trvn_Current_Folio_10Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission File Number 001-36193

 

Trevena, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

26-1469215
(I.R.S. Employer Identification No.)

 

 

955 Chesterbrook Boulevard, Suite 110
Chesterbrook, PA
(Address of Principal Executive Offices)

19087
(Zip Code)

 

Registrant’s telephone number, including area code: (610) 354-8840

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

TRVN

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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   No 

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

 

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

 

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

 

 

 

Common Stock, $0.001 par value

Shares outstanding as of August 5, 2019: 92,567,195

 

 

Table of Contents

TABLE OF CONTENTS

 

 

 

 

 

Page

Cautionary Note Regarding Forward-Looking Statements 

iii

 

 

 

 

PART I- FINANCIAL INFORMATION

 

Item 1. 

Financial Statements (Unaudited)

1

 

Balance Sheets

1

 

Statements of Operations and Comprehensive Loss

2

 

Statement of Stockholders’ Equity

3

 

Statements of Cash Flows

4

 

Notes to Unaudited Financial Statements

5

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4. 

Controls and Procedures

28

 

PART II- OTHER INFORMATION

 

Item 1. 

Legal Proceedings

29

Item 1A. 

Risk Factors

29

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3. 

Defaults Upon Senior Securities

61

Item 4. 

Mine Safety Disclosures

62

Item 5. 

Other Information

62

Item 6. 

Exhibits

62

 

 

 

SIGNATURES 

63

 

 

 

ii

 

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10‑Q, or this “Quarterly Report,” contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but also are contained elsewhere in this Quarterly Report, as well as in sections such as “Risk Factors” that are incorporated by reference into this Quarterly Report from our most recent Annual Report on Form 10‑K, or the “Annual Report.” In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

 

·

any ongoing or planned clinical trials and preclinical studies for our product candidates;

 

·

the extent of future clinical trials potentially required by the FDA for our product candidates;

 

·

our ability to fund future operating expenses and capital expenditures with our current cash resources or to secure additional funding in the future;

 

·

the timing and likelihood of obtaining and maintaining regulatory approvals for our product candidates;

 

·

our plans to develop and potentially commercialize our product candidates;

 

·

the clinical utility and market acceptance of our product candidates, particularly in light of existing and future competition;

 

·

our sales, marketing, and manufacturing capabilities and strategies;

 

·

our intellectual property position;

 

·

ongoing litigation; and

 

·

our ability to identify additional product candidates with significant commercial potential that are consistent with our commercial objectives.

 

You should refer to the “Risk Factors” section of this Quarterly Report and our Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

 

iii

 

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

TREVENA, INC.

Balance Sheets

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

    

June 30, 2019

    

December 31, 2018

 

 

 

(unaudited)

 

 

 

Assets

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

23,826

 

$

32,892

Marketable securities

 

 

30,140

 

 

28,590

Prepaid expenses and other current assets

 

 

1,301

 

 

607

Total current assets

 

 

55,267

 

 

62,089

Restricted cash

 

 

1,306

 

 

1,303

Property and equipment, net

 

 

2,982

 

 

3,387

Right-of-use lease asset

 

 

5,629

 

 

 —

Total assets

 

$

65,184

 

$

66,779

Liabilities and stockholders’ equity

 

 

  

 

 

  

Current liabilities:

 

 

  

 

 

  

Accounts payable

 

$

403

 

$

1,416

Accrued expenses and other current liabilities

 

 

2,416

 

 

3,295

Current portion of loans payable, net

 

 

11,258

 

 

12,562

Lease liability

 

 

581

 

 

10

Deferred rent

 

 

 —

 

 

207

Total current liabilities

 

 

14,658

 

 

17,490

Loans payable, net

 

 

 —

 

 

4,811

Leases, net of current portion

 

 

8,127

 

 

20

Deferred rent, net of current portion

 

 

 —

 

 

2,931

Warrant liability

 

 

 7

 

 

 1

Total liabilities

 

 

22,792

 

 

25,253

Commitments and contingencies (Note 6)

 

 

  

 

 

  

Stockholders’ equity:

 

 

  

 

 

  

Common stock—$0.001 par value; 200,000,000 shares authorized; 92,567,195 and 82,323,413 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

92

 

 

82

Preferred stock—$0.001 par value; 5,000,000 shares authorized, none issued or outstanding at June 30, 2019 and December 31, 2018

 

 

 —

 

 

 —

Additional paid-in capital

 

 

440,424

 

 

429,727

Accumulated deficit

 

 

(398,134)

 

 

(388,274)

Accumulated other comprehensive loss

 

 

10

 

 

(9)

Total stockholders’ equity

 

 

42,392

 

 

41,526

Total liabilities and stockholders’ equity

 

$

65,184

 

$

66,779

 

See accompanying notes to financial statements.

1

Table of Contents

TREVENA, INC.

Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2019

    

2018

    

2019

    

2018

Revenue:

 

 

  

 

 

  

 

 

  

 

 

  

License revenue

 

$

 —

 

$

2,500

 

$

 —

 

$

2,500

Operating expenses:

 

 

  

 

 

  

 

 

  

 

 

  

General and administrative

 

 

3,311

 

 

5,926

 

 

6,371

 

 

10,998

Research and development

 

 

2,722

 

 

5,128

 

 

4,876

 

 

9,726

Restructuring charges

 

 

 —

 

 

41

 

 

 —

 

 

64

Impairment of property and equipment

 

 

108

 

 

 —

 

 

108

 

 

 —

Total operating expenses

 

 

6,141

 

 

11,095

 

 

11,355

 

 

20,788

Loss from operations

 

 

(6,141)

 

 

(8,595)

 

 

(11,355)

 

 

(18,288)

Other income (expense):

 

 

  

 

 

  

 

 

  

 

 

  

Change in fair value of warrant liability

 

 

 6

 

 

 4

 

 

(6)

 

 

 4

Net (loss) gain on asset disposals

 

 

 —

 

 

(107)

 

 

 —

 

 

116

Other income, net

 

 

1,616

 

 

500

 

 

1,873

 

 

1,428

Interest income

 

 

98

 

 

226

 

 

251

 

 

425

Interest expense

 

 

(271)

 

 

(597)

 

 

(624)

 

 

(1,275)

Gain on foreign currency exchange

 

 

 1

 

 

10

 

 

 1

 

 

10

Total other income

 

 

1,450

 

 

36

 

 

1,495

 

 

708

Loss before income tax expense

 

 

(4,691)

 

 

(8,559)

 

 

(9,860)

 

 

(17,580)

Foreign income tax expense

 

 

 —

 

 

(745)

 

 

 —

 

 

(745)

Net loss attributable to common stockholders

 

$

(4,691)

 

$

(9,304)

 

$

(9,860)

 

$

(18,325)

Other comprehensive gain, net:

 

 

  

 

 

  

 

 

  

 

 

  

Unrealized gain on marketable securities

 

 

 7

 

 

26

 

 

19

 

 

22

Other comprehensive gain, net

 

 

 7

 

 

26

 

 

19

 

 

22

Comprehensive loss

 

$

(4,684)

 

$

(9,278)

 

$

(9,841)

 

$

(18,303)

Per share information:

 

 

  

 

 

  

 

 

  

 

 

  

Net loss per share of common stock, basic and diluted

 

$

(0.05)

 

$

(0.13)

 

$

(0.11)

 

$

(0.27)

Weighted average common shares outstanding, basic and diluted

 

 

92,414,644

 

 

69,664,994

 

 

90,665,684

 

 

67,127,711

 

See accompanying notes to financial statements.

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Table of Contents

TREVENA, INC.

Statement of Stockholders’ Equity (Unaudited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

Other

 

 

 

 

 

Number

 

$0.001

 

Additional

 

 

 

 

Comprehensive

 

Total

 

 

of

 

Par

 

Paid-in

 

Accumulated

 

Income

 

Stockholders'

 

    

Shares

    

Value

    

Capital

    

Deficit

    

(Loss)

    

Equity

Balance, January 1, 2019

 

82,323,413

 

$

82

 

$

429,727

 

$

(388,274)

 

$

(9)

 

$

41,526

Stock-based compensation expense

 

 —

 

 

 —

 

 

754

 

 

 —

 

 

 —

 

 

754

Exercise of stock options

 

30,225

 

 

 —

 

 

21

 

 

 —

 

 

 —

 

 

21

Issuance of warrants to underwriters in connection with equity offering

 

 —

 

 

 —

 

 

347

 

 

 —

 

 

 —

 

 

347

Issuance of common stock, net of issuance costs

 

10,000,000

 

 

10

 

 

8,886

 

 

 —

 

 

 —

 

 

8,896

Unrealized gain on marketable securities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

12

 

 

12

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(5,169)

 

 

 —

 

 

(5,169)

Balance, March 31, 2019

 

92,353,638

 

$

92

 

$

439,735

 

$

(393,443)

 

$

 3

 

$

46,387

Stock-based compensation expense

 

 —

 

 

 —

 

 

793

 

 

 —

 

 

 —

 

 

793

Shares repurchased by the Company

 

(122)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

 

213,679

 

 

 —

 

 

(104)

 

 

 —

 

 

 —

 

 

(104)

Unrealized gain on marketable securities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 7

 

 

 7

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(4,691)

 

 

 —

 

 

(4,691)

Balance, June 30, 2019

 

92,567,195

 

$

92

 

$

440,424

 

$

(398,134)

 

$

10

 

$

42,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

Other

 

 

 

 

 

Number

 

$0.001

 

Additional

 

 

 

 

Comprehensive

 

Total

 

 

of

 

Par

 

Paid-in

 

Accumulated

 

Income

 

Stockholders'

 

    

Shares

    

Value

    

Capital

    

Deficit

    

(Loss)

    

Equity

Balance, January 1, 2018

 

62,310,795

 

$

62

 

$

392,103

 

$

(357,490)

 

$

(42)

 

$

34,633

Stock-based compensation expense

 

 —

 

 

 —

 

 

1,498

 

 

 —

 

 

 —

 

 

1,498

Exercise of stock options

 

88,048

 

 

 —

 

 

57

 

 

 —

 

 

 —

 

 

57

Issuance of common stock, net of issuance costs

 

5,204,893

 

 

 6

 

 

9,148

 

 

 —

 

 

 —

 

 

9,154

Unrealized gain on marketable securities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4)

 

 

(4)

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(9,021)

 

 

 —

 

 

(9,021)

Balance, March 31, 2018

 

67,603,736

 

$

68

 

$

402,806

 

$

(366,511)

 

$

(46)

 

$

36,317

Stock-based compensation expense

 

 —

 

 

 —

 

 

1,287

 

 

 —

 

 

 —

 

 

1,287

Exercise of stock options

 

44,904

 

 

 —

 

 

26

 

 

 —

 

 

 —

 

 

26

Issuance of common stock, net of issuance costs

 

5,859,345

 

 

 6

 

 

10,338

 

 

 —

 

 

 —

 

 

10,344

Unrealized gain on marketable securities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

26

 

 

26

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(9,304)

 

 

 —

 

 

(9,304)

Balance, June 30, 2018

 

73,507,985

 

$

74

 

$

414,457

 

$

(375,815)

 

$

(20)

 

$

38,696

 

See accompanying notes to financial statements.

3

Table of Contents

TREVENA, INC.

Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30, 

 

    

2019

    

2018

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(9,860)

 

$

(18,325)

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

 

 

  

 

 

 

Depreciation and amortization

 

 

297

 

 

340

Stock-based compensation

 

 

1,547

 

 

2,785

Noncash interest expense on loans

 

 

218

 

 

446

Impairment of property and equipment

 

 

108

 

 

 —

Revaluation of warrant liability

 

 

 6

 

 

(4)

Accretion of bond discount on marketable securities

 

 

(348)

 

 

(25)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(720)

 

 

(2,400)

Operating lease right-of-use assets and operating lease liabilities

 

 

(59)

 

 

 —

Accounts payable, accrued expenses and other liabilities

 

 

(1,890)

 

 

(1,560)

Deferred revenue

 

 

 —

 

 

3,000

Net cash used in operating activities

 

 

(10,701)

 

 

(15,743)

Investing activities:

 

 

  

 

 

  

Purchases of property and equipment

 

 

 —

 

 

(147)

Maturities of marketable securities

 

 

40,179

 

 

32,550

Purchases of marketable securities

 

 

(41,362)

 

 

(22,422)

Net cash (used in) provided by investing activities

 

 

(1,183)

 

 

9,981

Financing activities:

 

 

  

 

 

  

Proceeds from exercise of common stock options

 

 

21

 

 

83

Proceeds from issuance of common stock, net

 

 

9,243

 

 

19,498

Payment of employee withholding taxes on vested restricted stock units

 

 

(104)

 

 

 —

Capital lease payments

 

 

(6)

 

 

(6)

Repayments of loans payable, net

 

 

(6,333)

 

 

(6,333)

Net cash provided by financing activities

 

 

2,821

 

 

13,242

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(9,063)

 

 

7,480

Cash, cash equivalents and restricted cash—beginning of period

 

 

34,195

 

 

17,970

Cash, cash equivalents and restricted cash—end of period

 

$

25,132

 

$

25,450

Supplemental disclosure of cash flow information:

 

 

  

 

 

  

Cash paid for interest

 

$

406

 

$

827

Fair value of common stock warrants issued to underwriters

 

$

347

 

$

 —

 

See accompanying notes to financial statements.

4

Table of Contents

TREVENA, INC.

Notes to Unaudited Financial Statements

June 30, 2019

1. Organization and Description of the Business

Trevena, Inc., or the Company, was incorporated in Delaware as Parallax Therapeutics, Inc. on November 9, 2007. The Company began operations in December 2007, and its name was changed to Trevena, Inc. on January 3, 2008. The Company is a biopharmaceutical company focused on the development and commercialization of novel medicines for patients affected by central nervous system, or CNS, conditions. The Company operates in one segment and has its principal office in Chesterbrook, Pennsylvania.

 

Since commencing operations in 2007, the Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials. The Company has never been profitable and has not yet commenced commercial operations. On November 2, 2018, the U.S. Food and Drug Administration, or FDA, issued a complete response letter, or CRL, with respect to the Company’s new drug application, or NDA, for oliceridine. In the CRL, the FDA requested additional clinical data on the QT interval and indicated that the submitted safety database was not of adequate size for the proposed labeling. The FDA also requested certain additional nonclinical data and validation reports. On January 28, 2019, the Company announced the receipt of the official Type A meeting minutes from the FDA regarding the CRL wherein it agreed that the current oliceridine safety database will support labeling at a maximum daily dose of 27 mg. The FDA also agreed that the Company can conduct a study in healthy volunteers to collect the requested QT interval data and that the study should include placebo- and positive-control arms. The Company submitted a detailed protocol and analysis plan to the FDA and has received feedback from the FDA on key design elements for the study and analysis plan. The Company began the study in June 2019 and expects to report topline data in the fourth quarter of 2019. To address remaining items in the CRL, the FDA indicated that the Company should include supporting nonclinical data related to the characterization of the 9662 metabolite and the remaining product validation reports when the Company resubmits the oliceridine NDA.

 

Since its inception, the Company has incurred losses and negative cash flows from operations. At June 30, 2019, the Company had an accumulated deficit of $398.1 million. The Company’s net loss was $9.9 million and $18.3 million for the six months ended June 30, 2019 and 2018, respectively. The Company expects its cash and cash equivalents of $23.8 million and marketable securities of $30.1 million as of June 30, 2019, together with interest thereon, to be sufficient to fund its operating expenses, debt service, and capital expenditure requirements for at least twelve months following the date of this filing, into the third quarter of 2020.

Certain prior period amounts have been reclassified to conform to the current period presentation, the effect of which was not material to the Company’s interim consolidated financial statements.

 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB. The Company’s functional currency is the U.S. dollar.

The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s balance sheet as of June 30, 2019, its results of operations and its comprehensive loss for the three and six months ended June 30, 2019 and 2018, its statement of stockholders’ equity for the period from January 1, 2019 to June 30, 2019, and its cash flows for the six months ended June 30, 2019 and 2018. The information included in this Quarterly Report on Form 10‑Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10‑K for the year ended December 31, 2018. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The financial data and other information disclosed in these notes related to the six

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months ended June 30, 2019 and 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, any other interim periods, or any future year or period.

Leases

The Company adopted ASU 2016‑02, Leases (Topic 842), and all applicable amendments as of January 1, 2019 using a modified retrospective approach. The Company determines if an arrangement is a lease at inception. Operating leases are included in long-term right-of-use assets and current and long-term lease liabilities on our consolidated balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The right-of-use assets are tested for impairment according to ASC 360. See Note 6 for details. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these immaterial leases on a straight-line basis over the lease term. 

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component under the practical expedient provisions of the standard. Lease payments, which may include lease and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts that depend on a rate or index as stipulated in the lease contract.    

Revenue

In accordance with FASB’s ASC 606, Revenue from Contracts with Customers, or ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

(i)

identify the contract(s) with a customer;

(ii)

identify the performance obligations in the contract;

(iii)

determine the transaction price;

(iv)

allocate the transaction price to the performance obligations in the contract; and

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

The Company applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s balance sheet. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified as Current portion of deferred revenue. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as Deferred revenue, net of current portion.

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License Revenues

The Company’s revenues have primarily been generated through licensing arrangements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, up-front license fees; regulatory and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. See Note 7.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:

(i)

identification of the promised goods or services in the contract;

(ii)

determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii)

measurement of the transaction price, including the constraint on variable consideration;

(iv)

allocation of the transaction price to the performance obligations; and

(v)

recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company also assesses whether there is an option in a contract to acquire additional goods or services. An option gives rise to a performance obligation only if the option provides a material right to the customer that it would not receive without entering into that contract. Factors that the Company considers in evaluating whether an option represents a material right include, but are not limited to: (i) the overall objective of the arrangement, (ii) the benefit the collaborator might obtain from the arrangement without exercising the option, (iii) the cost to exercise the option (e.g. priced at a significant and incremental discount), and (iv) the likelihood that the option will be exercised. With respect to options determined to be performance obligations, the Company recognizes revenue when those future goods or services are transferred or when the options expire.

 

The Company’s revenue arrangements may include the following:

 

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

 

Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements.

 

Research and Development Activities: Under the Company’s current collaboration and license arrangements, if the Company is entitled to reimbursement for costs for services provided by the Company, it expects such reimbursement would be an offset to research and development expenses.

 

Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably 

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measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

 

Manufacturing Supply and Research Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

 

The Company receives payments from its licensees based on schedules established in each contract. Upfront payments are recorded as deferred revenue upon receipt, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.

 

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. To date, the Company has not taken any uncertain tax position or recorded any reserves, interest or penalties.

 

Recently Adopted Accounting Standards

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides the option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings. This option would be available in each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA (or a portion thereof) is recorded. This is effective for the Company beginning after December 15, 2018, with early adoption permitted. These amendments should be applied in the period of adoption or retrospectively to each period in which the effect of the change in the U.S federal corporate income tax rate in the TCJA is recognized. The adoption of this standard did not have an impact on the Company’s consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842), which requires lessees to record most leases on their balance sheets and disclose key information about leasing arrangements in an effort to increase transparency and comparability among organizations. The standard is effective for annual periods beginning after December 15, 2018 and interim periods within that reporting period. The Company adopted the standard on January 1, 2019 using a modified retrospective approach. The Company recognized a right-of-use asset and corresponding lease liability related to its operating leases as of the date of adoption. The Company elected to apply the package of practical expedients which allows entities not to reassess whether contracts are or contain leases, lease classification, and whether initial direct costs qualify for capitalization. The Company elected not to separate lease and non-lease components and will not apply the hindsight practical expedient. The adoption of this standard resulted in recording additional net lease assets and lease liabilities of approximately $5.7 million and $8.8 million, respectively. The standard did not materially impact our consolidated net earnings and had no impact on cash flows.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer in an amount reflecting the consideration it expects to receive in exchange for those goods or

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services. Additionally, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations. ASU 2016-08 amends the principal versus agent guidance in ASU 2014-09 to clarify how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principal to certain types of arrangements. The effective date for both standards is January 1, 2018. The Company adopted these standards on January 1, 2018 and elected the modified retrospective transition method, meaning the cumulative effect of applying the new guidance, if any, was recognized at that date as an adjustment to the opening accumulated deficit balance. There was no impact to the Company’s financial statements upon adoption, as the Company did not have any contracts with customers as of the adoption date.

 

Recent Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements related to fair value measurements in Topic 820, Fair Value Measurement, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and modifying certain other disclosure requirements. The ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect this standard will have on its financial statements and related disclosures.

3. Fair Value of Financial Instruments

ASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:

·

Level 1‑Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

·

Level 2‑Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

·

Level 3‑Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. 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.

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Cash, Cash Equivalents and Marketable Securities

The following table presents fair value of the Company’s cash, cash equivalents, and marketable securities as of June 30, 2019 and December 31, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

    

Adjusted 

   

Unrealized

   

Unrealized

   

 

 

   

Cash and Cash

   

Restricted

   

Marketable

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

Equivalents

 

Cash

 

Securities

Cash

 

$

7,818

 

$

 —

 

$

 —

 

$

7,818

 

$

6,512

 

$

1,306

 

$

 —

Level 1 (1):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Money market funds

 

 

14,318

 

 

 —

 

 

 —

 

 

14,318

 

 

14,318

 

 

 —

 

 

 —

U.S. treasury securities

 

 

23,929

 

 

10

 

 

 —

 

 

23,939

 

 

 —

 

 

 —

 

 

23,939

Subtotal

 

 

38,247

 

 

10

 

 

 —

 

 

38,257

 

 

14,318

 

 

 —

 

 

23,939

Level 2 (2):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

U.S. government agency securities

 

 

9,197

 

 

 —

 

 

 —

 

 

9,197

 

 

2,996

 

 

 —

 

 

6,201

Total

 

$

55,262

 

$

10

 

$

 —

 

$

55,272

 

$

23,826

 

$

1,306

 

$

30,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Adjusted 

 

Unrealized

 

Unrealized

 

 

 

 

Cash and Cash

 

Restricted

 

Marketable

 

    

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

    

Securities

Cash

 

$

10,992

 

$

 —

 

$

 —

 

$

10,992

 

$

9,689

 

$

1,303

 

$

 —

Level 1 (1):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Money market funds

 

 

23,203

 

 

 —

 

 

 —

 

 

23,203

 

 

23,203

 

 

 —

 

 

 —

U.S. treasury securities

 

 

18,938

 

 

 —

 

 

(4)

 

 

18,934

 

 

 —

 

 

 —

 

 

18,934

Subtotal

 

 

42,141

 

 

 —

 

 

(4)

 

 

42,137

 

 

23,203

 

 

 —

 

 

18,934

Level 2 (2):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

U.S. government agency securities

 

 

9,661

 

 

 —

 

 

(5)

 

 

9,656

 

 

 —

 

 

 —

 

 

9,656

Total

 

$

62,794

 

$

 —

 

$

(9)

 

$

62,785

 

$

32,892

 

$

1,303

 

$

28,590


(1)

The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.

(2)

The fair value of Level 2 securities is estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

The Company classifies investments available to fund current operations as current assets on its balance sheets. As of June 30, 2019, the Company did not hold any investment securities exceeding a one-year maturity.

The Company maintains $1.3 million as collateral under a letter of credit for the Company’s facility lease obligations in Chesterbrook, Pennsylvania. The Company has recorded this deposit and accumulated interest thereon as restricted cash on its balance sheet.

Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive income (loss) included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive income (loss) on a specific identification basis. The Company did not record any realized gains or losses during the three and six months ended June 30, 2019 and 2018. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 2 and Level 3 during the six months ended June 30, 2019 or the year ended December 31, 2018.

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4. Loans Payable

In September 2014, the Company entered into a loan and security agreement with Oxford Finance LLC and Pacific Western Bank (formerly Square 1Bank) (together, the lenders), pursuant to which the lenders agreed to lend the Company up to $35.0 million in a three-tranche series of term loans (Term Loans A, B, and C). Upon initially entering into the agreement, the Company borrowed $2.0 million under Term Loan A. In April 2015, the Company amended the agreement with the lenders to change the draw period for Term Loan B. In December 2015, the Company further amended the agreement with the lenders to, among other things, change the draw period for Term Loan C, modify the interest only period, and modify the maturity date of the loan. In December 2015, the Company borrowed the Term Loan B tranche of $16.5 million. The Company’s ability to draw an additional $16.5 million under Term Loan C was subject to the satisfaction of one or more specified triggers related to the results of the Company’s Phase 2b clinical trial of TRV027, which were announced in May 2016. Although those triggers were not attained, in December 2016, the Company and the lenders modified the terms and conditions under which the Company could exercise an option to draw $10.0 million of Term Loan C. In March 2017, the Company borrowed the Term Loan C tranche of $10.0 million.

Borrowings under Term Loans A and B accrue interest at a fixed rate of 6.50% per annum. Borrowings under Term Loan C accrue interest at a fixed rate of 6.98% per annum. The Company was required to make payments of interest only on borrowings under the loan agreement on a monthly basis through and including January 1, 2018. Payments of principal in equal monthly installments and accrued interest began on January 1, 2018 and will continue to be due until the loan matures on March 1, 2020. As of June 30, 2019, there was $9.5 million aggregate principal balance outstanding under the term loans. Upon the last payment date of the amounts borrowed under the agreement, the Company will be required to pay a final payment fee equal to 6.6% of the aggregate amounts borrowed, which is recorded as interest expense over the term of the loans payable. In addition, if the Company repays Term Loan A, Term Loan B, or Term Loan C prior to the applicable maturity date, it will pay the lenders a prepayment fee of 1.0% of Term Loan C.

The Company’s obligations under the loan and security agreement are secured by a first priority security interest in substantially all of the assets of the Company, including the Company’s cash, cash equivalents, and marketable securities but excluding the Company’s intellectual property (together, the collateral). The Company has agreed not to pledge or otherwise encumber its intellectual property, other than through grants of certain permitted non-exclusive or exclusive licenses or other conveyances of its intellectual property.

The loan and security agreement includes affirmative and restrictive covenants, including: (a) financial reporting requirements; (b) limitations on the incurrence of indebtedness; (c) limitations on liens; (d) limitations on certain merger and acquisition transactions; (e) limitations on dispositions of certain assets; (f) limitations on fundamental corporate changes (including changes in control); (g) limitations on investments; (h) limitations on payments and distributions and (i) other covenants. The agreement also contains certain events of default, including for payment defaults, breaches of covenants, a material adverse change in the Company’s business, operations or condition (financial or otherwise), a material impairment in the value of the collateral or in the prospect of repayment of the Company’s obligations to the lender, certain levies, attachments and other restraints on the Company’s business, insolvency, defaults under other agreements and misrepresentations. Upon an event of default, the lenders have the right to foreclose upon the available collateral, including the Company’s existing cash and cash equivalents and marketable securities.

In connection with entering into the agreement, the Company issued to the lenders and the placement agent warrants to purchase an aggregate of 7,678 shares of Trevena’s common stock, of which 5,728 shares remain outstanding as of June 30, 2019. These detachable warrant instruments have qualified for equity classification and have been allocated upon the relative fair value of the base instrument and the warrants, according to the guidance of ASC 470-20-25-2. These warrants are exercisable immediately and have an exercise price of $5.8610 per share. The warrants may be exercised on a cashless basis and will terminate on the earlier of September 19, 2024 or the closing of a merger or consolidation transaction in which the Company is not the surviving entity. In connection with the draw of Term Loan B, the Company issued to the lenders and the placement agent additional warrants to purchase an aggregate of 34,961 shares of Trevena common stock. These warrants have substantially the same terms as those noted above, have an exercise price of $10.6190 per share and an expiration date of December 23, 2025. In connection with draw of Term Loan C, the Company issued to the lenders and placement agent additional warrants to purchase an aggregate of 62,241 shares of the Company’s common stock. These warrants have substantially the same terms as those noted above, and have an exercise price of $3.6150 per share and an expiration date of March 31, 2027.

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As of June 30, 2019, borrowings of $9.5 million attributable to Term Loans A, B, and C are outstanding. Interest expense of $0.4 million and $0.8 million was recorded during the six months ended June 30, 2019 and 2018, respectively. The Company incurred lender and third-party costs of $1.0 million related to the issuance of its term loans. Per ASU 2015‑03, Interest-Imputation of Interest, debt discount and debt issuance costs are to be presented as a contra-liability to the debt on the balance sheet. These costs will be amortized to interest expense over the life of the loans using the effective interest method. Immaterial amounts of debt discount and debt issuance cost were amortized to interest expense during the three and six months ended June 30, 2019 and 2018, respectively.

The following table summarizes how the issuance of Term Loans A, B, and C are reflected on the balance sheet at June 30, 2019 and December 31, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

    

June 30, 

 

December 31, 

    

 

 

2019

 

2018

 

Gross proceeds

 

$

9,500

 

$

15,833

 

Debt discount and debt issuance costs (1)

 

 

1,758

 

 

1,540

 

Carrying value

 

 

11,258

 

 

17,373

 

Current portion of loans payable, net

 

 

11,258

 

 

12,562

 

Loans payable, net

 

$

 —

 

$

4,811

 


(1)

Includes the final fee payment due upon last payment date of the amounts borrowed.

 

 

 

 

5. Stockholders’ Equity

Equity Offerings

ATM Programs

On December 14, 2015, the Company entered into an at the market, or ATM, sales agreement, or the Prior ATM Agreement, with Cowen and Company, LLC, or Cowen, to offer and sell, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $75.0 million through Cowen as its sales agent. Sales under the Prior ATM Agreement are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. Under the Prior ATM Agreement, the Company was required to pay Cowen a commission of up to three percent of the gross sales proceeds and provided Cowen with customary indemnification rights. In 2018, the Company issued and sold 11.4 million shares of common stock under the Prior ATM Agreement at a weighted average price per share of $1.80. The net offering proceeds to the Company in 2018 for sales under the Prior ATM Agreement were approximately $20.0 million after deducting related expenses, including commissions. Sales of common stock under the Prior ATM Agreement terminated on June 29, 2018 when the Company’s Registration Statement on Form S-3 (File No. 333-225685), or the Shelf Registration Statement, was declared effective by the SEC. Accordingly, as of June 30, 2019, there was no remaining capacity available under this ATM sales facility.

In June 2018, the Company filed a $175.0 million shelf registration statement that included an ATM sales facility to offer and sell, through Cowen, from time to time at the Company’s sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million. Sales of the shares of common stock are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act. During 2018, the Company sold approximately 8.5 million shares of its common stock under this facility, at a weighted average share price of $1.60, which yielded net proceeds to the Company of approximately $13.2 million after deducting related expenses, including commissions. The Company terminated sales under this ATM sales facility on April 17, 2019, and the remaining capacity was added back to the aggregate amount available under the Shelf Registration Statement. Accordingly, as of June 30, 2019, there was no remaining capacity available under this ATM sales facility.

 

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On April 17, 2019, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which the Company may offer and sell through Wainwright, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million, or the Current ATM Program. Sales of the shares of common stock are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act. The Company intends to use the net proceeds from the offering primarily for the development of its lead product candidate, oliceridine, and for general corporate purposes. The Company did not issue any shares through the Current ATM Program during the quarter ended June 30, 2019. As of June 30, 2019, there was $50.0 million remaining available for future issuances under the Current ATM Program.

Private Placement and Concurrent Warrant Issuance

 

On January 29, 2019, the Company entered into securities purchase agreements with two institutional investors wherein the Company agreed to sell to the investors an aggregate of 10,000,000 shares of its common stock, at an offering price of $1.00 per share, in a registered direct offering made pursuant to the Company’s existing registration statement on Form S-3. The net proceeds to the Company from the offering were approximately $9.2 million, after deducting fees and the expenses of the placement agent.

Pursuant to a letter agreement dated January 28, 2019, the Company engaged H.C. Wainwright & Co., LLC, or Wainwright, to act as its exclusive placement agent in connection with the issuance and sale of the shares. The Company paid Wainwright 7.0% of the aggregate gross proceeds in the offering and $50,000 for certain expenses, and it issued warrants to purchase 500,000 shares of common stock to certain designees of Wainwright. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. The warrants are classified as equity and recorded at fair value as of the date of issuance on the Company’s Consolidated Balance Sheets and no further adjustments to their valuation are made. The letter agreement also includes indemnification obligations of the Company and other provisions customary for transactions of this nature.

Equity Incentive Plans

The Company utilizes equity incentive plans to grant various forms of stock options and restricted stock to eligible employees, directors and consultants to the Company. Under all of such plans, the amount, terms of grants and exercisability provisions are determined by the board of directors or its designee. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the board of directors. Vesting generally occurs over a period of not greater than four years. For performance-based stock awards, the Company recognizes expense when achievement of the performance factor is probable, over the requisite service period.

The estimated grant-date fair value of the Company’s stock-based awards is amortized on a straight-line basis over the awards’ service periods. Stock-based compensation expense recognized was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

Research and development

 

$

192

 

$

386

 

$

424

 

$