calculating basic and diluted net loss per common share for the three and six months ended June 30 exclude as antidilutive the following share equivalents:
|
|
|
June 30, |
|
||
|
|
|
2013 |
|
2012 |
|
|
Options to purchase Common Stock |
|
4,012,710 |
|
3,061,816 |
|
|
Warrants to purchase Common Stock |
|
6,796,491 |
|
5,729,754 |
|
|
Series A Convertible Preferred Stock |
|
81,354 |
|
99,583 |
|
|
|
|
10,890,555 |
|
8,891,153 |
|
3. Accounting for Share-Based Payments
Stock Options
ASC Topic 718 “Compensation—Stock Compensation” requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the estimated fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. ASC Topic 718 did not change the way Trovagene accounts for non-employee stock-based compensation. Trovagene accounts for shares of common stock, stock options and warrants issued to non-employees based on the fair value of the stock, stock option or warrant, if that value is more reliably measurable than the fair value of the consideration or services received. The Company accounts for stock options issued and vesting to non-employees in accordance with ASC Topic 505-50 “ Equity-Based Payment to Non-Employees” whereas the value of the stock compensation is based upon the measurement date as determined at either: a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Accordingly the fair value of these options is being “marked to market” quarterly until the measurement date is determined.
Stock-based compensation expense related to Trovagene options have been recognized in operating results as follow:
|
|
|
Three Months
|
|
Six Months
|
|
||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
||||
|
Included in research and development expense |
|
$ |
179,892 |
|
$ |
23,897 |
|
$ |
302,209 |
|
$ |
31,480 |
|
|
Included in general and administrative expense |
|
167,450 |
|
91,922 |
|
386,608 |
|
187,170 |
|
||||
|
Total stock-based compensation expense |
|
$ |
347,342 |
|
$ |
115,819 |
|
$ |
688,817 |
|
$ |
218,650 |
|
The unrecognized compensation cost related to non-vested stock options outstanding at June 30, 2013 and 2012, net of expected forfeitures, was $3,708,208 and $1,224,040, respectively, to be recognized over a weighted-average remaining vesting period of approximately three and four years, respectively.
The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following assumptions during the following periods indicated.
|
|
|
Six Months
|
|
Six Months
|
|
|
Risk-free interest rate |
|
0.74-1.48 |
% |
0.72-1.04 |
% |
|
Dividend yield |
|
0 |
% |
0 |
% |
|
Expected volatility |
|
97-100 |
% |
90 |
% |
|
Expected term (in years) |
|
5.0 yrs. |
|
5.0 yrs. |
|
A summary of stock option activity and of changes in stock options outstanding under the Plan is presented below:
|
|
|
Number of
|
|
Weighted Average
|
|
Intrinsic
|
|
||
|
Balance outstanding, December 31, 2012 |
|
3,711,303 |
|
$ |
4.69 |
|
|
|
|
|
Granted |
|
620,427 |
|
$ |
6.50 |
|
|
|
|
|
Forfeited |
|
(319,000 |
) |
$ |
4.14 |
|
|
|
|
|
Balance outstanding, June 30, 2013 |
|
4,012,710 |
|
$ |
5.02 |
|
$ |
9,590,508 |
|
|
Exercisable at June 30, 2013 |
|
1,967,995 |
|
$ |
5.80 |
|
$ |
3,997,377 |
|
As of June 30, 2013, the Company had issued 260,000 options over the authorized number of options in the Plan. As per ASC Topic 815-40, the options have been accounted for as liabilities and recorded at fair value with the changes in fair value being recorded in the Company’s statement of operations. Once stockholder approval is obtained to increase the number of authorized shares, the liability will then be reversed into additional paid in capital. The Company has recorded the $23,817 liability for this amount in accrued expenses.
See Note 10 related to the approval by the stockholders to increase the number of authorized shares in the Plan.
Warrants
A summary of warrant activity is presented below:
|
|
|
Number
|
|
Weighted
|
|
Remaining
|
|
|
|
Balance outstanding, December 31, 2012 |
|
6,985,070 |
|
$ |
3.96 |
|
|
|
|
Granted |
|
50,000 |
|
$ |
8.00 |
|
|
|
|
Exercised |
|
(238,579 |
) |
$ |
3.90 |
|
|
|
|
Balance outstanding June 30, 2013 |
|
6,796,491 |
|
$ |
3.99 |
|
4.89 |
|
The Company issued a warrant to purchase 50,000 shares of common stock at an exercise price of $8.00 per share, during the six months ended June 30, 2013. The warrants were issued in connection with an agreement to provide services related to investor and public relations materials and expire three years from date of grant. The estimated fair value of the warrant was determined on the date of grant using the Black-Scholes option valuation model using the following assumptions: a risk-free interest rate of 0.42%, dividend yield of 0%, expected volatility of 97% and expected term of three years. The resulting fair value of $198,791 was recorded as stock based compensation expense.
4. Stockholders’ (Deficiency) Equity
Common Stock
During the six month period ended June 30, 2013, the Company issued 233,118 shares of Common Stock upon exercise of warrants. Of these shares, 225,834 were issued upon exercise of 225,834 warrants at a weighted average exercise price of $3.95. The remaining 7,284 were issued upon net exercise of 12,745 warrants at an exercise price of $3.00. See Note 10.
Series A Convertible Preferred Stock
During the six month period ended June 30, 2013, 17,500 shares of Series A Convertible Preferred Stock were converted into 18,229 shares of common stock, on a net converted basis. As of June 30, 2013, 78,100 shares of Series A Convertible Preferred were outstanding. See Note 10.
5. Asset Purchase Agreement
On February 1, 2012 the Company entered into an asset purchase agreement with MultiGen Diagnostics, Inc. The Company determined that the acquired asset does not meet the definition of a business, as defined in ASC 805 , Business Combinations and will be accounted for under ASC 350, Intangibles- Goodwill and Other . In connection with the acquisition, the Company issued 125,000 shares of restricted common stock to MultiGen. In addition, up to an additional $3.7 million may be paid in a combination of common stock and cash to MultiGen upon the achievement of specific sales and earnings targets. In addition, in connection with the acquisition, the Company entered into a Reagent Supply Agreement dated as of February 1, 2012 pursuant to which MultiGen will supply and deliver reagents to be used in connection with a Clinical Laboratory Improvement Amendment (CLIA) laboratory. The total purchase consideration was determined to be $187,500 which was paid in the Company’s common stock.
Under ASC Topic 805, Business Combinations, the Company was required to assess the fair value of the assets acquired and the contingent consideration at the date of acquisition. Therefore, the Company assessed the fair value of the assets purchased and concluded that the purchase price would be allocated entirely to one intangible asset, a CLIA license. The contingent consideration of the $3.7 million milestone was determined to have no fair value by applying a weighted average probability on the achievement of the milestones developed during the valuation process. The Company will assess the fair value of the contingent consideration at each quarter and make adjustments as necessary until the milestone dates have expired. As of June 30, 2013, no adjustments to the fair value of the contingent consideration have been necessary, and therefore the fair value of the contingent consideration remains unchanged.
6. Derivative Financial Instruments - Warrants
Effective January 1, 2009, the Company adopted provisions of ASC Topic 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity” (“ASC Topic 815-40”). ASC Topic 815-40 clarifies the determination of whether an instrument issued by an entity (or an embedded feature in the instrument) is indexed to an entity’s own stock, which would qualify as a scope exception under ASC Topic 815-10.
Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Trovagene has determined that the warrants issued in connection with certain of its private placements and with its debentures must be recorded as derivative liabilities. Accordingly the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s statement of operations.
The Company estimates the fair value of the warrants issued in connection with certain of its private placements and with its debentures using the Black-Scholes model in order to determine the associated derivative instrument liability and change in fair value described above. The range of assumptions used to determine the fair value of the warrants at the end of each six month period, June 30, 2013 and 2012 were as follows:
|
|
|
Six Months Ended
|
|
Six Months Ended
|
|
||
|
Estimated fair value of Trovagene common stock |
|
$ |
6.26-6.99 |
|
$ |
1.50-3.90 |
|
|
Expected warrant term |
|
4 months – 5.8 years |
|
6 months – 6.8 years |
|
||
|
Risk-free interest rate |
|
0.04-1.41% |
|
0.09-1.54% |
|
||
|
Expected volatility |
|
97 -100% |
|
90% |
|
||
|
Dividend yield |
|
0% |
|
0% |
|
||
The following table sets forth the components of changes in the Company’s derivative financial instruments liability balance, valued using the Black-Scholes option pricing method, for the periods indicated:
|
Date |
|
Description |
|
Warrants |
|
Derivative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012 |
|
Balance of derivative financial instruments liability |
|
1,087,060 |
|
$ |
6,252,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrants during the six months ended June 30, 2013 recognized as a loss in the statement of operations |
|
— |
|
15,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013 |
|
Balance of derivative financial instruments liability |
|
1,087,060 |
|
$ |
6,268,425 |
|
The Company has issued units that were price protected. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Trovagene has determined that these price protected units issued in connection with the private placements must be recorded as derivative liabilities. Accordingly the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s statement of operations. The fair value of these price protected units was estimated using the binomial option pricing model. The binomial model requires the input of variable inputs over time, including the expected stock price volatility, the expected price multiple at which unit holders are likely to exercise their warrants and the expected forfeiture rate. The Company uses historical data to estimate forfeiture rate and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the warrant is based on the U.S. Treasury yield curve in effect at the date of grant for the expected term of the warrant.
The following table sets forth the components of changes in the Company’s derivative financial instruments liability balance, valued using the Binomial option pricing method, for the periods indicated:
|
Date |
|
Number of
|
|
Derivative
|
|
Change In
|
|
Ending
|
|
|||
|
December 31, 2012 |
|
1,288,650 |
|
$ |
1,171,463 |
|
$ |
1,341,405 |
|
$ |
2,512,868 |
|
|
Change in fair value of warrants during the six months ended June 30, 2013 recognized as a loss in the statement of operations |
|
— |
|
— |
|
1,600,503 |
|
1,600,503 |
|
|||
|
June 30, 2013 |
|
1,288,650 |
|
$ |
1,171,463 |
|
$ |
2,941,908 |
|
$ |
4,113,371 |
|
At June 30, 2013 and December 31, 2012, the total fair value of the above warrants accounted for as derivative financial instruments, valued using the Black-Scholes option pricing model and the Binomial option pricing model was $10,381,796 and $8,765,628, respectively, and is classified as derivative financial instruments liability on the balance sheet.
7. Fair Value Measurements
Fair value of financial instruments
The Company has adopted ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities that are required to be measured at fair value, and non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis. Financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable. These financial instruments are stated at their respective historical carrying amounts which approximate fair value due to their short term nature.
The following tables present the Company’s liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2012 and June 30, 2013:
|
Description |
|
Quoted Prices
|
|
Significant
|
|
Significant
|
|
Balance as of
|
|
||||
|
Derivative liabilities related to warrants |
|
$ |
— |
|
$ |
— |
|
$ |
8,765,628 |
|
$ |
8,765,628 |
|
|
Description |
|
Quoted Prices
|
|
Significant
|
|
Significant
|
|
Balance as of
|
|
||||
|
Derivative liabilities related to warrants |
|
$ |
— |
|
$ |
— |
|
$ |
10,381,796 |
|
$ |
10,381,796 |
|
The following table sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the six months ended June 30, 2013:
|
Description |
|
Balance at
|
|
Unrealized
|
|
Balance as of
|
|
|||
|
Derivative liabilities related to warrants |
|
$ |
8,765,628 |
|
$ |
1,616,168 |
|
$ |
10,381,796 |
|
The unrealized gains or losses on the derivative liabilities are recorded as a change in fair value of derivative liabilities in the Company’s statement of operations. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, the Company reviews the assets and liabilities that are subject to ASC Topic 815-40. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.
Equipment Line of Credit
In June 2013, the Company entered into a Loan and Security Agreement with Silicon Valley Bank that provides for cash borrowings for equipment of up to $1.0 million, secured by the equipment financed. As of June 30, 2013, $315,168 has been borrowed, of which $62,993 is included in current liabilities and $252,175 is long-term.
Under the terms of the agreement, interest is the greater of 5% or 4.6% above the U.S. Treasury Note as of the date of each borrowing. Interest only payments are due on borrowings through December 31, 2013, with both interest and principal payments commencing in January 2014. Any equipment advances after December 31, 2013 are subject to principal and interest payments immediately over a 30 month period following the advance. The Company has an obligation to make a final payment equal to 7% of total amounts borrowed at the loan maturity date and the final payment is being accrued over the term of the loans using the effective-interest method.
At June 30, 2013, Trovagene was in compliance with all covenants under the Loan Agreement. The Company is subject to certain nonfinancial covenants and a material adverse change clause.
The Company recorded $668 in interest expense related to the Loan and Security Agreement during the quarter ended June 30, 2013. Closing costs were not material and were expensed to general and administrative expenses in June 2013.
9. Commitments and Contingencies
Research and Development Agreements
During 2012, the Company entered into research agreements with University of Texas MD Anderson Cancer Center (“MDACC”) to provide samples and evaluate methods used by the Company in identification of pancreatic cancer mutations, as well as to measure the degree of concordance between results of transrenal DNA mutations analysis from urine samples and tumor tissue. Under these agreements, the Company has committed to pay $152,900 for the services performed by the University. As of June 30, 2013, the Company has incurred $94,615 related to these agreements.
On April 25, 2013 the Company entered into a Research and Development Agreement with PerkinElmer Health Sciences, Inc. (“PerkinElmer”) pursuant to which the Company will design an assay, based on the Company’s TrNA technology, to determine the risk for developing hepatocellular carcinoma. The Company and PerkinElmer will jointly validate the assay and evaluate the potential of combining the Company’s TrNA technology with PerkinElmer’s technology for automation of nucleic acid isolation. PerkinElmer will pay the Company certain milestone payments. In addition, the Company has granted PerkinElmer an exclusive option (the “HCC Option”) to obtain an exclusive royalty-bearing license to use the Company’s technology within the hepatocellular carcinoma field (the “HCC Field”). Such option is exercisable within 15 days of the end of proof of principle work on the hepatocellular carcinoma assay. In the event PerkinElmer exercises such option, the Company and PerkinElmer shall have a 60 day period to negotiate a license agreement. If both parties cannot agree on the terms of a license agreement during such period, for a period of one year, and if the Company wishes to enter into a license agreement with a third party pursuant to which the Company shall grant to such third party a license on terms that are in the aggregate more favorable to the Company than the terms last offered by the Company to PerkinElmer, then the Company shall, prior to entering into such license agreement, first offer to enter into such license agreement with PerkinElmer instead of such third party.
The Company has also granted PerkinElmer an exclusive option to obtain an exclusive royalty-bearing license to use the Company’s technology in other fields. Such option is exercisable within 15 days of the completion of the proof of principle work for the HCC assay development. In the event PerkinElmer exercises such option, the Company and PerkinElmer shall have a 60 day period to negotiate a license agreement. If both parties cannot agree on the terms of a license agreement during such period or the option is not exercised by PerkinElmer, the Company shall be free to license such technology to any party.
The Company recognizes milestone payments received from PerkinElmer as a reduction in research and development costs as the services are performed. Amounts received in advance of services performed are recorded as accrued liabilities until the services for which the payment has been received have been performed. The Company has received milestone payments related to this agreement of approximately $90,000 and incurred approximately $48,000 of research and development of costs during the three months ended June 30, 2013.
In June 2013, the Company entered into a Research Agreement with Illumina, Inc. (“Illumina”) pursuant to which the parties will work together to evaluate the potential for integrating the Company’s transrenal technology for isolating, extracting and genetic analysis of nucleic acids from urine with Illumina’s genetic analysis sequencing technology (the “Research Plan”). The parties have agreed that all results and reagents from the Research Plan will be shared between the parties. The Agreement will terminate upon the earlier of 30 days after completion of the Research Plan or the one year anniversary of the Agreement unless extended by mutual written agreement.
Employment Agreements
In January 2013, the Company entered into an employment agreement with Mark Erlander, Ph.D. in which he agreed to serve as Chief Scientific Officer. Dr. Erlander’s salary is $200,000 per year. Dr. Erlander is eligible to receive a cash bonus of up to 50% of his base salary per year at the discretion of the Compensation Committee based on goals mutually agreed upon by Dr. Erlander, the CEO and the Board of Directors. In connection with his employment, Dr. Erlander was granted a stock option to purchase 200,000 shares of common stock at an exercise price of $7.04. The option vests ratably over a four year period. If the Company terminates Dr. Erlander without cause, he is entitled to severance benefits equal to six months of his base salary.
In June 2013, the Compensation Committee approved an increase to the salaries of the CEO and CFO to $350,000 and $220,000, respectively. In addition, the CEO and CFO were granted options to purchase 200,000 and 60,000 shares of common stock, respectively. The options have an exercise price of $6.00 and vest ratably over a four year period.
Public Offering and Controlled Equity Offering
On January 25, 2013 the Company filed a Form S-3 Registration Statement to offer and sell in one or more offerings, any combination of common stock, preferred stock, warrants, or units having an aggregate initial offering price not exceeding $150,000,000. The preferred stock, warrants, and units may be convertible or exercisable or exchangeable for common stock or preferred stock or other Trovagene securities. This form was declared effective on February 4, 2013. In addition, in connection with the Form S-3, the Company entered into an agreement with Cantor Fitzgerald & Co. (“Agent”) on January 25, 2013 to issue and sell up to $30,000,000 of shares of common stock through them. As payment for its services, the Agent is entitled to a 3% commission on gross proceeds. No amounts have been raised through June 30, 2013 date relating to this agreement. See Note 10 for amounts raised subsequent to June 30, 2013.
10. Subsequent Events
Public Offering and Controlled Equity Offering
In July 2013, the Company sold 2,142,857 shares of its common stock for gross proceeds of approximately $15.0 million. During July 2013, the Company sold 488,475 shares of its common stock under the agreement with Cantor Fitzgerald & Co., for gross proceeds of approximately $4.2 million.
Stock Option Plan
The authorized shares in the Plan were increased to 6,000,000 from 3,666,667 by the stockholders at the Company’s annual meeting held on July 18, 2013.
Series A Convertible Preferred Stock
In August 2013, 17,500 shares of Series A Convertible Preferred Stock were converted into 18,229 shares of common stock, on a net converted basis.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding the future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions.
In addition, our business and financial performance may be affected by the factors that are discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2012, filed on April 1, 2013. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
You should not rely upon forward looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward looking statements will be achieved or occur. Although we believe that the expectations
reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Overview
From August 4, 1999 (inception) through June 30, 2013 we have sustained a cumulative total deficit of $61,598,689. From inception through June 30, 2013, we have generated minimal revenues and expect to incur additional losses to perform further research and development activities. During 2013, we have made the following advances:
· Announced the launch of our first commercial product, a urine-based human papillomavirus (HPV) test.
· Continued to file and maintain our patent portfolio and issued new patents including a broad microRNA patent covering methods of detecting and quantitating cell-free microRNA in urine and blood.
· Validated urine-based cancer detection technology and developed an ultra-sensitive cell-free DNA assay initially confirmed for the detection of the BRAF mutation.
· Expanded clinical collaboration with the University of Texas MD Anderson Cancer Center to include the detection of transrenal BRAF mutations in the urine of patients with advanced or metastatic cancers.
Our product development and commercialization efforts are in their early stages and we cannot make estimates of the costs or the time they will take to complete, or the timing and amount of revenues related to the sale of our tests and revenues related to our license agreements. The risk of completion of any program is high because of the many uncertainties involved in bringing new diagnostic products to market including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, the extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses and competing technologies being developed by organizations with significantly greater resources.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Inflation
It is our opinion that inflation has not had a material effect on our operations.
Critical Accounting Policies
Royalty and License Revenues
We license and sublicense our patent rights to healthcare companies, medical laboratories and biotechnology partners. These agreements may involve multiple elements such as license fees, royalties and milestone payments. Revenue is recognized for each element when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.
· Up-front nonrefundable license fees pursuant to agreements under which we have no continuing performance obligations are recognized as revenues on the effective date of the agreement and when collection is reasonably assured.
· Minimum royalties are recognized as earned, and royalties in excess of minimum amounts are recognized upon receipt of payment when collection is assured.
· Milestone payments are recognized when both the milestone is achieved and the related payment is received.
Derivative Financial Instruments-Warrants
Our derivative liabilities are related to warrants issued in connection with financing transactions and are therefore not designated as hedging instruments. All derivatives are recorded on our balance sheet at fair value in accordance with current accounting guidelines for such complex financial instruments.
We have issued common stock warrants in connection with the execution of certain equity and debt financings. Such warrants are classified as derivative liabilities under the provisions of FASB ASC 815 Derivatives and Hedging (“ASC 815”) , and are recorded at their fair market value as of each reporting period. Such warrants do not meet the exemption that a contract should not be considered a derivative instrument if it is: (1) indexed to its own stock, and (2) classified in stockholders’ equity. Changes in fair value of derivative liabilities are recorded in the consolidated statement of operations under the caption “Change in fair value of derivative instruments.”
Research and Development
Research and development costs, which include expenditures in connection with an in-house research and development laboratory, salaries and staff costs, application and filing for regulatory approval of proposed products, purchased in-process research and development, regulatory and scientific consulting fees, as well as contract research and insurance, are accounted for in accordance with ASC Topic 730-10-55-2, Research and Development. Also, as prescribed by this guidance, patent filing and maintenance expenses are considered legal in nature and therefore classified as general and administrative expense. Costs are not allocated to projects as the majority of the costs relate to employees and facilities costs and we do not track employees’ hours by project or allocate facilities costs on a project basis.
Share-based Compensation
Share-based compensation expense for employees and directors is recognized in the statement of operations based on estimated amounts, including the grant date fair value and the expected service period. For stock options, we estimate the grant date fair value using a Black-Scholes model. Share-based compensation recorded in our statement of operations is based on awards expected to ultimately vest and has been reduced for estimated forfeitures. We recognize the value of the awards on a straight-line basis over the awards’ requisite service periods. The requisite service period is generally the time over which our share-based awards vest.
We account for equity instruments granted to non-employees in accordance with ASC Topic 505-50 “ Equity-Based Payment to Non-Employees” where the value of the share-based compensation is based upon the measurement date as determined at either: a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Accordingly the fair value of these options is being “marked to market” quarterly until the measurement date is determined.
Fair value of financial instruments
Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and derivative liabilities. We have adopted FASB ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities that are required to be measured at fair value, and non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis. These financial instruments are stated at their respective historical carrying amounts which approximate to fair value due to their short term nature.
ASC 820 provides that the measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
· Level 1 — Quoted prices for identical instruments in active markets.
· Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable.
· Level 3 — Instruments where significant value drivers are unobservable to third parties.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2013 and 2012
Revenues
Our total revenues were $49,000 and $41,500 for the three months ended June 30, 2013 and 2012, respectively, and consisted only of royalty income. Royalty income increased by $7,500 in the three months ended June 30, 2013, due to an increase in number of royalty bearing agreements compared to the same period in the prior year.
Research and Development Expenses
Research and development expenses increased by $466,698 to $943,849 for the three months ended June 30, 2013 from $477,151 for the same period in 2012. Substantially all of the increase resulted from the expansion of our research and development efforts as we moved towards commercialization, increased the number of our research and development personnel by four, and purchased additional laboratory equipment to support the clinical collaborations we have entered into during 2012 and 2013 related to detection of certain types of cancer in urine samples. In addition, the validation of our urine-based cancer technology for the detection of the BRAF mutation and extension of our planned offering of urine-based oncogene mutation tests to include a test for the detection of a specific p53 mutation and a specific double mutation in the hepatitis B virus also resulted in additional research and development costs. We also established a clinical advisory board during the three months ended June 30, 2013.
Research and development expenses consisted of the following:
|
|
|
For the three months ended June 30, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
Increase |
|
|||
|
Salaries and staff costs |
|
$ |
484,628 |
|
$ |
255,563 |
|
$ |
229,065 |
|
|
Outside services, consultants and lab supplies |
|
314,932 |
|
110,362 |
|
204,570 |
|
|||
|
Facilities |
|
107,538 |
|
98,626 |
|
8,912 |
|
|||
|
Other |
|
36,751 |
|
12,600 |
|
24,151 |
|
|||
|
Total research and development |
|
$ |
943,849 |
|
$ |
477,151 |
|
$ |
466,698 |
|
We expect our research and development costs to increase as we complete existing collaborations and enter into new research agreements.
General and Administrative Expenses
General and administrative expenses increased by $669,395 to $1,479,263 for the three months ended June 30, 2013, from $809,868 for the same period in 2012. This increase was primarily due to the building of our sales, marketing and business development infrastructure in preparation for the launch and commercialization of our diagnostics products. In addition, continued patent filing and maintenance as well as the costs associated with being a publicly traded company added to our general and administrative expenses.
General and administrative expenses consisted of the following:
|
|
|
For the three months ended June 30, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
Increase (Decrease) |
|
|||
|
Salaries and staff costs |
|
$ |
514,306 |
|
$ |
277,203 |
|
237,103 |
|
|
|
Outside services and Board of Director fees |
|
400,038 |
|
428,564 |
|
(28,526 |
) |
|||
|
Legal and accounting fees |
|
197,794 |
|
27,033 |
|
170,761 |
|
|||
|
Facilities |
|
80,680 |
|
32,861 |
|
47,819 |
|
|||
|
Insurance |
|
27,491 |
|
18,170 |
|
9,321 |
|
|||
|
Marketing |
|
104,896 |
|
— |
|
104,896 |
|
|||
|
Travel |
|
103,112 |
|
16,108 |
|
87,004 |
|
|||
|
Fees, licenses and taxes |
|
37,130 |
|
7,147 |
|
29,983 |
|
|||
|
Other |
|
13,816 |
|
2,782 |
|
11,034 |
|
|||
|
Total general and administrative expenses |
|
$ |
1,479,263 |
|
$ |
809,868 |
|
$ |
669,395 |
|
We expect our general and administrative expenses to increase as we begin commercialization.
Change in Fair Value of Derivative Instruments - Warrants
We have issued securities that are accounted for as derivative liabilities. As of June 30, 2013, the derivative liabilities related to securities issued were revalued to $10,381,796, resulting in a net increase in value of $2,895,310 from March 31, 2013, based primarily upon the change in our stock price from $6.26 at March 31, 2013 to $6.99 at June 30, 2013 and the changes in the expected term and risk free interest rates for the expected term. The increase in value was recorded as non-operating loss for the three months ended June 30, 2013.
Net Loss
Net loss and per share amounts were as follows:
|
|
|
For the three months ended June 30, |
|
||||
|
|
|
2013 |
|
2012 |
|
||
|
Net loss and comprehensive loss attributable to common shareholders |
|
$ |
(5,279,475 |
) |
$ |
(3,435,970 |
) |
|
|
|
|
|
|
|
||
|
Net loss per common share: basic and diluted |
|
$ |
(0.34 |
) |
$ |
(0.28 |
) |
|
Weighted average shares: basic and diluted |
|
15,583,957 |
|
12,086,528 |
|
||
The $1,843,505 increase in net loss and $0.06 increase in net loss per share in 2013 compared to 2012 reflected a slight increase in revenues, offset by an increase in operating expenses and a loss from the change in fair value in derivative liabilities. Weighted average shares outstanding increased in 2013 due to the sale and issuance of 4.3 million shares of common stock resulting from the direct public offering in May 2012, in addition to the private placements, and exercise of stock options and warrants through June 30, 2013.
Six Months Ended June 30, 2013 and 2012
Revenues
Our total revenues were $168,123 and $75,653 for the six months ended June 30, 2013 and 2012, respectively, and consisted only of royalty income. Royalty income increased by $92,470 in the six months ended June 30, 2013 due to the fact there are more royalty bearing agreements in 2013 compared to the same period in 2012. In addition, revenues in the six months ended June 30, 2013 include approximately $75,000 of royalty payments earned in excess of minimum royalty amounts received related to the prior year. In accordance with our revenue recognition policy, we do not record royalty revenues in excess of minimum royalty amounts until we have received the payment.
Research and Development Expenses
Research and development expenses increased by $931,536 to $1,746,094 for the six months ended June 30, 2013 from $814,558 for the same period in 2012. Substantially all of the increase resulted from the expansion of our research and development efforts as we moved towards commercialization, increased the number of our internal research and development personnel to nine, and purchased additional laboratory equipment to support the clinical collaborations we have entered into related to validating our tests to detect certain types of cancer in urine samples.
Research and development expenses consisted of the following:
|
|
|
For the six months ended June 30, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
Increase |
|
|||
|
Salaries and staff costs |
|
$ |
911,257 |
|
425,662 |
|
$ |
485,595 |
|
|
|
Outside services, consultants and lab supplies |
|
583,576 |
|
197,164 |
|
386,412 |
|
|||
|
Facilities |
|
199,299 |
|
177,304 |
|
21,995 |
|
|||
|
Other |
|
51,962 |
|
14,428 |
|
37,534 |
|
|||
|
Total research and development |
|
$ |
1,746,094 |
|
$ |
814,558 |
|
$ |
931,536 |
|
General and Administrative Expenses
General and administrative expenses increased by $1,549,150 to $3,185,980 for the six months ended June 30, 2013 from $1,636,830 for the same period in 2012. This increase was primarily due to the building of our sales, marketing and business development infrastructure in preparation for the launch and commercialization of our diagnostics products. We have increased our internal headcount in these functional areas by four. In addition, continued patent filing and maintenance as well as the costs associated with being a publicly traded company, such as additional costs for insurance, NASDAQ fees and Sarbanes-Oxley compliance have added to our general and administrative expenses in comparison to the same period of the prior year.
General and administrative expenses consisted of the following:
|
|
|
For the six months ended June 30, |
|
|||||||
|
|
|
2013 |
|
2012 |
|
Increase |
|
|||
|
Salaries and staff costs |
|
$ |
1,235,673 |
|
406,943 |
|
828,730 |
|
||
|
Outside services and Board of Director fees |
|
843,162 |
|
720,108 |
|
123,054 |
|
|||
|
Legal and accounting fees |
|
533,945 |
|
355,889 |
|
178,056 |
|
|||
|
Facilities |
|
128,273 |
|
56,984 |
|
71,289 |
|
|||
|
Insurance |
|
55,272 |
|
35,719 |
|
19,553 |
|
|||
|
Marketing |
|
127,499 |
|
— |
|
127,499 |
|
|||
|
Travel |
|
157,859 |
|
39,877 |
|
117,982 |
|
|||
|
Fees, licenses and taxes |
|
52,782 |
|
7,869 |
|
44,913 |
|
|||
|
Other |
|
51,515 |
|
13,441 |
|
38,074 |
|
|||
|
Total general and administrative expenses |
|
$ |
3,185,980 |
|
$ |
1,636,830 |
|
$ |
1,549,150 |
|
Change in Fair Value of Derivative Instruments - Warrants
We have issued securities that are accounted for as derivative liabilities. As of June 30, 2013, the derivative liabilities related to securities issued were revalued to $10,381,796, resulting in an increase in value of $1,616,168 from December 31, 2012, based primarily upon the change in our stock price from $6.93 at December 31, 2012 to $6.99 at June 30, 2013 and the changes in the expected term and risk free interest rates for the expected term. The increase in value was recorded as non-operating loss for the six months ended June 30, 2013.
Net Loss
Net loss and per share amounts were as follows:
|
|
|
For the six months ended June 30, |
|
||||
|
|
|
2013 |
|
2012 |
|
||
|
Net loss and comprehensive loss attributable to common shareholders |
|
$ |
(6,396,057 |
) |
$ |
(4,608,170 |
) |
|
|
|
|
|
|
|
||
|
Net loss per common share: basic and diluted |
|
$ |
(0.41 |
) |
$ |
(0.40 |
) |
|
Weighted average shares: basic and diluted |
|
15,547,352 |
|
11,544,112 |
|
||
The $1,784,887 increase in net loss and $0.01 increase in net loss per share in 2013 compared to 2012 reflected a slight increase in revenues, offset by an increase in operating expenses and a loss from the change in fair value in derivative liabilities. Weighted average shares increased primarily due to the sale and issuance of 4.3 million shares of common stock resulting from the direct public offering in May 2012, in addition to the private placements, and exercise of stock options and warrants through June 30, 2013.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2013, we had $8,302,290 in cash and cash equivalents. Net cash used in operating activities for the six months ended June 30, 2013 was $3,364,625, compared to $2,201,600 for the six months ended June 30, 2012. Our use of cash was primarily a result of the net loss of $6,380,786 for the six months ended June 30, 2013, adjusted for non-cash items related to stock-based compensation of $887,608, depreciation and amortization of $43,933 and the loss from the change in fair value of derivatives of $1,616,168. The changes in our operating assets and liabilities consisted of higher accounts payable and accrued expenses, prepaid expenses and other assets, and a decrease in accounts receivable. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow for the next several years.
Investing activities consisted of purchases for capital equipment that used $360,138 in cash during the six months ended June 30, 2013, compared to $140,969 for the same period in 2012.
Net cash provided by financing activities was $1,207,272 during the six months ended June 30, 2013, compared to $10,946,605 during the six months ended June 30, 2012. Financing activities during the six months ended June 30, 2013 were from proceeds related to the exercise of warrants and borrowings on equipment lines, while in 2012 the net cash provided by financing activities were from proceeds received related to the sale of common stock.
As of June 30, 2013, and December 31, 2012, we had working capital of $7,061,277 and $10,317,833, respectively. As of August 9, 2013, our working capital was $28,024,465. This increase in working capital is primarily due to the approximately $19.2 million of gross proceeds from the sale of common stock and approximately $2.6 million from warrant exercises subsequent to June 30, 2013 through August 9, 2013.
Our working capital requirements will depend upon numerous factors including but not limited to the nature, cost and timing of our research and development programs. We believe that we have sufficient cash and cash equivalents to fund our operations for at least the next twelve months. We do not anticipate that our existing working capital alone will be sufficient to fund our operations through the successful development and commercialization of products we develop. As a result, we will need to raise additional capital to fund our operations and continue to conduct activities to support our product development and commercialization. To date, our sources of cash have been primarily limited to the sale of equity securities and debentures and debt borrowings. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. If we are unable to raise additional capital when required or on acceptable terms, we may have to (i) significantly delay, scale back or discontinue the development and/or commercialization of one or more of product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves on unfavorable terms.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, as of June 30, 2013, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective, due to weaknesses in our internal controls over financial reporting. We are implementing remedial measures designed to address the ineffectiveness of our disclosure controls and procedures.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2013, we implemented an anti-fraud program designed to detect and prevent fraud including (i) a whistle-blower program and (ii) an ongoing program to manage identified fraud risks. There were no other completed changes in our internal control over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
|
Exhibit
|
|
Description of Exhibit |
|
|
|
|
|
10.1 |
|
Research Agreement between Trovagene, Inc. and Illumina, Inc. dated June 20, 2013.* |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. |
|
|
|
|
|
31.2 |
|
Certification of Principal Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act. |
|
|
|
|
|
32.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.2 |
|
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101 |
|
Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended June 30, 2013, filed on August 14, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows (iv) the Condensed Consolidated Statement of Stockholders Equity (Deficit) and (v) the Notes to Consolidated Financial Statements tagged as blocks of text. |
|
|
|
|
|
|
||
|
|
|
*Portions of this exhibit were omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to a request for confidential treatment |
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.
|
|
TROVAGENE, INC. |
|
|
|
|
|
|
August 14, 2013 |
By: |
/s/ Antonius Schuh |
|
|
|
Antonius Schuh |
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
TROVAGENE, INC. |
|
|
|
|
|
|
August 14, 2013 |
By: |
/s/ Stephen Zaniboni |
|
|
|
Stephen Zaniboni |
|
|
|
Chief Financial Officer |
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|