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 ~~March 31,~~September 30, 2017



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~~COMMISSION FILE NUMBER 001-35558

TROVAGENE, INC.

(Exact Name of registrant as specified in its charter)



Delaware		27-2004382
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11055 Flintkote Avenue, Suite B, San Diego, California		92121
(Address of principal executive offices)		(Zip Code)

(858) 952-7570
(Registrant’s telephone number, including area code)

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, smaller reporting company, or an emerging growth company. See 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	o		Accelerated filer	xo

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	ox

			Emerging growth company	o

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. o

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 ~~April 28,~~October 31, 2017, the issuer had ~~30,973,000~~38,106,460 shares of Common Stock issued and outstanding.

Table of Contents

TROVAGENE, INC.

Table of Contents



		Page
PART I	FINANCIAL INFORMATION

Item 1.1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets (unaudited) as of ~~March 31,~~September 30, 2017 and December 31, 2016	3

	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended ~~March 31,~~September 30, 2017 and 2016	4

	Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended ~~March 31,~~September 30, 2017 and 2016	5

	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~three~~nine months ended ~~March 31,~~September 30, 2017 and 2016	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2528

Item 4.	Controls and Procedures	2529

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	2730

Item 1A.	Risk Factors	2730

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3930

Item 3.	Defaults Upon Senior Securities	3930

Item 4.	Mine Safety Disclosures	3930

Item 5.	Other Information	3930

Item 6:	Exhibits	3930

SIGNATURES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TROVAGENE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	10,183,460		$	13,915,094		$	7,434,298		$	13,915,094
Short-term investments	18,619,712			23,978,022			—			23,978,022
Accounts receivable	80,348			100,460			178,127			100,460
Prepaid expenses and other assets	845,845			956,616
Prepaid expenses and other current assets							939,200			956,616
Total current assets	29,729,365			38,950,192			8,551,625			38,950,192
Property and equipment, net	3,567,064			3,826,915			3,126,969			3,826,915
Other assets	628,640			1,173,304			539,309			1,173,304
Total Assets	$	33,925,069		$	43,950,411		$	12,217,903		$	43,950,411

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	968,385		$	1,130,536		$	675,499		$	1,130,536
Accrued expenses	3,830,741			4,021,365			2,620,250			4,021,365
Deferred rent	285,246			285,246			298,213			285,246
Current portion of long-term debt	3,873,438			2,360,109
Current portion of long-term debt (in default)							1,488,041			2,360,109
Total current liabilities	8,957,810			7,797,256			5,082,003			7,797,256
Long-term debt, less current portion	12,699,739			14,176,359			—			14,176,359
Derivative financial instruments—warrants	279,434			834,940			2,037,712			834,940
Deferred rent, net of current portion	1,307,598			1,373,717			1,153,316			1,373,717
Total Liabilities	23,244,581			24,182,272			8,273,031			24,182,272

Commitments and contingencies (Note 9)

Stockholders’ equity
Preferred stock, $0.001 par value, 20,000,000 shares authorized; 60,600 shares outstanding at March 31, 2017 and December 31, 2016; designated as Series A Convertible Preferred Stock with liquidation preference of $606,000 at March 31, 2017 and December 31, 2016	60			60
Common stock, $0.0001 par value, 150,000,000 shares authorized; 30,967,791 and 30,696,791 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively	3,098			3,070
Preferred stock, $0.001 par value, 20,000,000 shares authorized; 60,600 shares outstanding at September 30, 2017 and December 31, 2016; designated as Series A Convertible Preferred Stock with liquidation preference of $606,000 at September 30, 2017 and December 31, 2016							60			60
Common stock, $0.0001 par value, 150,000,000 shares authorized; 38,105,251 and 30,696,791 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively							3,811			3,070
Additional paid-in capital	168,811,755			167,890,984			174,426,891			167,890,984
Accumulated other comprehensive loss	(13,626		)	(10,773		)	(15,194		)	(10,773		)
Accumulated deficit	(158,120,799		)	(148,115,202		)	(170,470,696		)	(148,115,202		)
Total stockholders’ equity	10,680,488			19,768,139			3,944,872			19,768,139
Total liabilities and stockholders’ equity	$	33,925,069		$	43,950,411		$	12,217,903		$	43,950,411

See accompanying notes to the unaudited condensed consolidated financial statements.

TROVAGENE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Revenues:
Royalties	$	65,826		$	112,868		$	58,779		$	47,236		$	169,415		$	207,869
Diagnostic services	28,862			7,618			58,119			37,978			142,482			69,558
Clinical research services	350			—			6,431			3,900			8,481			35,573
Total revenues	95,038			120,486			123,329			89,114			320,378			313,000
Costs and expenses:
Cost of revenues	616,426			309,271			473,202			424,559			1,427,831			1,143,293
Research and development	4,279,830			3,208,064			1,414,706			3,937,398			6,676,251			11,221,876
Selling and marketing	1,407,985			3,057,552			419,927			2,940,862			2,442,931			9,127,450
General and administrative	2,196,639			4,004,247			3,659,587			2,710,782			9,915,359			9,183,761
Restructuring charges	1,719,804			—
Restructuring (benefit) charges							(46,472		)	—			1,669,526			—
Total operating expenses	10,220,684			10,579,134			5,920,950			10,013,601			22,131,898			30,676,380

Loss from operations	(10,125,646		)	(10,458,648		)	(5,797,621		)	(9,924,487		)	(21,811,520		)	(30,363,380		)

Net interest expense	(429,397		)	(337,620		)	(16,473		)	(354,993		)	(877,741		)	(967,522		)
Gain from change in fair value of derivative financial instruments—warrants	555,506			533,750			1,528,669			88,208			2,012,747			674,834
Loss on extinguishment of debt							—			—			(1,655,825		)	—
Other loss, net							(6,541		)	—			(4,975		)	—
Net loss	(9,999,537		)	(10,262,518		)	(4,291,966		)	(10,191,272		)	(22,337,314		)	(30,656,068		)

Preferred stock dividend	(6,060		)	(6,060		)	(6,060		)	(6,060		)	(18,180		)	(18,180		)

Net loss attributable to common stockholders	$	(10,005,597	)	$	(10,268,578	)	$	(4,298,026	)	$	(10,197,332	)	$	(22,355,494	)	$	(30,674,248	)

Net loss per common share — basic	$	(0.32	)	$	(0.35	)	$	(0.12	)	$	(0.34	)	$	(0.68	)	$	(1.02	)
Net loss per common share — diluted	$	(0.32	)	$	(0.36	)	$	(0.12	)	$	(0.34	)	$	(0.68	)	$	(1.04	)

Weighted-average shares outstanding — basic	30,961,014			29,755,184			36,465,672			30,339,774			32,826,306			30,018,841
Weighted-average shares outstanding — diluted	30,961,014			30,108,377			36,465,672			30,339,774			32,826,306			30,136,572

See accompanying notes to the unaudited condensed consolidated financial statements.

TROVAGENE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Net loss	$	(9,999,537	)	$	(10,262,518	)	$	(4,291,966	)	$	(10,191,272	)	$	(22,337,314	)	$	(30,656,068	)
Other comprehensive loss:
Other comprehensive income (loss):
Foreign currency translation loss	(2,399		)	(651		)	(1,544		)	(81		)	(13,486		)	(1,877		)
Unrealized loss on securities available-for-sale	(454		)	—
Total other comprehensive loss	(2,853		)	(651		)
Unrealized gain or reversal of previous losses on securities available-for-sale							—			(7,997		)	9,065			(2,865		)
Total other comprehensive income (loss)							(1,544		)	(8,078		)	(4,421		)	(4,742		)

Total comprehensive loss	(10,002,390		)	(10,263,169		)	(4,293,510		)	(10,199,350		)	(22,341,735		)	(30,660,810		)

Preferred stock dividend	(6,060		)	(6,060		)	(6,060		)	(6,060		)	(18,180		)	(18,180		)

Comprehensive loss attributable to common stockholders	$	(10,008,450	)	$	(10,269,229	)	$	(4,299,570	)	$	(10,205,410	)	$	(22,359,915	)	$	(30,678,990	)

See accompanying notes to the unaudited condensed consolidated financial statements.

TROVAGENE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating activities
Net loss	$	(9,999,537	)	$	(10,262,518	)	$	(22,337,314	)	$	(30,656,068	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of assets							28,199			—
Impairment loss	485,000			—			485,000			—
Depreciation and amortization	330,968			156,821			956,995			693,485
Stock based compensation expense	920,799			2,811,108			3,117,364			5,942,392
Loss on extinguishment of debt							1,655,825			—
Accretion of final fee premium	125,012			93,062			293,614			266,423
Amortization of discount on debt	68,223			27,631			113,780			105,710
Net realized loss on short-term investments							6,400			—
Amortization of premiums on short-term investments	10,877			—			9,230			61,719
Deferred rent	(66,119		)	—			(207,435		)	(133,378		)
Interest income accrued on short-term investments	151,583			—			(90,330		)	10,122
Change in fair value of derivative financial instruments—warrants	(555,506		)	(533,750		)	(2,012,747		)	(674,834		)
Changes in operating assets and liabilities:
Decrease in other assets	—			2,761			—			2,761
Decrease in accounts receivable	20,112			36,801
Decrease (increase) in prepaid expenses	110,957			(51,272		)
(Increase) decrease in accounts receivable							(77,667		)	13,584
Decrease (increase) in prepaid expenses and other current assets							18,230			(157,051		)
(Decrease) increase in accounts payable and accrued expenses	(360,577		)	1,072,343			(1,908,796		)	2,490,137
Decrease in other liabilities	—			(268,694		)
Net cash used in operating activities	(8,758,208		)	(6,915,707		)	(19,949,652		)	(22,034,998		)

Investing activities:
Capital expenditures, net	(11,452		)	(352,023		)	(136,251		)	(797,781		)
Maturities of short-term investments	14,000,000			—			16,431,837			—
Purchases of short-term investments	(8,804,604		)	—			(8,804,604		)	(24,451,611		)
Sales of short-term investments							16,434,553			—
Net cash provided by (used in) investing activities	5,183,944			(352,023		)	23,925,535			(25,249,392		)

Financing activities:
Proceeds from sales of common stock and warrants, net of expenses							6,634,803			2,293,857
Proceeds from exercise of options	—			133,613			—			366,966
Borrowings under equipment line of credit	—			550,297			—			792,251
Borrowings under long-term debt, net of costs							—			7,805,086
Payment upon debt extinguishment							(1,613,067		)	—
Repayments of long-term debt	—			(919,864		)	(15,000,000		)	(8,896,166		)
Repayments of equipment line of credit	(156,526		)	—			(469,578		)	—
Net cash used in financing activities	(156,526		)	(235,954		)
Net cash (used in) provided by financing activities							(10,447,842		)	2,361,994
Effect of exchange rate changes on cash and cash equivalents	(844		)	(34		)	(8,837		)	(1,544		)
Net change in cash and equivalents	(3,731,634		)	(7,503,718		)	(6,480,796		)	(44,923,940		)
Cash and cash equivalents—Beginning of period	13,915,094			67,493,047			13,915,094			67,493,047
Cash and cash equivalents—End of period	$	10,183,460		$	59,989,329		$	7,434,298		$	22,569,107

Supplementary disclosure of cash flow activity:
Cash paid for taxes							$	800		$	4,560
Cash paid for interest	$	300,040		$	276,214		$	650,331		$	806,228
Supplemental disclosure of non-cash investing and financing activities:
Preferred stock dividends accrued	$	6,060		$	6,060		$	18,180		$	18,180
Leasehold improvements paid for by lessor	$	—		$	1,860,000		$	—		$	1,860,000

See accompanying notes to the unaudited condensed consolidated financial statements.

TROVAGENE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Basis of Presentation

Business Organization and Overview

Trovagene, Inc. (“Trovagene” or the “Company”) ~~is a precision medicine biotechnology company~~ headquartered in San Diego, ~~California.~~California, is a clinical-stage, precision medicine oncology therapeutics company. The Company’s primary focus is to develop oncology therapeutics for improved cancer care, optimizing drug development by leveraging its proprietary Precision Cancer Monitoring® (“PCM”) diagnostic technology in tumor genomics. ~~The Company’s PCM technology allows for detection~~

Trovagene’s lead drug candidate, PCM-075, is a Polo-like Kinase 1 (“PLK1”) selective adenosine triphosphate (“ATP”) competitive inhibitor. PCM-075 has shown preclinical antitumor activity as a single agent and ~~quantitation~~synergy in combination with more than ten different chemotherapeutics and targeted therapies, such as Zytiga® (abiraterone acetate), Beleodaq® (belinostat), Quizartinib (AC220), a development stage FLT3 inhibitor, and Velcade® (bortezomib) in Acute Myeloid Leukemia (“AML”), metastatic Castration-Resistant Prostate Cancer (“mCRPC”) and other liquid and solid tumor cancers.

PCM-075 was developed to have high selectivity to PLK1, to be administered orally, and to have a relatively short drug half-life of ~~oncogene mutations~~approximately 24 hours compared to other PLK inhibitors. PCM-075 has completed a safety study in ~~cancer~~ patients ~~for improved disease management. Trovagene’s Trovera™ liquid biopsy test, which utilizes PCM technology, is designed to provide important~~with advanced metastatic solid tumors with a phase 1b/2 clinical ~~information beyond the current standard of care. Trovagene has broad intellectual property and proprietary technology to measure circulating tumor DNA (“ctDNA”)~~trial in urine and blood to identify and quantify clinically actionable markers for predicting response to cancer therapeutics. Trovagene offers its PCM technology at its Clinical Laboratory Improvement Amendments (“CLIA”)-certified/College of American Pathologists (“CAP”)-accredited laboratory and plans to continue to vertically integrate its PCM technologypatients with ~~precision cancer therapeutics.~~AML underway.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Trovagene, which include all accounts of its wholly owned subsidiary, Trovagene, Srl, 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.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows for the periods presented. ~~All such adjustments are~~The unaudited condensed balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of ~~a normal~~the information and ~~recurring nature.~~disclosures required by GAAP for annual financial statements. The operating results presented in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2016 included in the Company’s annual report on Form 10-K filed with the SEC on March 15, 2017.

Liquidity

Trovagene’s condensed consolidated financial statements as of ~~March 31,~~September 30, 2017 have been prepared under the assumption that Trovagene will continue as a going ~~concern.~~concern, which assumes that the Company will realize its assets and satisfy its liabilities in the normal course of business. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going ~~concern~~concern.

However, the Company has incurred net losses since its inception and has negative operating cash flows. The Company also received a default letter from Silicon Valley Bank (“SVB”) regarding the Loan and Security Agreement entered in November 2015 which stated that events of default had occurred and SVB will decide in its sole discretion whether or not to exercise rights and remedies. Based on its current business plan and assumptions, the Company expects to continue to incur significant losses and require significant additional capital to further advance its clinical trial programs and support its other operations. Considering the Company’s current cash resources, including the net proceeds received from the offering of its equity securities in July 2017, management believes the Company’s existing resources will be sufficient to fund the Company’s

planned operations into the first quarter of 2018. In addition, the Company has based its cash sufficiency estimates on its current business plan and its assumptions that may prove to be wrong. The Company could utilize its available capital resources sooner than it currently expects, and it could need additional funding to sustain its operations even sooner than currently anticipated. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. For the foreseeable future, the Company’s ability to continue its operations is dependent upon its ability to obtain additional ~~equity or debt financing, attain further operating efficiencies and, ultimately, to generate additional revenue.~~ capital.

The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company’s stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct its business.

If the Company is unable to raise additional capital when required or on acceptable terms, it may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of its product candidates, all of which may have a material adverse impact on the Company’s operations. The Company may also be required to:

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; and

Relinquish licenses or otherwise dispose of rights to technologies, product candidates or products that the Company would otherwise seek to develop or commercialize themselves, on unfavorable terms.

The Company is evaluating the following options to raise additional capital, increase revenue, as well as reduce costs, in an effort to strengthen its liquidity position:

Raising capital through public and private equity offerings;

Adding capital through short-term and long-term borrowings;

Introducing operation and business development initiatives to bring in new revenue streams by leveraging capabilities within our CLIA lab, as well as monetizing our proprietary NextCollect™ DNA collection and preservation cup;

Reducing operating costs by identifying internal synergies;

Engaging in strategic partnerships; and

Taking actions to reduce or delay capital expenditures.

On October 25, 2017, the Company filed a registration statement on Form S-1 with the SEC for a best efforts public offering of up to $17.5 million of common stock and warrants. The Company continually assesses any spending plans, including a review of its discretionary spending in connection with certain strategic contracts, to effectively and efficiently address its liquidity needs.

NASDAQ Notice

On September 5, 2017, the Company received a written notice from the NASDAQ Stock Market LLC (“NASDAQ”) that it was not in compliance with NASDAQ Listing Rule 5550(a)(2) for continued listing on the NASDAQ Capital Market, as the minimum bid price of the Company’s common stock had been below $1.00 per share for 30 consecutive business days. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until March 5, 2018, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Short-Term Investments

Short-term investments ~~consist~~consisted of corporate debt securities, U.S. treasury securities, and commercial paper. The Company ~~classifies~~classified its short-term investments as available-for-sale, as the sale of such securities may be required prior to maturity to execute management strategies. Investments classified as available-for-sale are carried at fair value, with the unrealized gains and losses reported as a component of consolidated accumulated other comprehensive income (loss) in stockholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities ~~if any, are~~were determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is determined to be other than temporary will result in an impairment charge to earnings and a new cost basis for the security is established. No such impairment charges were recorded for any period presented. Premiums and discounts ~~are~~were amortized or accreted over the life of the related security as an adjustment to yield using the straight-line method and included in interest income. Interest income iswas recognized when earned. Realized gains and losses on investments in securities ~~will be~~were included in other income (loss) within the consolidated statements of operations. ~~There were no~~As of September 30, 2017, all of the short-term investments have been sold to satisfy the Company’s outstanding obligations under the Loan and Security Agreement dated as of June 30, 2014 upon demanding repayment by the lenders. As a result, the Company recognized net realized ~~gains and losses~~loss of approximately $6,400 for the ~~three~~nine months ended ~~March 31,~~September 30, 2017.

Revenue Recognition

Revenue is recognized when persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.

Milestone, Royalty and License Revenues

The Company licenses and sublicenses its 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 when the criteria described above have been met as well as the following:

•Up-front nonrefundable license fees pursuant to agreements under which the Company has 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 are earned based on the licensee’s use. The Company is unable to predict licensee’s sales and thus revenue is recognized upon receipt of notification from licensee and payment when collection is assured. Notification is generally one quarter in arrears.

•Milestone payments are recognized when both the milestone is achieved and the related payment is received.

Diagnostic Service Revenues

Revenue for clinical laboratory tests may come from several sources, including commercial third-party payors, such as insurance companies and health maintenance organizations, government payors, such as Medicare and Medicaid in the United States, patient self-pay and, in some cases, from hospitals or referring laboratories who, in turn, might bill third-party payors for testing. The Company is recognizing diagnostic service revenue on the cash collection basis until such time as it is able to properly estimate collections on third party reimbursements.

Clinical Research Services Revenue

Revenue from clinical research services consists ~~primarily~~ of revenue from the sale of urine and blood collection supplies and tests performed under agreements with our clinical research and business development partners. Revenue iswas recognized when supplies ~~are~~and/or test results were delivered.

Cost of Revenue

Cost of revenue represents the cost of materials, personnel costs and costs associated with processing specimens including pathological review, quality control analyses, and delivery charges necessary to render an individualized test result. Costs associated with performing tests are recorded as the tests are processed. However, the revenue on diagnostic services is recognized on a cash collection basis resulting in costs incurred before the collection of related revenue.

Derivative Financial Instruments—Warrants

The Company has issued common stock warrants in connection with the execution of certain equity financings. Such warrants are classified as derivative liabilities under the provisions of Financial Accounting Standards Board (“FASB”) ASC 815 Derivatives and Hedging (“ASC 815”) ~~and~~ or ASC 480 Distinguishing Liabilities from Equity (“ASC 480”)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. The warrants within the scope of ASC 480 contain a feature that could require the transfer of cash in the event a change of control occurs without an authorization of our Board of Directors, and therefore classified as a liability. 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.”

The fair value of warrants is determined using the Black-Scholes option-pricing model using assumptions regarding the volatility of Trovagene’s common stock price, the remaining life of the ~~warrant,~~warrants, and the risk-free interest rates at each period end. The Company thus uses model-derived valuations where inputs are observable in active markets to determine the fair value and accordingly classifies such warrants in Level 3 per FASB ASC Topic 820, Fair Value Measurements (“ASC 820”). At ~~March 31,~~September 30, 2017 and December 31, 2016, the fair value of these warrants was ~~$279,434~~$2,037,712 and $834,940, respectively, and was recorded as a liability under the caption “derivative financial instruments—warrants” on the consolidated balance ~~sheet.~~sheets.

Net Loss Per Share

Basic and diluted net loss per share is presented in conformity with ~~FASB~~ ASC Topic 260, Earnings per Share, for all periods presented. In accordance with this guidance, basic 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. Preferred dividends are included in income available to common stockholders in the computation of basic and diluted earnings per share. Diluted net loss per share is computed by dividing the net loss by the ~~weighted-average~~weighted average number of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive.

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Numerator: Net loss attributable to common shareholders	$	(10,005,597	)	$	(10,268,578	)	$	(4,298,026	)	$	(10,197,332	)	$	(22,355,494	)	$	(30,674,248	)
Adjustment for (gain) loss from change in fair value of derivative financial instruments—warrants	—			(533,750		)
Adjustment for gain from change in fair value of derivative financial instruments—warrants							—			—			—			(533,750		)
Net loss used for diluted loss per share	$	(10,005,597	)	$	(10,802,328	)	$	(4,298,026	)	$	(10,197,332	)	$	(22,355,494	)	$	(31,207,998	)
Denominator for basic and diluted net loss per share:
Weighted-average shares used to compute basic loss per share	30,961,014			29,755,184			36,465,672			30,339,774			32,826,306			30,018,841
Adjustments to reflect assumed exercise of warrants	—			353,193			—			—			—			117,731
Weighted-average shares used to compute diluted net loss per share	30,961,014			30,108,377			36,465,672			30,339,774			32,826,306			30,136,572
Net loss per share attributable to common stockholders:
Basic	$	(0.32	)	$	(0.35	)	$	(0.12	)	$	(0.34	)	$	(0.68	)	$	(1.02	)
Diluted	$	(0.32	)	$	(0.36	)	$	(0.12	)	$	(0.34	)	$	(0.68	)	$	(1.04	)

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their effect was anti-dilutive:


	March 31,		September 30,
	2017	2016	2017	2016
Options to purchase Common Stock	4,687,566	8,117,024	4,257,031	6,051,186
Warrants to purchase Common Stock	5,505,901	4,515,947	8,972,503	4,546,939
Restricted Stock Units	976,991	—	1,277,302	392,000
Series A Convertible Preferred Stock	63,125	63,125	63,125	63,125
	11,233,583	12,696,096	14,569,961	11,053,250

License Fees

The Company expenses amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired. Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. The Company has determined that technological feasibility for its product candidates is reached when the requisite regulatory approvals are obtained to make the product available for sale.

Restructuring

Restructuring costs are included in loss from operations in the condensed consolidated statements of operations. The Company has accounted for these costs in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. One-time termination benefits are recorded at the time they are communicated to the affected employees. In March 2017, the Company announced a restructuring plan which is expected to be completed in the ~~second~~last quarter of 2017. See Note 10 to the condensed consolidated financial statements for further information.

~~Change in Accounting Principle~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”), which aims to simplify the accounting for share-based payment transactions, including accounting for income taxes, classification on the statement of cash flows, accounting for forfeitures, and classification of awards as either liabilities or equity. In addition, under the ASU 2016-09, excess income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than cash flow from financing activities. The Company adopted ASU 2016-09 as

of January 1, 2017 and has elected to continue estimating forfeitures based on historical experience. The adoption of ASU 2016-09 did not have a material impact on the Company’s financial statements.

Recent Accounting Pronouncements

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which includes amendments that clarify how certain cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 also provides guidance clarifying when an entity should

separate cash receipts and cash payments and classify them into more than one class of cash flows. The new amendments and guidance are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted provided that all amendments are adopted in the same period. The Company is currently evaluating the impact of adoption of ASU 2016-15 on its consolidated statements of cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for most leases. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard will impact the Company’s accounting for its office leases and the Company is currently evaluating the impact of the new standard on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The new standard is based on the ~~principal~~principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Since its initial release, the FASB has issued several amendments to the standard, which include clarification of accounting guidance related to identification of performance obligations, intellectual property licenses, and ~~principal~~principle versus agent considerations. ASU 2014-09 and all subsequent amendments (collectively, the “new standards”) will be effective for the Company beginning in the first quarter of fiscal year 2018 and may be applied using either the full retrospective method, in which case the ~~standard~~new standards would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the ~~standard~~new standards would be recognized at the date of initial application. ~~To date,~~The Company has reviewed its revenue streams to identify potential differences in accounting as a result of the new standards. Currently, the Company does not have any significant contracts with customers given its stage of development. The Company has derived its revenues primarily from a limited number of royalty, license and diagnostic service agreements. The consideration the Company is eligible to receive under these agreements includes upfront license payments, milestone payments and royalties. Each of ~~its collaboration~~these agreements has unique terms that ~~will need to be~~are being evaluated separately under the new standards. ~~The Company has started its preliminary assessment of its active license and collaboration agreements.~~ The new standards differ from the current accounting standard in many respects, such as in the accounting for variable consideration, including milestone payments. For example, the Company currently recognizes milestone revenue using the milestone method specified in ASC 605-28, which generally results in recognition of milestone revenue in the period that the milestone event is achieved. However, under the new ~~accounting~~ standards, it is possible to start to recognize milestone revenue before the milestone is achieved if management determines with a high degree of certainty that amounts recorded as revenues will not have to be reversed when the uncertainty associated with the variable consideration is subsequently resolved. ~~In addition,~~The Company is also continuing to assess the ~~current accounting~~potential impact that the new standards ~~include~~may have with respect to its diagnostic service revenue which is currently recognized on a ~~presumption that~~cash collection basis. Under the new standards, the Company may recognize diagnostic service revenue ~~from upfront non-refundable fees are recognized ratably over the performance period, unless another attribution method is determined to more closely approximate the~~upon delivery of test results if management determines with a high degree of certainty that amounts recorded as revenues will not have to be reversed when the ~~goods or services to~~uncertainty associated with the customer. The new accounting standards will require entities to determine an appropriate attribution method using either output or input methods and do not include a presumption that entities would default to ratable attribution approach.variable consideration is subsequently resolved. The Company is continuing to assess the impact ~~these items~~the new standards will have on its financial ~~statements.~~statements and expects to complete the assessment on or before the year-end 2017. The Company ~~is completing~~does not expect a significant change in the timing and recognition of its ~~initial assessment of the new standards, including a high level review of the Company’s contract portfolio and~~ revenue ~~streams, particularly around royalty revenues, to identify potential differences in accounting as a result~~upon adoption of the new standards. The Company expects to adopt the new standards using the modified retrospective method with an adjustment, if any, to beginning retained earnings for the cumulative effect of the change.

3. Fair Value Measurements

The following table presents the Company’s assets and 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 ~~March 31,~~September 30, 2017 and December 31, 2016:


	Fair Value Measurements at March 31, 2017								Fair Value Measurements at September 30, 2017
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market fund (1)	$	8,707,706	$	—	$	—	$	8,707,706	$	6,510,214	$	—	$	—	$	6,510,214
Corporate debt securities (2)	—		3,743,945		—		3,743,945
Commercial paper (3)	—		7,272,879		—		7,272,879
U.S. treasury securities (2)	—		8,602,627		—		8,602,627
Total Assets	$	8,707,706	$	19,619,451	$	—	$	28,327,157	$	6,510,214	$	—	$	—	$	6,510,214
Liabilities:
Derivative financial instruments—warrants	$	—	$	—	$	279,434	$	279,434	$	—	$	—	$	2,037,712	$	2,037,712
Total Liabilities	$	—	$	—	$	279,434	$	279,434	$	—	$	—	2,037,712		$	2,037,712



	Fair Value Measurements at December 31, 2016
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market fund (1)	$	12,095,620	$	—	$	—	$	12,095,620
Corporate debt securities (2)	—		14,160,686		—		14,160,686
Commercial paper (3)	—		2,393,948		—		2,393,948
U.S. treasury securities (2)	—		8,621,892		—		8,621,892
Total Assets	$	12,095,620	$	25,176,526	$	—	$	37,272,146
Liabilities:
Derivative financial instruments—warrants	$	—	$	—	$	834,940	$	834,940
Total Liabilities	$	—	$	—	$	834,940	$	834,940

(1) Included as a component of cash and cash equivalents on the accompanying condensed consolidated balance sheets.

(2) Included in short-term investments on the accompanying condensed consolidated balance sheets.

(3) ~~$999,739~~$0 and $1,198,504 of commercial paper was included as a component of cash and cash equivalents at ~~March 31,~~September 30, 2017 and December 31, 2016, respectively, and the remaining amount was included in short-term investments on the accompanying consolidated balance sheets.

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the ~~three~~nine months ended ~~March 31,~~September 30, 2017:


Description	Balance at December 31, 2016		Unrealized Gain			Balance at March 31, 2017		Balance at December 31, 2016		Issuance of Derivative Financial Instruments	Realized Gain			Balance at September 30, 2017
Derivative financial instruments—warrants	$	834,940	$	(555,506	)	$	279,434	$	834,940	3,215,519	$	(2,012,747	)	$	2,037,712

The ~~unrealized~~realized gains or losses on the derivative financial instruments—warrants are recorded as a change in fair value of derivative financial instruments—warrants in the Company’s consolidated 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 that trade infrequently and therefore have little or no price transparency are classified as Level 3.

4. Short-Term Investments

As of September 30, 2017, all short-term investments have been sold to satisfy the Company’s outstanding obligations under the Loan and Security Agreement dated as of June 30, 2014 upon demanding repayment by the lenders.

The following table sets forth the composition of ~~securities available-for-sale~~short-term investments as of ~~March 31, 2017 and~~ December 31, 2016.

March 31, 2017
Unrealized
Maturity in Years Cost Gains Losses Fair Value

Corporate debt securities Less than 1 year $ 3,747,683
$ —
$ (3,738 ) $ 3,743,945
Commercial paper Less than 1 year 6,273,140
—
—
6,273,140
U.S. treasury securities Less than 1 year 8,608,408
—
(5,781 ) 8,602,627
Total Investment $ 18,629,231
$ —
$ (9,519 ) $ 18,619,712



	December 31, 2016
				Unrealized
	Maturity in Years	Cost		Gains		Losses			Fair Value
Corporate debt securities	Less than 1 year	$	14,165,915	$	44	$	(5,273	)	$	14,160,686
Commercial paper	Less than 1 year	1,195,444		—		—			1,195,444
U.S. treasury securities	Less than 1 year	8,625,728		330		(4,166		)	8,621,892
Total Investment		$	23,987,087	$	374	$	(9,439	)	$	23,978,022

5. Property and Equipment

Property and equipment consist of the following:


	As of March 31, 2017			As of December 31, 2016			As of September 30, 2017			As of December 31, 2016
Furniture and office equipment	$	1,144,741		$	1,144,741		$	1,076,709		$	1,144,741
Leasehold improvements	1,994,514			1,994,514			1,994,514			1,994,514
Laboratory equipment	2,461,097			2,449,645			2,584,363			2,449,645
	5,600,352			5,588,900			5,655,586			5,588,900
Less—accumulated depreciation and amortization	(2,033,288		)	(1,761,985		)	(2,528,617		)	(1,761,985		)
Property and equipment, net	$	3,567,064		$	3,826,915		$	3,126,969		$	3,826,915

6. Debt

Equipment Line of Credit

In November 2015, the Company entered into a Loan and Security Agreement (“Equipment Line of Credit”) with ~~Silicon Valley Bank~~SVB that provided for cash borrowings for equipment (“Equipment Advances”) of up to $2.0 million, secured by the equipment financed. Under the terms of the agreement, interest is equal to 1.25% above the Prime Rate. At ~~March 31,~~September 30, 2017, the interest rate was ~~5.25%~~5.50%. Interest only payments are due on borrowings through November 30, 2016, with both interest and principal payments commencing in December 2016. All unpaid principal and interest on each Equipment Advance will be due on November 1, 2019. The Company has an obligation to make a final payment equal to 7% of total amounts borrowed at the loan maturity date.

The Company is also subject to certain affirmative and negative covenants under the Equipment Line of Credit. ~~As of March 31,~~

On June 20, 2017, the Company ~~was~~received a Notice of Event of Default (“Default Letter”) from SVB which stated that Events of Default had occurred and SVB will decide in ~~compliance with all covenants.~~

Asits sole discretion whether or not to exercise rights and remedies. Pursuant to the Default Letter, the Company has classified the entire balance of ~~March 31,~~$1,488,041 as a current liability as of September 30, 2017 ~~amounts due under the Equipment Line of Credit included $626,104 in current liabilities~~ and ~~$1,084,537 in long-term liabilities, which includes $41,030 of final fee premium accretion.~~also started recording accrued interest at a default rate. The Company recorded ~~$30,267~~$209,082 in interest expense related to the Equipment Line of Credit during the ~~three~~nine months ended ~~March 31,~~September 30, 2017.

~~Future principal payments of long-term debt at March 31, 2017 are as follows:~~

March 31,
2018 $ 626,104
2019 626,104
2020 417,403
Total principal 1,669,611
Plus final fee premium accretion 41,030
Total long-term obligations $ 1,710,641
The Company is currently working with lender for resolution.

Loan and Security Agreement

In June 2014, the Company entered into a $15,000,000 ~~loan~~Loan and ~~security agreement~~Security Agreement (“Agreement”) under which the lenders provided the Company a term loan. The loan is secured by a security interest in all of the Company’s assets except intellectual property, which is subject to a negative pledge. In connection with the loan, the lenders received a warrant to purchase an aggregate 85,470 shares of the Company’s common stock at an exercise price of $3.51 per share exercisable for ten years from the date of issuance.

On July 20, 2016, the Company signed the 5th Amendment to Loan and Security Agreement ~~(“Amendment”)~~ to refinance its existing term loan. Under the Amendment, interest is equal to 3.75% plus the Wall Street Journal Prime Rate, subject to a floor of 7.25%~~. At March 31, 2017, the interest rate was 7.75%~~. The Company is required to make interest only payments on the outstanding amount of the loan on a monthly basis through September 1, 2017, after which equal monthly payments of principal and interest are due until the loan maturity date of February 1, 2020. ~~In addition,~~

On June 1, 2017, the Company received a Notice of Event of Default from the lenders ~~received a warrant to purchase an aggregate 30,992 shares~~which stated that Events of Default had occurred and all of the obligation under the Agreement were immediately due and payable. On June 6, 2017, the lenders took the total pay-off amount of $16,668,583 for the principal, interest, final payment, and other amounts out of the Company’s common stock at an exercise price of $4.84 per share exercisable for ten years from the date of issuance. The fair value of the warrants, totaling $148,885, was recorded as debt discount and additional paid-in capital as the warrants were equity classified. As of March 31, 2017, warrants to purchase 73,727 shares of common stock remains outstanding, ofbank accounts which ~~42,735 of these warrants were in connection with the original Agreement.~~

~~At the Company’s option, it may prepay~~satisfied all of the Company’s outstanding ~~principal balance, subject to certain pre-payment fees ranging from 1% to 3%~~obligations under the Agreement. Accordingly, the Agreement was terminated in June 2017. Upon termination of the Agreement, the prepayment ~~amount. In the event~~fee of ~~a final payment~~$450,000, unamortized debt discount of ~~the loans under the Amendment, either in the event of repayment of the loan at maturity or upon any prepayment, the Company is obligated to pay the~~$400,562 and unamortized final fee of ~~$1,125,000.~~

~~The Company is also subject to certain affirmative and negative covenants under the Agreement, including limitations~~$738,196 were recorded as loss on its ability to undergo certain change of control events, and is required to maintain its primary operating, deposit and securities accounts with the lender. In addition, the Company is required to be in compliance with healthcare laws and regulations and terms and conditions of healthcare permits. The Company was in compliance with all covenants as of March 31, 2017.

~~As of March 31, 2017, amounts due under the Agreement include $3,247,334 in current liabilities, which include $252,666 of current portion of~~ debt ~~discount, and $11,615,202 in long-term liabilities, which include $308,654 of final fee premium accretion.~~extinguishment. The Company recorded ~~$465,956 in~~total interest expense of $801,173 related to the Agreement during the ~~three~~nine months ended ~~March 31,~~September 30, 2017.

~~Future principal payments of long-term debt at March 31, 2017 are as follows:~~

March 31,
2018 $ 3,500,000
2019 6,000,000
2020 5,500,000
Total principal 15,000,000
Less discount (446,118 )
Plus final fee premium accretion 308,654
Total long-term obligations $ 14,862,536

7. Derivative Financial ~~Instruments—~~Instruments — Warrants

Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) or ASC Topic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”), Trovagene determined that certain warrants issued in connection with the execution of certain equity financings must be recorded as derivative liabilities. In accordance with ASC ~~Topic~~ 815-40 and ASC 480-10, the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant change in fair value is being recorded in the Company’s condensed consolidated statements of operations. The Company estimates the fair value of these warrants using the Black-Scholes option pricing model.

The range of assumptions used to determine the fair value of the warrants valued using the Black-Scholes option pricing model during the periods indicated was:


	Three Months Ended March 31,				Nine Months Ended September 30,
	2017		2016		2017		2016
Estimated fair value of Trovagene common stock	$1.15-$2.10		$5.69-$10.15		0.73-1.26		4.49-4.65
Expected warrant term	1.8-2.0 years		3.3-3.8 years		1.3-5.5 years		2.3-2.8 years
Risk-free interest rate	1.20-1.27%		0.89-1.01%		1.27-1.95%		0.71-0.87%
Expected volatility	94-98%		75-77%		86-109%		82-89%
Dividend yield	0	%	0	%	0	%	0	%

Expected volatility is based on historical volatility of Trovagene’s common stock. The warrants have a transferability provision and based on guidance provided in Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment (“SAB No. 107”), for instruments issued with such a provision, Trovagene used the ~~full~~remaining contractual term as the expected term of the warrants. The risk free rate is based on the U.S. Treasury security rates consistent with the expected remaining term of the warrants at each balance sheet date.

The following table sets forth the components of changes in the Company’s derivative financial instruments—warrants liability balance, valued using the Black-Scholes option pricing method, for the periods indicated.


Date	Description	Number of Warrants	Derivative Instrument Liability			Description	Number of Warrants	Derivative Instrument Liability
December 31, 2016	Balance of derivative financial instruments—warrants liability	967,295	$	834,940		Balance of derivative financial instruments—warrants liability	967,295	$	834,940
	Change in fair value of derivative financial instruments—warrants during the period recognized as a gain in the condensed consolidated statements of operations	—	(555,506		)	Issuance of derivative financial instruments	4,643,626	3,215,519
March 31, 2017	Balance of derivative financial instruments—warrants liability	967,295	$	279,434
						Change in fair value of derivative financial instruments—warrants during the period recognized as a gain in the condensed consolidated statements of operations	—	(2,012,747		)
September 30, 2017						Balance of derivative financial instruments—warrants liability	5,610,921	$	2,037,712

8. Stockholders’ Equity

Common Stock

During the ~~three~~nine months ended ~~March 31,~~September 30, 2017, the Company issued a total of ~~275,000~~7,408,460 shares of Common ~~Stock, all~~Stock. The Company received gross proceeds of ~~which~~approximately $7.1 million from the sale of 6,191,500 shares of its common stock and 4,643,626 share of warrants through registered direct offering and private placement in July 2017. The Company received gross proceeds of approximately $0.1 million from the sale of 102,081 shares of its common stock at a weighted average price of $1.08 under the agreement with Cantor Fitzgerald & Co. (“Agent”). In addition, 369,487 shares were issued upon vesting of restricted stock units (“RSU”), and 745,392 shares were issued upon vesting of restricted stock awards (“RSA”).

Stock Options

Stock-based compensation expense related to Trovagene equity awards have been recognized in operating results as follow:


	Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016		2017		2016		2017			2016
Included in research and development expense	$	372,200		$	398,741	$	219,480	$	872,792	$	798,143		$	1,862,069
Included in cost of revenue	26,156			18,297		15,633		42,639		56,998			99,164
Included in selling and marketing expense	304,532			578,721		118,434		476,865		550,317			1,493,744
Included in general and administrative expense	296,777			1,815,349		1,067,633		437,075		1,837,128			2,487,415
Benefit from restructuring	(78,866		)	—		—		—		(125,222		)	—
Total stock-based compensation expense	$	920,799		$	2,811,108	$	1,421,180	$	1,829,371	$	3,117,364		$	5,942,392

The unrecognized compensation cost related to non-vested stock options outstanding at ~~March 31,~~September 30, 2017 and 2016, net of expected forfeitures, was ~~$5,677,247~~$3,271,046 and ~~$12,118,815,~~$10,416,565, respectively, which is expected to be recognized over a weighted-average remaining vesting period of ~~2.6~~2.2 and ~~2.8~~3.0 years, respectively. The weighted-average remaining contractual term of outstanding options as of ~~March 31,~~September 30, 2017 was approximately ~~7.3~~7.2 years. The total fair value of stock options vested during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 and 2016 was ~~$1,526,211~~$3,378,243 and ~~$3,348,611,~~$5,416,168, 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 weighted-average assumptions during the following periods indicated:

Three Months Ended
March 31,
2017 (1) 2016
Risk-free interest rate 0 % 1.77 %
Dividend yield 0 % 0 %
Expected volatility 0 % 76 %
Expected term 0
6.1 years

~~(1) No options granted during the three months ended March 31, 2017.~~



	Nine Months Ended September 30,
	2017		2016
Risk-free interest rate	1.82	%	1.48	%
Dividend yield	0	%	0	%
Expected volatility	87	%	103	%
Expected term	5.2 years		5.5 years

A summary of stock option activity and changes in stock options outstanding is presented below:


	Total Options		Weighted-Average Exercise Price Per Share		Intrinsic Value		Total Options		Weighted-Average Exercise Price Per Share		Intrinsic Value
Balance outstanding, December 31, 2016	5,528,628		$	5.49	$	—	5,528,628		$	5.49	$	—
Granted	—		—				823,106		$	0.84
Exercised	—		—		$	—
Canceled / Forfeited	(841,062	)	$	6.22			(2,077,246	)	$	6.24
Balance outstanding, March 31, 2017	4,687,566		$	5.36	$	—
Exercisable at March 31, 2017	2,640,484		$	5.19	$	—
Expired							(17,457	)	$	4.74
Balance outstanding, September 30, 2017							4,257,031		$	4.23	$	381
Exercisable at September 30, 2017							2,492,242		$	4.79	$	—

On ~~May 17, 2016,~~June 13, 2017, the number of authorized shares in the Trovagene 2014 Equity Incentive Plan (“2014 EIP”) was increased from 7,500,000 to ~~7,500,000.~~9,500,000. As of ~~March 31,~~September 30, 2017 there were ~~2,563,428~~3,670,232 shares available for issuance under the 2014 EIP.

Restricted Stock Units

The weighted-average grant date fair value of the RSU was ~~$2.05~~$1.59 and $4.06 per share during the ~~three~~nine months ended ~~March 31, 2017. There were no RSUs granted during the three months ended March 31, 2016.~~September 30, 2017 and 2016, respectively.

A summary of the RSU activity is presented below:


	Number of Shares		Weighted-Average Grant Date Fair Value Per Share		Intrinsic Value		Number of Shares		Weighted-Average Grant Date Fair Value Per Share		Intrinsic Value
Non-vested RSU outstanding, December 31, 2016	272,000		$	3.99	$	571,200	272,000		$	3.99	$	571,200
Granted	1,339,742		$	2.05			2,249,242		$	1.59
Vested	(275,000	)	$	3.97	$	577,350	(369,487	)	$	3.48	$	645,775
Forfeited	(359,751	)	$	2.05			(874,453	)	$	1.75
Non-vested RSU outstanding, March 31, 2017	976,991		$	2.05	$	1,123,540
Non-vested RSU outstanding, September 30, 2017							1,277,302		$	1.44	$	932,430

At ~~March 31,~~September 30, 2017, total unrecognized compensation cost related to non-vested RSU was ~~$1,603,214,~~$1,011,494, which is expected to be recognized over a weighted-average period of ~~3.3~~2.5 years. The total fair value of vested RSU ~~vested~~ during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 was ~~$1,091,580.~~$1,285,578.

Restricted Stock Awards

During the nine months ended September 30, 2017, a total of 745,392 shares of RSA were granted, all of which were vested immediately. The total fair value of vested RSA during the nine months ended September 30, 2017 was $596,314. The weighted-average grant date fair value of the RSA was $0.80 per share during the nine months ended September 30, 2017. There were no such awards granted during the nine months ended September 30, 2016.

Warrants

A summary of warrant activity and changes in warrants outstanding, including both liability and equity classifications is presented below:


	Total Warrants	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term	Total Warrants		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term
Balance outstanding, December 31, 2016	5,505,901	$	3.83	1.6	5,505,901		$	3.83	1.6
Balance outstanding, March 31, 2017	5,505,901	$	3.83	1.4
Granted					4,643,626		$	1.41
Expired					(1,177,024	)	$	5.32
Balance outstanding, September 30, 2017					8,972,503		$	2.38	3.3

9. Commitments and Contingencies

Executive and Consulting Agreements

The Company has ~~long-term~~longer-term contractual commitments with various consultants and employees. Certain employment agreements provide for severance payments.

Lease Agreements

The Company leases approximately 26,100 square feet of office and laboratory space at a monthly rental rate of approximately $68,000. The lease will expire on December 31, 2021. The Company currently subleases certain office space and records the rental receipt under the subleases as a reduction of its rent expense. The Company also ~~leases~~leased certain lab and office space in Torino, Italy, of approximately 2,300 square feet, at a monthly rental rate of approximately $3,100 through the end of September ~~30,~~ 2017.

Research and Development and ~~Licen~~seClinical Trial Agreements

In March 2017, the Company entered into a license agreement with Nerviano ~~Medical Sciences S.r.l. (“Nerviano”)~~ which granted the Company development and commercialization rights to NMS-1286937, which Trovagene refers to as PCM-075. PCM-075 is an oral, investigative drug and a highly-selective adenosine triphosphate competitive inhibitor of the serine/threonine ~~polo-like-kinase 1 (“~~PLK ~~1”).~~1. The Company plans to develop PCM-075 initially in patients with ~~acute myeloid leukemia (“AML”).~~AML. Upon execution of the agreement, the Company paid $2.0 million in license fees which were expensed to research and development costs during the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The Company is committed to pay $1.0 million for future services provided by Nerviano, such as the costs to manufacture drug product, no later than June 30, 2019. Terms of the agreement also provide for the Company to pay royalties based on certain development and sales milestones.

The Company has entered into a variety of ~~collaboration~~clinical trial and ~~specimen transfer~~collaboration agreements relating to its drug development efforts. ~~The Company has recorded approximately $88,000~~Included in research and development expense, the Company has recorded approximately $291,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2017 relating to services provided ~~by the collaborators~~ in connection with these agreements.

The Company is a party to various agreements under which it licenses technology on an exclusive basis in the field of human diagnostics. License fees are generally calculated as a percentage of product revenues, with rates that vary by agreement. To date, payments have not been material.

~~Collaborative Arrangement~~

In November 2016, the Company entered into a collaborative development agreement with Boreal Genomics, Inc. (“Boreal”) to co-develop urine and blood ctDNA assay kits and systems and to globally distribute assay kits for use on the Boreal OnTarget™ system in blood and exclusively urine. On March 24, 2017, the Company issued Boreal a written 60 days’ notice to terminate the agreement. During the three months ended March 31, 2017, the Company recorded an approximately $0.5 million impairment loss on license fees in connection with this collaborative arrangement (see Note 10). In addition, the Company incurred approximately $33,000 in research and development expenses for the three months ended March 31, 2017.

Litigation

Trovagene does not believe that the Company has legal liabilities that are probable or reasonably possible that require either accrual or disclosure, except for the following: On March 28, 2016 the Company filed a complaint in the Superior Court of the State of California for the County of San Diego against the Company’s former CEO and CFO, for, among other things, breach of fiduciary duty for failing to present a lucrative corporate opportunity to the Company concerning promising new therapeutics in the field of precision medicine and instead taking that opportunity for their own personal ~~benefit.~~benefit (the “Complaint”). The ~~complaint~~Complaint asks that these two former executives be required to turn over their interests in these new therapeutics to the Company. The former CEO and CFO filed a cross complaint in the Superior Court of the State of California

for the County of San Diego against the Company on May 23, 2016 for, among other things, breach of ~~contract.~~contract (the “Cross Complaint”, and together with the Complaint, collectively, the “Litigation”). On July 28, 2017, the parties settled the Litigation. The settlement involved mutual releases by all parties ~~are currently engaged~~involved. The net cost to Trovagene in connection with the ~~discovery process.~~settlement is approximately $2.1 million. Of that amount, $975,000 was the net amount paid directly to the former CEO and CFO. From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. ~~However, litigation~~Litigation is subject to inherent uncertainties, and an adverse result in ~~these or other~~ matters may arise from time to time that may harm the Company’s business. As of the date of this report, management believes that there are no claims against the Company, which it believes will result in a material adverse effect on the Company’s business or financial condition.

Public Offering and Controlled Equity Offering

On March 15, 2017, the Company filed a Form 424B5 to amend and supplement the information in the Company’s registration statement and prospectus, dated June 13, 2016, to offer and sell additional shares of the Company’s common stock having an aggregate offering price up to $20,698,357. 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 the Agent. As payment for its services, the Agent is entitled to a commission on gross proceeds of up to 3%. NoGross proceeds of approximately $110,000 have been raised in 2017.

10. Restructuring Charges

On March 15, 2017, in connection with the addition of precision medicine therapeutics to its business, the Company announced a restructuring plan (the “Restructuring”) which included a reduction in force. The Restructuring is expected to be completed in the ~~second~~last quarter of 2017. The Company estimates that it will incur approximately $2.0 million in charges related to this Restructuring. During the ~~three~~nine months ended ~~March 31,~~September 30, 2017, the Company incurred approximately $1.7 million in restructuring charges which included approximately $1.2 million of personnel termination costs and an approximately $0.5 million charge related to impairment of capitalized license fees. As of ~~March 31,~~September 30, 2017, approximately ~~$1.3~~$0.4 million of these restructuring costs were included in accrued liabilities in the condensed consolidated balance sheet.

11. Related Party Transactions

In March 2016, the Company engaged Rutan & Tucker, LLP, a law firm to represent Trovagene, Inc. with respect to various lawsuits. One of the partners from Rutan & Tucker, LLP, is the son of the Company’s Chairman of the Board. The fees for legal services are based on the hourly rates of the individuals performing the legal services. During the ~~three~~nine months ended ~~March 31,~~September 30, 2017 and 2016, the Company has incurred approximately ~~$155,000~~$763,075 and $377,464 of legal expenses, net of insurance reimbursements, for services performed by Rutan & Tucker, ~~LLP.~~LLP, respectively.

12. Subsequent Event

On October 25, 2017, the Company filed a registration statement on Form S-1 with the SEC for a best efforts public offering of up to $17.5 million of common stock and warrants. H.C. Wainwright & Co. is acting as placement agent.

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, 2016, filed on March 15, 2017, on Form 10-Q

for the period ended March 31, 2017, filed on May 10, 2017, and on Form 10-Q for the period ended June 30, 2017, filed on August 9, 2017. 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 is qualified in its entirety by, and should be read in conjunction with, the more detailed information set forth in the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. 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

We are a precision medicine biotechnology company developing oncology therapeutics for improved cancer care, optimizing drug development by leveraging our proprietary PCM technology in tumor genomics. Our broad intellectual property and proprietary technology enables us to measure ctDNA in urine and blood to identify and quantify clinically actionable markers for predicting response to cancer therapies. We offer our PCM technology at our CLIA-certified/CAP-accredited laboratory and plan to continue to vertically integrate our PCM technology with the development of precision cancer therapeutics.

We believe ~~that there is~~we have an opportunity to utilize precision diagnostics to improve treatment outcomes for cancer patients using our proprietary technology to detect clinically actionable mutations and monitor patient response to therapy. On March 15, 2017, we announced the licensing of PCM-075, a PLK1 inhibitor, ~~for the treatment of AML,~~ from Nerviano. We have a supplier agreement with NerPharMa, S.r.l., a pharmaceutical manufacturing company and a subsidiary of Nerviano, to manufacture drug product for PCM-075. The agreement covers the clinical and commercial supply of PCM-075, and includes both Active Pharmaceutical Ingredients and Good Manufacturing Process production of capsules. The licensing of global development and commercialization rights to PCM-075 allows us to execute our strategy to vertically integrate our ~~ctDNA~~ PCM technology with precision cancer therapeutics, by developing drugs where our deep understanding of tumor genomics may allow for effective targeting of appropriate cancer patients.

We have completed a Phase 1 safety study of PCM-075 in patients with advanced metastatic solid tumors and we received notification from the U.S. Food and Drug Administration (“FDA”) that our Phase 1b/2 clinical trial of PCM-075 in patients with AML may proceed. PCM-075 has positive preclinical data as a single agent and in combination with select chemotherapeutics and targeted agents used in many hematologic and solid cancers, including AML, Non-Hodgkin Lymphoma, mCRPC, Adrenocortical Carcinoma, and Triple Negative Breast Cancer.

We have significant experience and expertise with biomarkers and technology in cancer, including AML. We are one of the patent ~~holder~~holders of NPM1 for diagnosis and monitoring of patients. NPM1-mutated AML is a ~~founder~~ genetic marker in leukemia and accounts for approximately one-third of all AML patients. We plan to use our PCM technology to profile other dominant AML markers, such as FLT3, DNMT3A, NRAS, and KIT, as well as to measure PLK1 enzymatic activity to potentially identify patients most likely to respond to PCM-075 and to measure patient therapy response.

A Phase 1 safety study of PCM-075 has been completed in patients with advanced metastatic cancers with data indicating an acceptable safety profile as well as antitumor activity. We believe that PCM-075 has pharmacokinetic and pharmacodynamic properties that provide advantages and may show improvement in clinical benefits over an earlier PLK1 inhibitor, for the treatment of patients with AML. We plan to submit an investigational new drug application to the FDA in the second quarter of 2017. This submission will include a Phase 1/2 clinical protocol that will identify the safety of PCM-075 in

AML patients, provide a preliminary assessment of response, study the effect of different clinical dosing regimens, as well as explore the potential of correlative biomarker analyses to select patients more likely to respond.

The genetic materials that result when cells in the body die and release their DNA into the bloodstream, are collectively referred to as “cell-free nucleic acids.” The circulating fragments of genetic material can be detected and measured in urine, filtered through the kidney, and blood. Cell-free nucleic acids can be used as genetic markers of disease and the ability to use urine or blood as liquid biopsy sample types allows for simple, noninvasive, or minimally invasive, sample collection methods. We are leveraging our proprietary PCM technology to extract and enrich the DNA in urine and blood to enable ourselves and other, through branded Trovera™ liquid biopsy tests performed at our CLIA-certified/CAP-accredited laboratory, to detect and monitor ctDNA in urine and blood. We believe our PCM technology can allow for improved detection and quantitation of oncogene mutations from tumors to help improve disease and cancer patient management. We also believe that our PCM technology can be used to advance our ability to develop precision cancer therapeutics.

Our fundamental ctDNA diagnostic platform is protected by significant intellectual property around cell-free nucleic acids in urine and blood, the extraction of cell-free nucleic acids from urine and blood, as well as novel assay designs, particularly our proprietary non-naturally occurring primers. As of March 31, 2017, our intellectual property portfolio consists of 120 issued patents worldwide and 60 pending patent applications globally. Our patent estate includes intellectual property for the detection of cell-free nucleic acids that pass through the kidney into the urine, as well as their application in specific disease areas, including oncology, infectious disease, transplantation, urology, and prenatal genetics.

We believe our technology expertise and extensive patent portfolio around cell-free DNA in urine and blood gives us a competitive advantage to leverage an emerging trend of monitoring cancer using ctDNA as a marker of disease status. Our proprietary sample preparation process includes novel technology for the collection and DNA preservation (“Next™Collect”), DNA extraction and isolation of ctDNA protocol, proprietary, non-naturally occurring primers to enrich the sample for mutant alleles, and the ability to detect nucleic acids of interest using next-generation sequencing. We believe that our quantitative ctDNA detection and monitoring platforms offer industry-leading sensitivity, allowing single-copy detection, a significant advantage over competitive methods.

Targeted therapies are typically very expensive, can have significant side effects, and efficacy can vary by patient. In order to measure effectiveness, repeated monitoring is needed and serial biopsies can be difficult to obtain. If resistance develops, fast and accurate detection of emerging or changing oncogene mutation status is critical. Our technology platforms provide a novel solution for identifying ctDNA in urine and blood, plentiful sample sources, and we are continuing to build a growing body of evidence supporting the clinical utility of our technology to monitor cancer using ctDNA. We believe that we can successfully leverage this deep understanding of tumor genomics to advance the development of PCM-075.

Our accumulated deficit through ~~March 31,~~September 30, 2017 is ~~$158,120,799.~~$170,470,696. To date, we have generated minimal revenues and expect to incur additional losses to perform further research and development activities and expand commercial operations. During 2017, we have advanced our business with the following activities:

~~Signed agreements~~Announced preclinical research demonstrating synergy of PCM-075 with strategic partners across Europe and the Middle East for commercialization of the Trovera™ liquid biopsy tests. This milestone marks the first wave of international distribution agreements for our CLIA based liquid biopsy tests for urine and blood samples.Zytiga® (abiraterone acetate) in Castration-Resistant Prostate Cancer tumor cells.

Announced that the FDA granted Orphan Drug Designation to PCM-075 for the treatment of patients with AML.

~~Published study results~~

Announced the expansion and strengthening of its Board of Directors with the appointment of Athena Countouriotis, M.D. Dr. Countouriotis brings significant experience in ~~Clinical Cancer Research, demonstrating~~oncology clinical development and orphan indications

Announced PCM-075 synergy with a HDAC Inhibitor in Non-Hodgkin Lymphoma Cell Lines. Additionally, PCM-075 demonstrates synergy in combination with more than ten chemotherapeutic and targeted therapies across a broad range of solid tumor and hematologic cancers.

Announced preclinical AML data shows PCM-075 significantly enhances the ~~analytical and clinical performance~~efficacy of ~~Trovera™ urine and blood liquid biopsy tests to quantitatively assess~~ ~~KRAS~~ ~~mutations~~a FLT3 inhibitor in combination therapy.

Announced FDA approval of IND for Phase 1b/2 trial of PCM-075 in patients with ~~diverse advanced cancers. This~~AML.

Announced peer-reviewed publication of first-in-human Phase 1 trial results with PCM-075 in the journal Investigational New Drugs. The data ~~was also featured~~from the trial demonstrated PCM-075’s potential as safe and effective treatment for solid tumor and hematological malignancies.

Completed a ~~presentation~~registered direct offering of 6,191,500 shares of common stock and a concurrent private placement issuing warrants to purchase up to 4,643,626 shares of common stock. The net proceeds from the registered direct offering and concurrent private placement were approximately $6.5 million in July 2017.

Entered into an agreement with Novogene Co. Ltd. (“Novogene”), a leading global provider of genomic services and solutions and the largest sequencing capacity in the world, whereby Novogene will purchase NextCollect™, our proprietary urine collection and nucleic acid preservation device for validation in the Chinese market.

Engaged PRA Health Sciences, a leading, global contract research organization, to conduct our Phase 1b/2 clinical trial of PCM-075.

Executed a supplier agreement with NerPharMa, S.r.l., a pharmaceutical manufacturing company and a subsidiary of Nerviano Medical Sciences S.r.l., to manufacture drug product for PCM-075.

Submitted an IND application to FDA to conduct a Phase 1b/2 clinical trial of PCM-075 in AML.

Announced expansion of key claims for our NPM1 patent portfolio for AML.

Entered into an agreement with a global biopharmaceutical company to utilize Trovera® ctDNA tests and services in cancer clinical trials.

Entered into an agreement with AstraZeneca to utilize Trovera® ctDNA test and services in prospective biomarker study.

Announced phase 1 safety study conducted by Nerviano Medical Sciences supports planned development of PCM-075 in AML.

Established a Clinical Advisory Board, appointing Dr. Jorge Cortes, of MD Anderson, Dr. Sandra Silberman, a leading clinical researcher in hematology/oncology, and practicing physician at the ~~2017 Gastrointestinal Cancers Symposium on January 21, 2017~~Duke VAMC, Dr. Filip Janku, of City of Hope Cancer Center, and Dr. David Berz, of the Beverly Hills Cancer Center. Dr. Cortes and Dr. Silberman have extensive experience in ~~San Francisco, CA.~~

the development of novel therapies for the treatment of hematologic cancers. Dr. Cortes will serve as the Principal Investigator for the Phase 1b/2 clinical trial in AML.

Entered into a license agreement with Nerviano that grants us exclusive global development and commercialization rights to NMS-1286937, which we refers to as PCM-075. PCM-075 is an oral, investigative drug and a highly-selective PLK 1 inhibitor for the treatment of AML.

Appointed Dr. Sandra Silberman, a leading clinical researcher in hematology/oncology, and practicing physician at the Duke VAMC, as a member of our Clinical Advisory Board (“CAB”). Dr. Silberman joins CAB members Dr. Jorge Cortes, of MD Anderson, Dr. Filip Janku, of MD Anderson, and Dr. David Berz, of the Beverly Hills Cancer Center, Dr. Silberman has extensive experience in theOur drug development ~~of novel therapies for the treatment of hematologic cancers and will work with us through the clinical development process for PCM-075.~~

~~Our product development and commercialization~~ efforts are in their early stages, and we cannot make estimates of the costs or the time that our development efforts will take to complete, or the timing and amount of revenues related to the sale of our ~~tests or our diagnostic services and revenues related to our license agreements.~~drugs. The risk of completion of any program is high because of the many uncertainties involved in ~~bringing~~developing new ~~diagnostic products~~drug candidates to market, including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, ~~and/or CLIA requirements,~~ 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 had no off-balance sheet arrangements as of ~~March 31,~~September 30, 2017.

Critical Accounting Policies

Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our accounting policies are described in ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of our Annual Report on Form 10-K as of and for the year ended December 31, 2016, filed with the SEC on March 15, 2017. There have been no changes to our critical accounting policies since December 31, 2016.

RESULTS OF OPERATIONS

Three Months Ended ~~March 31,~~September 30, 2017 and 2016

Revenues

Our total revenues were ~~$95,038~~$123,329 and ~~$120,486~~$89,114 for the three months ended ~~March 31,~~September 30, 2017 and 2016, respectively. The components of our revenues were as follows:


	Three Months Ended March 31,							Three Months Ended September 30,
	2017		2016		Increase (Decrease)			2017		2016		Increase (Decrease)
Royalties	$	65,826	$	112,868	$	(47,042	)	$	58,779	$	47,236	$	11,543
Diagnostic services	28,862		7,618		21,244			58,119		37,978		20,141
Clinical research services	350		—		350			6,431		3,900		2,531
Total revenues	$	95,038	$	120,486	$	(25,448	)	$	123,329	$	89,114	$	34,215

The ~~$47,042 decrease~~increase in royalty income related primarily to ~~lower~~higher receipts of payments in excess of minimum royalties in comparison to the same period of the prior year. Revenue from diagnostic services is recognized when payment is received for the test results. The number of ~~tests billed and~~ payments received ~~were~~was higher in 2017 as compared to the same period in the prior year. Revenue from clinical research services consists of revenue from the sale of urine and blood collection supplies and tests performed under agreements with our clinical research and business development partners. Revenue is recognized when supplies and/or test results are delivered. There were more sales of clinical research services for the three months ended September 30, 2017 as compared to the same period of 2016.

We expect our royalties to fluctuate as the royalties are based on the minimum royalty payments as well as the timing of when payments are received for royalties in excess of minimum royalties. In addition, our diagnostic service revenue may be impacted by our expansion into oncology therapeutics. We expect revenue from clinical research services to fluctuate based on timing of delivery of supplies and/or test results under agreements.

Cost of Revenues

Our total cost of revenues was ~~$616,426~~$473,202 for the three months ended ~~March 31,~~September 30, 2017, compared to ~~$309,271~~$424,559 in the same period of 2016. Cost of revenues mainly relates to the costs of our diagnostic service revenues. The costs are recognized at the completion of testing. Increase in cost of revenues for the three months ended September 30, 2017 compared to the same period of last year is mainly due to the higher percentage allocation of volume of tests processed. Due to revenue being recognized when cash is received, costs incurred in one period may relate to revenue recognized in a later ~~period. Gross margins are~~period which could result in negative as we begin to build test volume to cover costs associated with running our diagnostic tests as well as inefficiencies in realizing capacity related issues. Increase in cost of revenues for the three months ended March 31, 2017 compared to the same period of last year is mainly due to the increased volume of tests processed offset by decreased average cost per test.gross margins.

Research and Development Expenses

Research and development expenses consisted of the following:


	Three Months Ended March 31,							Three Months Ended September 30,
	2017		2016		Increase (Decrease)			2017		2016		Increase (Decrease)
Salaries and staff costs	$	875,377	$	1,302,260	$	(426,883	)	$	301,919	$	1,407,529	$	(1,105,610	)
Stock-based compensation	372,200		398,741		(26,541		)	219,480		872,792		(653,312		)
Outside services, consultants and lab supplies	634,794		1,181,379		(546,585		)	604,140		1,215,889		(611,749		)
Facilities	367,901		261,237		106,664			254,681		372,891		(118,210		)
Travel and scientific conferences	16,040		42,410		(26,370		)	28,000		51,203		(23,203		)
Fees, licenses and other	2,013,518		22,037		1,991,481
Other								6,486		17,094		(10,608		)
Total research and development	$	4,279,830	$	3,208,064	$	1,071,766		$	1,414,706	$	3,937,398	$	(2,522,692	)

Research and development expenses ~~increased~~decreased by ~~$1,071,766~~$2,522,692 to ~~$4,279,830~~$1,414,706 for the three months ended ~~March 31,~~September 30, 2017 from ~~$3,208,064~~$3,937,398 for the same period in 2016. ~~The increase in fees, licenses and other is primarily due to the $2.0 million license fee payment in March 2017 to Nerviano for development and commercialization rights to PCM-075.~~ As a result of the two strategic restructuring activities which occurred in December 2016 and March 2017, our average internal research and development personnel decreased from ~~thirty~~thirty-four to ~~nineteen,~~six, resulting in a decrease of expenses in salaries and staff costs, stock-based compensation, and travel and scientific conferences. In addition, due to the shifting of our business focus, we terminated certain clinical studies and collaboration agreements. Research and development expenses incurred related to samples processed and validated in connection with ~~our~~the clinical collaborations, as well as lab supplies, decreased ~~due to the shifting of our business focus.~~accordingly. We expect a reduction of research and development costs that relate to CLIA services as a result of our expansion into oncology therapeutics; however, other costs may increase as we complete the development of PCM-075.

Selling and Marketing Expenses

Selling and marketing expenses consisted of the following:


	Three Months Ended March 31,							Three Months Ended September 30,
	2017		2016		Increase (Decrease)			2017		2016		Increase (Decrease)
Salaries and staff costs	$	601,183	$	1,408,576	$	(807,393	)	$	158,097	$	1,427,254	$	(1,269,157	)
Stock-based compensation	304,532		578,721		(274,189		)	118,434		476,865		(358,431		)
Outside services and consultants	113,830		356,958		(243,128		)	51,717		441,699		(389,982		)
Facilities	110,138		118,261		(8,123		)	51,388		112,573		(61,185		)
Trade shows, conferences and marketing	191,070		342,173		(151,103		)	31,017		243,692		(212,675		)
Travel	62,020		219,633		(157,613		)	54		212,375		(212,321		)
Other	25,212		33,230		(8,018		)	9,220		26,404		(17,184		)
Total sales and marketing	$	1,407,985	$	3,057,552	$	(1,649,567	)	$	419,927	$	2,940,862	$	(2,520,935	)

Selling and marketing expenses decreased by ~~$1,649,567~~$2,520,935 to ~~$1,407,985~~$419,927 for the three months ended ~~March 31,~~September 30, 2017 from ~~$3,057,552~~$2,940,862 for the same period in 2016. The overall decrease in selling and marketing expenses was primarily due to our strategic restructuring activities. ~~As part of our restructuring,~~During the three months ended September 30, 2017 we ~~reduced~~decreased the number of our field sales, customer support and marketing personnel, bringing ~~down~~ our average ~~commercial team~~ headcount to ~~eleven~~two from ~~twenty-four~~twenty-two in the same period of the prior year. As a result, costs associated with selling and marketing activities as well as personnel related costs were decreased accordingly. We expect decreases in personnel and related costs ~~due to~~as a result of the reduction in ~~force; however, selling and marketing expenses may increase in future periods due to commercial introduction of new product offerings.~~force.

General and Administrative Expenses

General and administrative expenses consisted of the following:


	Three Months Ended March 31,							Three Months Ended September 30,
	2017		2016		Increase (Decrease)			2017		2016		Increase (Decrease)
Personnel and outside services costs	$	1,070,707	$	1,028,651	$	42,056		$	1,450,261	$	1,136,266	$	313,995
Board of Directors’ fees	113,619		101,995		11,624			120,085		122,187		(2,102		)
Stock-based compensation	296,777		1,815,349		(1,518,572		)	1,067,633		437,075		630,558
Legal and accounting fees	440,175		769,797		(329,622		)	595,194		695,061		(99,867		)
Facilities and insurance	159,200		135,922		23,278			291,547		149,921		141,626
Travel	30,843		76,145		(45,302		)	14,185		47,769		(33,584		)
Fees, licenses, taxes and other	85,318		76,388		8,930			120,682		122,503		(1,821		)
Total general and administrative	$	2,196,639	$	4,004,247	$	(1,807,608	)	$	3,659,587	$	2,710,782	$	948,805

General and administrative expenses ~~decreased~~increased by ~~$1,807,608~~$948,805 to ~~$2,196,639~~$3,659,587 for the three months ended ~~March 31,~~September 30, 2017, from ~~$4,004,247~~$2,710,782 for the same period in 2016. The ~~overall decrease was~~significant components of the increase were primarily due to the ~~decrease of~~increase in personnel and outside services cost and stock-based compensation. In ~~January 2016, our former CEO was granted~~August 2017, a ~~non-qualified stock option to purchase 350,000~~total of 745,392 shares of ~~Common Stock at an exercise price of $5.18 per share. As~~immediately vested RSA were granted to our CEO. Per the ~~stock option was vested upon grant,~~agreement, the ~~fair value of~~CEO’s income taxes associated with the ~~option, which approximated $1.2 million, was expensed in full in the first quarter of 2016. Stock-based~~RSA were also paid by our Company. Therefore, personnel costs and stock-based compensation ~~a non-cash expense, will fluctuate based on the timing and amount of options granted, forfeitures and the fair value of the options at the time of grant or remeasurement.~~expenses were increased. Our general and administrative costs may increase in future periods in order to support fundraising activities ~~on-going litigation,~~and general business activities as we continue to develop and introduce new product offerings.

Restructuring

On March 15, 2017, we announced a strategic restructuring plan in connection with the ~~addition~~expansion of precision medicine therapeutics to our business. The restructuring plan includes a reduction in force and is expected to be completed in the ~~second~~last quarter of 2017. ~~Restructuring charges of approximately $1.7 million were incurred and have been included as a component of operating loss~~The $46,472 restructuring benefit for the three months ended ~~March 31, 2017. Of the total restructuring charges, approximately $1.3 million~~September 30, 2017 was ~~related~~primarily due to certain employee termination ~~of employees and an approximately $0.5 million charge related to impaired license fees.~~costs expensed was less than estimated.

Net ~~interest~~Interest Expense

Net interest expense was ~~$429,397~~$16,473 and ~~$337,620~~$354,993 for the three months ended ~~March 31,~~September 30, 2017 and 2016, respectively. The ~~increase~~decrease of net interest expense is primarily due to ~~an increase~~a decrease in interest expense, ~~of approximately $102,000 as a result of higher interest rate and our debt refinancing in July 2016, offset by an increase in interest income of approximately $10,000~~ resulting from ~~short-term investments which have a higher average yield.~~pay-off of our $15.0 million term loan. We expect net interest expense to ~~fluctuate due to the potential changes in the variable interest rate~~decrease as a result of repayment of our ~~long-term debt.~~equipment line of credit.

Change in Fair Value of Derivative Financial Instruments—Warrants

We have issued warrants that are accounted for as derivative liabilities. As of ~~March 31,~~September 30, 2017, the derivative financial instruments—warrants liabilities were revalued to ~~$279,434,~~$2,037,712, resulting in ~~a decrease~~an increase in value of ~~$555,506~~$1,686,850 from ~~December 31, 2016,~~June 30, 2017, based primarily upon the issuance of new derivative financial instruments—warrants in connection with July fundraising activities, offset by the decrease in our stock price ~~from $2.10 at December 31, 2016 to $1.15 at March 31, 2017~~ as well as the changes in the expected term, volatility, and risk free interest rates for the expected term. The issuance of new warrants was recorded as a liability under derivative financial instruments—warrants in the condensed consolidated balance sheets. The decrease in value upon remeasurement at September 30, 2017 was recorded as a gain from the change in fair value of derivative financial instruments—warrants in the condensed consolidated statement of operations.

Net Loss

Net loss and per share amounts were as follows:


	Three Months Ended March 31,									Three Months Ended September 30,
	2017			2016			Increase			2017			2016			Increase (Decrease)
Net loss attributable to common shareholders	$	(10,005,597	)	$	(10,268,578	)	$	(262,981	)	$	(4,298,026	)	$	(10,197,332	)	$	(5,899,306	)
Net loss per common share — basic	$	(0.32	)	$	(0.35	)	$	(0.03	)	$	(0.12	)	$	(0.34	)	$	(0.22	)
Net loss per common share — diluted	$	(0.32	)	$	(0.36	)	$	(0.04	)	$	(0.12	)	$	(0.34	)	$	(0.22	)

Weighted-average shares outstanding — basic	30,961,014			29,755,184			1,205,830
Weighted-average shares outstanding — diluted	30,961,014			30,108,377			852,637
Weighted average shares outstanding — basic										36,465,672			30,339,774			6,125,898
Weighted average shares outstanding — diluted										36,465,672			30,339,774			6,125,898

The ~~$262,981~~$5,899,306 decrease in net loss attributable to common shareholders and the ~~$0.03~~$0.22 decrease in basic net loss per share was primarily the result of a decrease in operating expenses of $4,092,651 for the three months ended ~~March 31,~~September 30, 2017 compared to the same period in the prior year.

Nine Months Ended September 30, 2017 and 2016

Revenues

Our total revenues were $320,378 and $313,000 for the nine months ended September 30, 2017 and 2016, respectively. The components of our revenues were as follows:



	Nine Months Ended September 30,
	2017		2016		Increase (Decrease)
Royalties	$	169,415	$	207,869	$	(38,454	)
Diagnostic services	142,482		69,558		72,924
Clinical research services	8,481		35,573		(27,092		)
Total revenues	$	320,378	$	313,000	$	7,378

The $38,454 decrease in royalties related primarily to lower receipts of payments in excess of minimum royalties in comparison to the same period of the prior year. Revenue from diagnostic services is recognized when payment is received for the test results. The number of tests payments received were higher for the nine months ended September 30, 2017 as compared to the same period in the prior year. Revenue from clinical research services consists of revenue from the sale of urine and blood collection supplies and tests performed under agreements with our clinical research and business development partners. Revenue was recognized when supplies and/or test results were delivered.

We expect our royalties to fluctuate as the royalties are based on the minimum royalty payments as well as the timing of when payments are received for royalties in excess of minimum royalties. Our diagnostic service revenue may be impacted by our expansion into oncology therapeutics. In addition, we expect revenue from clinical research services to fluctuate based on timing of delivery of supplies under agreements.

Cost of Revenues

Our total cost of revenues was $1,427,831 for the nine months ended September 30, 2017, compared to $1,143,293 in the same period of 2016. Cost of revenues relates to the costs of our diagnostic service revenues. The costs are recognized at the completion of testing. Increase in cost of revenues for the nine months ended September 30, 2017 compared to the same period of last year is mainly due to the higher percentage allocation of volume of tests. Due to revenue being recognized when cash is received, costs incurred in one period may relate to revenue recognized in a later period which could result in negative gross margins.

Research and Development Expenses

Research and development expenses consisted of the following:



	Nine Months Ended September 30,
	2017		2016		Increase (Decrease)
Salaries and staff costs	$	1,468,491	$	4,263,595	$	(2,795,104	)
Stock-based compensation	798,143		1,862,069		(1,063,926		)
Outside services, consultants and lab supplies	1,456,504		3,837,485		(2,380,981		)
Facilities	842,196		1,042,682		(200,486		)
Travel and scientific conferences	72,901		157,445		(84,544		)
Fees, licenses and other	2,038,016		58,600		1,979,416
Total research and development	$	6,676,251	$	11,221,876	$	(4,545,625	)

Research and development expenses decreased by $4,545,625 to $6,676,251 for the nine months ended September 30, 2017 from $11,221,876 for the same period in 2016. Our costs have decreased primarily due to the average number of our internal research and development personnel decreasing from thirty-three to eleven. In addition, research and development expenses incurred related to clinical studies, samples processed and validated in connection with the clinical collaborations, as well as lab supplies, decreased for the nine months ended September 30, 2017 as compared to the same period in 2016 as a result of the shifting of our business focus. The total decrease of research and development expenses was offset by the increase in fees, license and other. The increase in fees, license and other was primarily due to the $2.0 million license fee payment in March 2017 to Nerviano for development and commercialization rights to PCM-075. We expect a reduction of research and development costs that relate to CLIA services as a result of our expansion into oncology therapeutics; however, other costs may increase as we continue the development of PCM-075.

Selling and Marketing Expenses

Selling and marketing expenses consisted of the following:



	Nine Months Ended September 30,
	2017		2016		Increase (Decrease)
Salaries and staff costs	$	977,040	$	4,266,029	$	(3,288,989	)
Stock-based compensation	550,317		1,493,744		(943,427		)
Outside services and consultants	219,800		1,117,368		(897,568		)
Facilities	220,860		362,339		(141,479		)
Trade shows, conferences and marketing	357,233		1,082,883		(725,650		)
Travel	71,865		716,473		(644,608		)
Other	45,816		88,614		(42,798		)
Total sales and marketing	$	2,442,931	$	9,127,450	$	(6,684,519	)

Selling and marketing expenses decreased by $6,684,519 to $2,442,931 for the nine months ended September 30, 2017 from $9,127,450 for the same period in 2016. The overall decrease in selling and marketing expenses was primarily due to our strategic restructuring activities. As part of our restructuring, we reduced the number of our field sales, customer support and marketing personnel, bringing down our average headcount to five from twenty-two in the same period of the prior year. We expect decreases in personnel and related costs due to the reduction in force.

General and Administrative Expenses

General and administrative expenses consisted of the following:



	Nine Months Ended September 30,
	2017		2016		Increase (Decrease)
Personnel and outside services costs	$	3,270,134	$	3,279,860	$	(9,726	)
Board of Directors’ fees	347,205		345,240		1,965
Stock-based compensation	1,837,128		2,487,415		(650,287		)
Legal and accounting fees	3,358,411		2,077,585		1,280,826
Facilities and insurance	742,405		551,382		191,023
Travel	81,106		151,355		(70,249		)
Fees, licenses, taxes and other	278,970		290,924		(11,954		)
Total general and administrative	$	9,915,359	$	9,183,761	$	731,598

General and administrative expenses increased by $731,598 to $9,915,359 for the nine months ended September 30, 2017, from $9,183,761 for the same period in 2016. The increase was primarily due to an increase in legal fees offset by the decrease of stock-based compensation. Legal fees increased primarily as a result of a litigation related loss contingency of $2.1 million expensed during the nine months ended September 30, 2017. Stock-based compensation, a non-cash expense, will fluctuate based on the timing and amount of options granted, forfeitures and the fair value of the options at the time of grant or remeasurement.

Restructuring

On March 15, 2017, we announced a strategic restructuring plan in connection with the addition of precision medicine therapeutics to our business. The restructuring plan includes a reduction in force and is expected to be completed in the last quarter of 2017. Restructuring charges of approximately $1.7 million were incurred and have been included as a component of operating loss for the nine months ended September 30, 2017. Of the total restructuring charges, approximately $1.2 million was related to termination of employees and an approximately $0.5 million charge related to impaired license fees.

Net Interest Expense

Net interest expense was $877,741 and $967,522 for nine months ended September 30, 2017 and 2016, respectively. The decrease of net interest expense is due to a decrease in interest expense of approximately $184,000, resulting from pay-off of our $15.0 million term loan, offset by a decrease in interest income as a result of liquidation of our short-term investments.

Change in Fair Value of Derivative Financial Instruments — Warrants

We have issued warrants that are accounted for as derivative liabilities. As of September 30, 2017, the derivative financial instruments—warrants liabilities were revalued to $2,037,712, resulting in an increase in value of $1,202,772 from December 31, 2016, based primarily upon the issuance of new derivative financial instruments—warrants in connection with July fundraising activities, offset by the decrease in our stock price as well as the changes in the expected term, volatility, and risk free interest rates for the expected term. The issuance of new warrants was recorded as a liability under derivative financial instruments—warrants in the condensed consolidated balance sheets. The decrease in value was recorded as a gain from the change in fair value of derivative financial instruments—warrants in the condensed consolidated statement of operations.

Net Loss

Net loss and per share amounts were as follows:



	Nine Months Ended September 30,
	2017			2016			Increase (Decrease)
Net loss attributable to common shareholders	$	(22,355,494	)	$	(30,674,248	)	$	(8,318,754	)
Net loss per common share — basic	$	(0.68	)	$	(1.02	)	$	(0.34	)
Net loss per common share — diluted	$	(0.68	)	$	(1.04	)	$	(0.36	)

Weighted average shares outstanding — basic	32,826,306			30,018,841			2,807,465
Weighted average shares outstanding — diluted	32,826,306			30,136,572			2,689,734

The $8,318,754 decrease in net loss attributable to common shareholders and the $0.34 decrease in basic net loss per share was primarily the result of a decrease in operating expenses compared to the same period in the prior year. This decrease was offset by a loss on extinguishment of debt of $1.7 million.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~March 31,~~September 30, 2017, we had ~~$10,183,460~~$7,434,298 in cash and cash ~~equivalents and $18,619,712 in short-term investments.~~equivalents. Net cash used in operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2017 was ~~$8,758,208,~~$19,949,652, compared to ~~$6,915,707~~$22,034,998 for the ~~three~~nine months ended ~~March 31,~~September 30, 2016. Our use of cash was primarily a result of the net loss of ~~$9,999,537~~$22,337,314 for the ~~three~~nine months ended ~~March 31,~~September 30, 2017, adjusted for non-cash items related to stock-based compensation of ~~$920,799,~~$3,117,364, loss on extinguishment of debt of $1,655,825, impairment loss of $485,000, ~~accretion of final fee premium of $125,012, amortization of discount on debt of $68,223,~~ depreciation and amortization of ~~$330,968, amortization of premiums on short-term investments of $10,877, deferred rent of $66,119, interest income accrued on short-term investments of $151,583,~~$956,995, and the gain from the change in fair value of derivative financial instruments—warrants of ~~$555,506.~~$2,012,747. The changes in our operating assets and liabilities consisted of lower accounts payable and accrued expenses, an increase in accounts receivable and a ~~decrease in~~decreased prepaid ~~expenses and accounts receivable.~~expenses. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow for the next several years.

Net cash provided by investing activities was ~~$5,183,944~~$23,925,535 during the ~~three~~nine months ended ~~March 31,~~September 30, 2017, compared to ~~$352,023 provided by~~$25,249,392 used in investing activities for the same period in 2016. Investing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 ~~related primarily to~~consisted of net sales and maturities of short-term investments ~~while investing actives during three months ended March 31, 2016 consisted~~ of $24,061,786 offset by net purchases for capital ~~equipment.~~equipment of $136,251.

Net cash used in financing activities was ~~$156,526~~$10,447,842 during the ~~three~~nine months ended ~~March 31,~~September 30, 2017, compared to ~~$235,954~~$2,361,994 provided in financing activities for the same period in 2016. Financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 ~~consisted~~related primarily to the pay-off of ~~repayments~~long-term debt resulting in debt extinguishment offset by the sale of ~~equipment line of credit. Financing~~common stock, while financing activities during the same period of the prior year ~~related~~consisted primarily ~~to payments~~of sales of common stock offset by repayment of long-term ~~debt offset by borrowings~~debt. On June 1, 2017, we received a Notice of Event of Default from the lenders which stated that Events of Default had occurred and all of the obligation under ~~equipment line~~the Loan and Security Agreement dated as of ~~credit.~~June 30, 2014 were immediately due and payable. On June 6, 2017, the lenders took the total pay-off amount of $16,668,583 out of our bank accounts which satisfied all of our outstanding obligations under the Agreement. We disagree with the lenders that any Event of Default has occurred and are reserving all of our options with respect to the Agreement.

As of ~~March 31,~~September 30, 2017, and December 31, 2016, we had working capital of ~~$20,771,555~~$3,469,622 and $31,152,936, respectively.

On October 25, 2017, we filed a registration statement on Form S-1 with the SEC for a best efforts public offering of up to $17.5 million of common stock and warrants. H.C. Wainwright & Co. is acting as placement agent.

Based on our current business plan and assumptions, we expect to continue to incur significant losses and require significant additional capital to further advance our clinical trial programs and support our other operations. Considering our current cash resources, including the net proceeds received from the offering of our equity securities in July 2017, we believe our existing resources will be sufficient to fund the Company’s planned operations into the first quarter of 2018. In addition, we have based our cash sufficiency estimates on our current business plan and assumptions that may prove to be wrong. We could utilize our available capital resources sooner than we currently expect, and we could need additional funding to sustain

our operations even sooner than currently anticipated. These circumstances raise substantial doubt about our ability to continue as a going concern.

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. To date, our sources of cash have been primarily limited to the sale of equity ~~securities and debentures and a venture capital loan.~~securities. 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 significantly delay, scale back or discontinue the development and/or commercialization of one or more product candidates, all of which may have a material adverse impact on our operations. We may also be required to (i) 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 (ii) 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. We are evaluating the following options to raise additional capital, increase revenue, as well as reduce costs, in an effort to strengthen our liquidity position: (1) Raising capital through public and private equity offerings; (2) Adding capital through short-term and long-term borrowings; (3) Introducing operation and business development initiatives to bring in new revenue streams by leveraging capabilities within our CLIA lab,

as well as monetizing our proprietary NextCollect™ DNA collection and preservation cup; (4) Reducing operating costs by identifying internal synergies; (5) Engaging in strategic partnerships; and (6) Taking actions to reduce or delay capital expenditures. We continually assess any spending plans, including a review of our discretionary spending in connection with certain strategic contracts, to effectively and efficiently address our liquidity needs.

NASDAQ Notice

On September 5, 2017, we received a written notice from the NASDAQ Stock Market LLC (“NASDAQ”) that we were not in compliance with NASDAQ Listing Rule 5550(a)(2) for continued listing on the NASDAQ Capital Market, as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days. The Notice had no immediate effect on the listing of our common stock, and our common stock continue to trade on the NASDAQ Capital Market under the symbol “TROV”.

In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until March 5, 2018, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period.

CONTRACTUAL OBLIGATIONS

For a discussion of our contractual obligations see (i) our Financial Statements and Notes to Consolidated Financial Statements Note 9. Commitments and Contingencies, and (ii) Item 7 Management Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Commitments, included in our Annual Report on Form 10-K as of December 31, 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our primary exposure to market risk ~~due to~~is interest income and expense sensitivity, which is affected by changes in the general level of interest rates, particularly because our equipment line of credit has a floating interest rate as of September 30, 2017. Changes in interest rates ~~is with~~could affect the amounts of interest ~~expense related to our long term debt agreements. All~~that we pay in the future.

Our cash and cash equivalent primary consists of deposits, and money market deposits managed by commercial banks as of September 30, 2017. The goals of our ~~long term debt is subject to variable interest rates as~~investment policy are preservation of ~~March 31, 2017. We also have interest rate risk related to the increase or decrease in the value~~capital, fulfillment of ~~debt securities, commercial paper~~liquidity needs and ~~U.S. treasury securities in our short-term investment portfolio.~~fiduciary control of cash and investments.

Our investments are in short-term money marketable funds. Due to the short-term duration of our investment portfolio and the relatively low risk profile of our investments, a sudden change in interest rates would not have a material effect on the fair market value of our portfolio, nor our operating results or cash flows.

We do not believe our cash and cash equivalents ~~or short-term investments~~ have significant risk of default ~~or liquidity issues,~~issues; however, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. Given the current stability of financial institutions, we believe that we will not experience losses on these deposits.

Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to increase the safety and preservation of our invested principal funds by limiting default risk, market risk, and reinvestment risk. We mitigate default risk by investing in investment grade securities. Changes in interest rates over time will increase or decrease our interest income.

~~Borrowings under our long-term debt and equipment line of credit bear interest at floating rates. Changes in interest rates could affect the amounts of interest that we pay in the future.~~

Foreign Currency Risk

Our foreign currency exchange risk mainly arises from our operations in Italy. Our functional and reporting currency is the United States dollar. We translate our foreign operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of consolidated accumulated other comprehensive income. In addition, we face the foreign currency risk as a result of entering into transactions denominated in currencies other than U.S. dollars. Changes in foreign currency exchange rates can create foreign exchange gains or losses to us.

Effects of Inflation

We do not believe that inflation and changing prices during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 had a significant impact on our results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our principal executive and financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our principal

executive and financial officer concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2017 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the three months ended ~~March 31,~~September 30, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 9 to the unaudited Condensed Consolidated Financial Statements for a summary of legal proceedings.

ITEM 1A. RISK FACTORS

~~Except for the following risk factors, there~~There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, ~~2016.~~

~~Risks Related to Our Business~~2016, Form 10-Q for the periods ended March 31, 2017, and Form 10-Q for the periods ended June 30, 2017, except for the following:

Our product candidate PCM-075 is in the early stages of development and its commercial viability remains subject to the successful outcome of current and future preclinical studies, clinical trials, regulatory approvals and the risks generally inherent in the development of a pharmaceutical product candidate. If we are unable to successfully advance or develop our product candidate, our business will be materially harmed.

In the near-term, failure to successfully advance the development of our product candidate may have a material adverse effect on us. To date, we have not successfully developed or commercially marketed, distributed or sold any product candidate. The success of our business depends primarily uponfinancial statements include an explanatory paragraph that expresses substantial doubt about our ability to successfully advance the development of our product candidate through preclinical studies and clinical trials, have the product candidate approved for sale by the FDA or regulatory authorities in other countries, and ultimately have the product candidate successfully commercialized by us or a strategic partner. We cannot assure you that the results of our ongoing preclinical studies or clinical trials will support or justify the continued development of our product candidate, or that we will receive approval from the FDA, or similar regulatory authorities in other countries, to advance the development of our product candidate.

Our product candidate must satisfy rigorous regulatory standards of safety and efficacy before we can advance or complete its clinical development or it can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy preclinical studies and clinical trials, develop acceptable manufacturing processes, and obtain regulatory approval of our product candidate. Despite these efforts, our product candidate may not:

~~offer therapeutic or other medical benefits over existing drugs or other product candidates in development to treat the same patient population;~~

~~be proven to be safe and effective in current and future preclinical studies or clinical trials;~~

~~have the desired effects;~~

~~be free from undesirable or unexpected effects;~~

~~meet applicable regulatory standards;~~

~~be capable of being formulated and manufactured in commercially suitable quantities and at an acceptable cost; or~~

~~be successfully commercialized by us or by collaborators.~~

Even if we demonstrate favorable results in preclinical studies and early-stage clinical trials, we cannot assure you that the results of late-stage clinical trials will be favorable enough to support the continued development of our product candidate. A number of companies in the pharmaceutical and biopharmaceutical industries have experienced significant delays, setbacks and failures in all stages of development, including late-stage clinical trials, even after achieving promising results in preclinical testing or early-stage clinical trials. Accordingly, results from completed preclinical studies and early-stage clinical trials of our product candidate may not be predictive of the results we may obtain in later-stage trials. Furthermore, even if the data collected from preclinical studies and clinical trials involving our product candidate demonstrate a satisfactory safety and efficacy profile, such results may not be sufficient to support the submission of a New Drug Application, or NDA or a biologics license application, or BLA to obtain regulatory approval from the FDA in the U.S., or other similar regulatory agencies in other jurisdictions, which is required to market and sell the product.

Our product candidate will require significant additional research and development efforts, the commitment of substantial financial resources, and regulatory approvals prior to advancing into further clinical development or being commercialized by us or collaborators. We cannot assure you that our product candidate will successfully progress through the drug development process or will result in commercially viable products. We do not expect our product candidate to be commercialized by us or collaborators for at least several years.

Our product candidate may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products or investigational new drugs, which may delay or preclude further development or regulatory approval, or limit their use if approved.

Throughout the drug development process, we must continually demonstrate the safety and tolerability of our product candidate to obtain regulatory approval to further advance clinical development or to market it. Even if our product candidate demonstrates biologic activity and clinical efficacy, any unacceptable adverse side effects or toxicities, when administered alone or in the presence of other pharmaceutical products, which can arise at any stage of development, may outweigh potential benefits. In preclinical studies and clinical trials we have conducted to date, our product candidate has demonstrated an acceptable safety profile, although these studies and trials have involved a small number of subjects or patients over a limited period of time. We may observe adverse or significant adverse events or drug-drug interactions in future preclinical studies or clinical trial candidates, which could result in the delay or termination of development, prevent regulatory approval, or limit market acceptance if ultimately approved.

If the results of preclinical studies or clinical trials for our product candidate, including those that are subject to existing or future license or collaboration agreements, are unfavorable or delayed, we could be delayed or precluded from the further development or commercialization of our product candidate, which could materially harm our business.

In order to further advance the development of, and ultimately receive regulatory approval to sell, our product candidate, we must conduct extensive preclinical studies and clinical trials to demonstrate its safety and efficacy to the satisfaction of the FDA or similar regulatory authorities in other countries, as the case may be. Preclinical studies and clinical trials are expensive, complex, can take many years to complete, and have highly uncertain outcomes. Delays, setbacks, or failures can occur at any time, or in any phase of preclinical or clinical testing, and can result from concerns about safety or toxicity, a lack of demonstrated efficacy or superior efficacy over other similar products that have been approved for sale or are in more advanced stages of development, poor study or trial design, and issues related to the formulation or manufacturing process of the materials used to conduct the trials. The results of prior preclinical studies or clinical trials are not necessarily predictive of the results we may observe in later stage clinical trials. In many cases, product candidates in clinical development may fail to show desired safety and efficacy characteristics despite having favorably demonstrated such characteristics in preclinical studies or earlier stage clinical trials.

~~In addition, we may experience numerous unforeseen events during, or~~continue as a ~~result of, preclinical studies and~~going concern, indicating the ~~clinical trial process, which could delay or impede our ability to advance the development of, receive regulatory approval for, or commercialize our product candidate, including, but not limited to:~~

~~communications with the FDA, or similar regulatory authorities in different countries, regarding the scope or design of a trial or trials;~~

~~regulatory authorities (including an Institutional Review Board or Ethical Committee) or IRB or EC, not authorizing us to commence or conduct a clinical trial at a prospective trial site;~~

enrollment in our clinical trials being delayed, or proceeding at a slower pace than we expected, because we have difficulty recruiting patients or participants dropping out of our clinical trials at a higher rate than we anticipated;

our third party contractors, upon whom we rely for conducting preclinical studies, clinical trials and manufacturing of our trial materials, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;

~~having to suspend or ultimately terminate our clinical trials if participants are being exposed to unacceptable health or safety risks;~~

~~IRBs, ECs or regulators requiring~~possibility that ~~we hold, suspend or terminate our preclinical studies and clinical trials for various reasons, including non-compliance with regulatory requirements; and~~

~~the supply or quality of drug material necessary to conduct our preclinical studies or clinical trials being insufficient, inadequate or unavailable.~~

Even if the data collected from preclinical studies or clinical trials involving our product candidates demonstrate a satisfactory safety and efficacy profile, such results may not be sufficient to support the submission of a NDA or BLA to obtain regulatory approval from the FDA in the U.S., or other similar foreign regulatory authorities in foreign jurisdictions, which is required to market and sell the product.

If third party vendors upon whom we intend to rely on to conduct our preclinical studies or clinical trials do not perform or fail to comply with strict regulations, these studies or trials of our product candidate may be delayed, terminated, or fail, or we could incur significant additional expenses, which could materially harm our business.

We have limited resources dedicated to designing, conducting and managing preclinical studies and clinical trials. We intend to rely on third parties, including clinical research organizations, consultants and principal investigators, to assist us in designing, managing, monitoring and conducting our preclinical studies and clinical trials. We intend to rely on these vendors and individuals to perform many facets of the drug development process, including certain preclinical studies, the recruitment of sites and patients for participation in our clinical trials, maintenance of good relations with the clinical sites, and ensuring that these sites are conducting our trials in compliance with the trial protocol, including safety monitoring and applicable regulations. If these third parties fail to perform satisfactorily, or do not adequately fulfill their obligations under the terms of our agreements with them, we may not be able to enter into alternative arrangements without undue delay or additional expenditures, and therefore the preclinical studies and clinical trials of our product candidate may be delayed or prove unsuccessful. Further, the FDA, or other similar foreign regulatory authorities, may inspect some of the clinical sites participating in our clinical trials in the U.S., or our third-party vendors’ sites, to determine if our clinical trials are being conducted according to Good Clinical Practices or GCPs. If we or the FDA determine that our third-party vendors are not in compliance with, or have not conducted our clinical trials according to, applicable regulations we may be forced to delay, repeat or terminate such clinical trials.

~~We have limited capacity for recruiting and managing clinical trials, which could impair our timing to initiate or complete clinical trials of our product candidates and materially harm our business.~~

We have limited capacity to recruit and manage the clinical trials necessary to obtain FDA approval or approval by other regulatory authorities. By contrast, larger pharmaceutical and bio-pharmaceutical companies often have substantial staff with extensive experience in conducting clinical trials with multiple product candidates across multiple indications. In addition, they may have greater financial resources to compete for the same clinical investigators and patients that we are attempting to recruit for our clinical trials. If potential competitors are successful in completing drug development for their product candidates and obtain approval from the FDA, they could limit the demand for PCM-075.

As a result, we may be at a competitive disadvantage that could delay the initiation, recruitment, timing, completion of our clinical trials and obtaining regulatory approvals, if at all, for our product candidate.

We, and our collaborators, must comply with extensive government regulations in order to advance our product candidate through the development process and ultimately obtain and maintain marketing approval for our products in the U.S. and abroad.

The product candidate that we, or our collaborators, are developing require regulatory approval to advance through clinical development and to ultimately be marketed and sold, and are subject to extensive and rigorous domestic and foreign government regulation. In the U.S., the FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record-keeping, labeling, storage, approval, advertising, promotion, sale and distribution of pharmaceutical and biopharmaceutical products. Our product candidate is also subject to similar regulation by foreign governments to the extent we seek to develop or market it in those countries. We, or our collaborators, must provide the FDA and foreign regulatory authorities, if applicable, with preclinical and clinical data, as well as data supporting an acceptable manufacturing process, that appropriately demonstrate our product candidate’s safety and efficacy before it can be approved for the targeted indications. Our product candidate has not been approved for sale in the U.S. or any foreign market, and we cannot predict whether we or our collaborators will obtain regulatory approval for any product candidates we are developing or plan to develop. The regulatory review and approval process can take many years, is dependent upon the type, complexity, novelty of, and medical need for the product candidate, requires the expenditure of substantial resources, and involves post-marketing surveillance and vigilance and ongoing requirements for post-marketing studies or Phase 4 clinical trials. In addition, we or our collaborators

may encounter delays in, or fail to gain, regulatory approval for our product candidate based upon additional governmental regulation resulting from future legislative, administrative action or changes in FDA’s or other similar foreign regulatory authorities’ policy or interpretation during the period of product development. Delays or failures in obtaining regulatory approval to advance our product candidate through clinical development, and ultimately commercialize them, may:

~~adversely impact our ability to raise sufficient capital to fund the development of our product candidate;~~

~~adversely affect our ability to further develop or commercialize our product candidate;~~

~~diminish any competitive advantages that we or our collaborators may have or attain; and~~

~~adversely affect the receipt of potential milestone payments and royalties from the sale of our products or product revenues.~~

Furthermore, any regulatory approvals, if granted, may later be withdrawn. If we or our collaborators fail to comply with applicable regulatory requirements at any time, or if post-approval safety concerns arise, we or our collaborators may be subject to restrictions or a number of actions, including:

~~delays, suspension or termination of clinical trials related to our products;~~

~~refusal by regulatory authorities to review pending applications or supplements to approved applications;~~

~~product recalls or seizures;~~

~~suspension of manufacturing;~~

~~withdrawals of previously approved marketing applications; and~~

~~fines, civil penalties and criminal prosecutions.~~

Additionally, at any time we or our collaborators may voluntarily suspend or terminate the preclinical or clinical development of a product candidate, or withdraw any approved product from the market if we believe that it may pose an unacceptable safety risk to patients, or if the product candidate or approved product no longer meets our business objectives. The ability to develop or market a pharmaceutical product outside of the U.S. is contingent upon receiving appropriate authorization from the respective foreign regulatory authorities. Foreign regulatory approval processes typically include many, if not all, of the risks and requirements associated with the FDA regulatory process for drug development and may include additional risks.

~~We have limited experience in the development of therapeutic product candidates and therefore may encounter difficulties developing our product candidate or managing our operations~~operate in the future.

We have limited experience in the discovery, development and manufacturing of therapeutic compounds. In order to successfully develop our product candidate, we must continuously supplement our research, clinical development, regulatory, medicinal chemistry, virology and manufacturing capabilities through the addition of key employees, consultants or third-party contractors to provide certain capabilities and skill sets that we do not possess.

Furthermore, we have adopted an operating model that largely relies on the outsourcing of a number of responsibilities and key activities to third-party consultants, and contract research and manufacturing organizations in order to advance the development of our product candidate. Therefore, our success depends in part on our ability to retain highly qualified key management, personnel, and directors to develop, implement and execute our business strategy, operate the company and oversee the activities of our consultants and contractors, as well as academic and corporate advisors or consultants to assist us in this regard. We are currently highly dependent upon the efforts of our management team. In order to develop our product candidate, we need to retain or attract certain personnel, consultants or advisors with experience in drug development activities that include a number of disciplines, including research and development, clinical trials, medical matters, government regulation of pharmaceuticals, manufacturing, formulation and chemistry, business development, accounting, finance, regulatory affairs, human resources and information systems. We are highly dependent upon our senior management and scientific staff, particularly William Welch, our Chief Executive Officer. The loss of services of Mr. Welch or one or more of

~~our other members of senior management could delay or prevent the successful completion of our planned clinical trials or the commercialization of our product candidate.~~

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists. The competition for qualified personnel in the biotechnology and pharmaceuticals field is intense. We will need to hire additional personnel as we expand our clinical development and commercial activities. While we have not had difficulties recruiting qualified individuals, to date, we may not be able to attract and retain quality personnel on acceptable terms given the competition for such personnel among biotechnology, pharmaceutical and other companies. Although we have not experienced material difficulties in retaining key personnel in the past, we may not be able to continue to do so in the future on acceptable terms, if at all. If we lose any key managers or employees, or are unable to attract and retain qualified key personnel, directors, advisors or consultants, the development of our product candidate could be delayed or terminated and our business may be harmed.

~~Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.~~

Our product candidate may not prove to be safe and efficacious in clinical trials and may not meet all the applicable regulatory requirements needed to receive regulatory approval. In order to receive regulatory approval for the commercialization of our product candidate, we must conduct, at our own expense, extensive preclinical testing and clinical trials to demonstrate safety and efficacy of our product candidate for the intended indication of use. Clinical testing is expensive, can take many years to complete, if at all, and its outcome is uncertain. Failure can occur at any time during the clinical trial process.

The results of preclinical studies and early clinical trials of new drugs do not necessarily predict the results of later-stage clinical trials. The design of our clinical trials is based on many assumptions about the expected effects of our product candidate, and if those assumptions are incorrect it may not produce statistically significant results. Preliminary results may not be confirmed on full analysis of the detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and efficacy sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected from clinical trials of our product candidates may not be sufficient to support the filing of an NDA or to obtain regulatory approval in the United States or elsewhere. Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if or when we will have an approved product for commercialization or achieve sales or profits.

~~Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.~~

We may experience delays in clinical testing of our product candidate. We do not know whether planned clinical trials will begin on time, will need to be redesigned or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a clinical trial, in securing clinical trial agreements with prospective sites with acceptable terms, in obtaining institutional review board approval to conduct a clinical trial at a prospective site, in recruiting patients to participate in a clinical trial or in obtaining sufficient supplies of clinical trial materials. Many factors affect patient enrollment, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, competing clinical trials and new drugs approved for the conditions we are investigating. Clinical investigators will need to decide whether to offer their patients enrollment in clinical trials of our product candidate versus treating these patients with commercially available drugs that have established safety and efficacy profiles. Any delays in completing our clinical trials will increase our costs, slow down our product development, timeliness and approval process and delay our ability to generate revenue.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidate, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that our existing product candidates or any product candidate we may seek to develop in the future will ever obtain regulatory approval.

~~Our product candidate could fail to receive regulatory approval for many reasons, including the following:~~

~~the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;~~

~~we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;~~

~~the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;~~

~~the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;~~

the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

~~the FDA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing with partners; and~~

~~the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.~~

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidate, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may approve our product candidate for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidate.

We have not previously submitted a biologics license application, or BLA, or a New Drug Application, or NDA, to the FDA, or similar drug approval filings to comparable foreign authorities, for our product candidate, and we cannot be certain that our product candidate will be successful in clinical trials or receive regulatory approval. Further, our product candidate may not receive regulatory approval even if it is successful in clinical trials. If we do not receive regulatory approvals for our product candidate, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our product candidates, our revenues will be dependent, in part, upon our collaborators’ ability to obtain regulatory approval of the companion diagnostics to be used with our product candidates, as well as the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patients that we are targeting for our product candidate are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

We plan to seek regulatory approval and to commercialize our product candidate, directly or with a collaborator, worldwide including the United States, the European Union and other additional foreign countries which we have not yet identified. While the scope of regulatory approval is similar in other countries, to obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our product candidates, and we cannot predict success in these jurisdictions.

~~We may be required to suspend or discontinue clinical trials due to unexpected side effects or other safety risks that could preclude approval of our product candidate.~~

Our clinical trials may be suspended at any time for a number of reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the clinical trial patients. In addition, the FDA or other regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the clinical trial patients.

Administering our product candidate to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory authorities denying further development or approval of our product candidate for any or all targeted indications. Ultimately, our product candidate may prove to be unsafe for human use. Moreover, we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effectsPrimarily as a result of ~~participating~~our losses incurred to date, our expected continued future losses, and limited cash balances, we have included an explanatory paragraph in our ~~clinical trials.~~

~~If we fail to comply with healthcare regulations, we could face~~financial statements expressing substantial ~~enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected.~~

As a developer of pharmaceuticals, even though we do not intend to make referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse, false claims and patients’ privacy rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse laws and patient privacy laws of both the federal government and the states in which we conduct our business. The laws include:

the federal healthcare program anti-kickback law, which prohibits, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, and which may apply to entities like us which provide coding and billing information to customers;

the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;

the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug manufacturing and product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples; and

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affectdoubt about our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

~~If we are unable to satisfy regulatory requirements, we may not be able to commercialize our product candidate.~~

We need FDA approval prior to marketing our product candidate in the United States. If we fail to obtain FDA approval to market our product candidate, we will be unable to sell our product candidate in the United States and we will not generate any revenue.

The FDA’s review and approval process, including among other things, evaluation of preclinical studies and clinical trials of a product candidate as well as the manufacturing process and facility, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-designed and well-controlled pre- clinical testing and clinical trials that the product candidate is both safe and effective for each indication for which approval is sought. Satisfaction of these requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. We cannot predict if or when we will submit an NDA for approval for our product candidate currently under development. Any approvals we may obtain may not cover all of the clinical indications for which we are seeking approval or may contain significant limitations on the conditions of use.

The FDA has substantial discretion in the NDA review process and may either refuse to file our NDA for substantive review or may decide that our data is insufficient to support approval of our product candidate for the claimed intended uses. Following any regulatory approval of our product candidate, we will be subject to continuing regulatory obligations such as safety reporting, required and additional post marketing obligations, and regulatory oversight of promotion and marketing. Even if we receive regulatory approvals, the FDA may subsequently seek to withdraw approval of our NDA if we determine that new data or a reevaluation of existing data show the product is unsafe for use under the conditions of use upon the basis of which the NDA was approved, or based on new evidence of adverse effects or adverse clinical experience, or upon other new information. If the FDA does not file or approve our NDA or withdraws approval of our NDA, the FDA may require that we conduct additional clinical trials, preclinical or manufacturing studies and submit that data before it will reconsider our application. Depending on the extent of these or any other requested studies, approval of any applications that we submit may be delayed by several years, may require us to expend more resources than we have available, or may never be obtained at all.

We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products to the extent we seek regulatory approval to develop and market our product candidate in a foreign jurisdiction. As of the date hereof we have not identified any foreign jurisdictions which we intend to seek approval from. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to marketing the product in those countries. The approval process varies and the time needed to secure approval in any region such as the European Union or in a country with an independent review procedure may be longer or shorter than that required for FDA approval. We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that an approval in one country or region will result in approval elsewhere.

~~If our product candidate is unable to compete effectively with marketed drugs targeting similar indications as our product candidate, our commercial opportunity will be reduced or eliminated.~~

We face competition generally from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize any drugs that are safer, more effective, have fewer side effects or are less expensive than our product candidate. These potential competitors compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

If approved and commercialized, PCM-075 would compete with several currently approved prescription therapies for the treatment of AML. To our knowledge, other potential competitors are in earlier stages of development. If potential competitors are successful in completing drug development for their product candidates and obtain approval from the FDA, they could limit the demand for PCM-075.

~~We expect that our ability to compete effectively will depend upon our ability to:~~

~~successfully identify and develop key points of product differentiations from currently available therapies;~~

~~successfully and rapidly complete clinical trials and submit for and obtain all requisite regulatory approvals in a cost-effective manner;~~

~~maintain a proprietary position for our products and manufacturing processes and other related product technology;~~

~~attract and retain key personnel;~~

~~develop relationships with physicians prescribing these products; and~~

~~build an adequate sales and marketing infrastructure for our product candidates.~~

Because we will be competing against significantly larger companies with established track records, we will have to demonstrate that, based on experience, clinical data, side-effect profiles and other factors, our products, if approved, are competitive with other products. If we are unable to compete effectively and differentiate our products from other marketed shingles drugs, we may never generate meaningful revenue.

If the manufacturers upon whom we rely fail to produce our product candidate, in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of our product candidate.

We do not currently possess internal manufacturing capacity. We plan to utilize the services of contract manufacturers to manufacture our clinical supplies. Any curtailment in the availability of PCM-075, however, could result in production or other delays with consequent adverse effects on us. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may result in production delays or higher raw material costs.

We continue to pursue active pharmaceutical ingredients, or API, and drug product supply agreements with other manufacturers. We may be required to agree to minimum volume requirements, exclusivity arrangements or other restrictions with the contract manufacturers. We may not be able to enter into long-term agreements on commercially reasonable terms, or at all. If we change or add manufacturers, the FDA and comparable foreign regulators may require approval of the changes. Approval of these changes could require new testing by the manufacturer and compliance inspections to ensure the manufacturer is conforming to all applicable laws and regulations and good manufacturing practices or GMP. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary for the production of our product candidate.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products may encounter difficulties in production, particularly in scaling up production. These problems include difficulties with production costs and yields, quality control, including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. In addition, any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical trials, increase the costs associated with conducting our clinical trials and, depending upon the period of delay, require us to commence new clinical trials at significant additional expense or to terminate a clinical trial.

We will be responsible for ensuring that each of our future contract manufacturers comply with the GMP requirements of the FDA and other regulatory authorities from which we seek to obtain product approval. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. The approval process for NDAs includes a review of the manufacturer’s compliance with GMP requirements. We will be responsible for regularly assessing a contract manufacturer’s compliance with GMP requirements through record reviews and periodic audits and for ensuring that the contract manufacturer takes responsibility and corrective action for any identified deviations. Manufacturers our product candidates may be unable to comply with these GMP requirements and with other FDA and foreign regulatory requirements, if any.

While we will oversee compliance by our contract manufacturers, ultimately we will not have control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines

and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of our product candidate is compromised due to a manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our product candidates, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of PCM-075 or other product candidates, entail higher costs or result in us being unable to effectively commercialize our product candidates. Furthermore, if our manufacturers fail to deliver the required commercial quantities on a timely basis and at commercially reasonable prices, we may be unable to meet demand for any approved products and would lose potential revenues.

~~We may not be able to manufacture our product candidate in commercial quantities, which would prevent us from commercializing our product candidate.~~

To date, our product candidate has been manufactured in small quantities for preclinical studies and clinical trials. If our product candidate is approved by the FDA or comparable regulatory authorities in other countries for commercial sale, we will need to manufacture such product candidate in larger quantities. We may not be able to increase successfully the manufacturing capacity for our product candidate in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. If we are unable to increase successfully the manufacturing capacity for a product candidate, the clinical trials as well as the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in supply. Our product candidate requires precise, high quality manufacturing. Our failure to achieve and maintain these high quality manufacturing standards in collaboration with our third-party manufacturers, including the incidence of manufacturing errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could harm our business, financial condition and results of operations.

Materials necessary to manufacture our product candidate may not be available on commercially reasonable terms, or at all, which may delay the development and commercialization of our product candidate.

We rely on Nerviano to purchase from third-party suppliers the materials necessary to produce bulk APIs, and product candidates for our clinical trials, and we will rely on such manufacturers to purchase such materials to produce the APIs and finished products for any commercial distribution of our products if we obtain marketing approval. Suppliers may not sell these materials to our manufacturers at the time they need them in order to meet our required delivery schedule or on commercially reasonable terms, if at all. We do not have any control over the process or timing of the acquisition of these materials by our manufacturers. Moreover, we currently do not have any agreements for the production of these materials. If our manufacturers are unable to obtain these materials for our clinical trials, testing of the affected product candidate would be delayed, which may significantly impact our ability to develop the product candidate. If we or our manufacturers are unable to purchase these materials after regulatory approval has been obtained for one of our products, the commercial launch of such product would be delayed or there would be a shortage in supply of such product, which would harm our ability to generate revenues from such product and achieve or sustain profitability.

~~Our product candidate, if approved for sale, may not gain acceptance among physicians, patients and the medical community, thereby limiting our potential to generate revenues.~~

If our product candidate is approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product by physicians, healthcare professionals and third-party payers and our profitability and growth will depend on a number of factors, including:

~~demonstration of safety and efficacy;~~

~~changes in the practice guidelines and the standard of care for the targeted indication;~~

~~relative convenience and ease of administration;~~

~~the prevalence and severity of any adverse side effects;~~

~~budget impact of adoption of our product on relevant drug formularies and the availability, cost and potential advantages of alternative treatments, including less expensive generic drugs;~~

~~pricing, reimbursement and cost effectiveness, which may be subject to regulatory control;~~

~~effectiveness of our or any of our partners’ sales and marketing strategies;~~

~~the product labeling or product insert required by the FDA or regulatory authority in other countries; and~~

~~the availability of adequate third-party insurance coverage or reimbursement.~~

If any product candidates that we develop does not provide a treatment regimen that is as beneficial as, or is perceived as being as beneficial as, the current standard of care or otherwise does not provide patient benefit, that product candidate, if approved for commercial sale by the FDA or other regulatory authorities, likely will not achieve market acceptance.going concern. Our ability to effectively promote and sell any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive price and our ability to obtain sufficient third-party coverage or reimbursement. If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, patients and third-party payers, our ability to generate revenues from that product would be substantially reduced. In addition, our efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources, may be constrained by FDA rules and policies on product promotion, and may never be successful.

~~Guidelines and recommendations published by various organizations can impact the use of our product.~~

Government agencies promulgate regulations and guidelines directly applicable to us and to our product. In addition, professional societies, practice management groups, private health and science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the health care and patient communities. Recommendations of government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines suggesting the reduced use of our products or the use of competitive or alternative products that are followed by patients and health care providers could result in decreased use of our proposed product.

If third-party contract manufacturers upon whom we rely to formulate and manufacture our product candidate do not perform, fail to manufacture according to our specifications or fail to comply with strict regulations, our preclinical studies or clinical trials could be adversely affected and the development of our product candidate could be delayed or terminated or we could incur significant additional expenses.

We do not own or operate any manufacturing facilities. We intend to rely on third-party contractors, at least for the foreseeable future, to formulate and manufacture these preclinical and clinical materials. Our reliance on third- party contract manufacturers exposes us to a number of risks, any of which could delay or prevent the completion of our preclinical studies or clinical trials, or the regulatory approval or commercialization of our product candidate, result in higher costs, or deprive us of potential product revenues. Some of these risks include:

~~our third-party contractors failing to develop an acceptable formulation to support later-stage clinical trials for, or the commercialization of, our product candidates;~~

our contract manufacturers failing to manufacture our product candidate according to their own standards, our specifications, cGMPs, or otherwise manufacturing material that we or the FDA may deem to be unsuitable in our clinical trials;

our contract manufacturers being unable to increase the scale of, increase the capacity for, or reformulate the form of our product candidate. We may experience a shortage in supply, or the cost to manufacture our products may increase to the point where it adversely affects the cost of our product candidate. We cannot assure you that our contract manufacturers will be able to manufacture our products at a suitable scale, or we will be able to find alternative manufacturers acceptable to us that can do so;

~~our contract manufacturers placing a priority on the manufacture of their own products, or other customers’ products;~~

~~our contract manufacturers failing to perform as agreed or not remain in the contract manufacturing business; and~~

~~our contract manufacturers’ plants being closed~~continue as a ~~result of regulatory sanctions or a natural disaster.~~

Manufacturers of pharmaceutical products are subject to ongoing periodic inspections by the FDA, the U.S. Drug Enforcement Administration (“DEA”) and corresponding state and foreign agencies to ensure strict compliance with FDA-mandated current good marketing practices or cGMPs,going concern is contingent upon, among other government regulations and corresponding foreign standards. While we are obligated to audit their performance, we do not have control over our third-party contract manufacturers’ compliance with these regulations and standards. Failure by our third-party manufacturers, or us, to comply with applicable regulations could result in sanctions being imposed on us or the drug manufacturer from the production of other third-party products. These sanctions may include fines, injunctions, civil penalties, failure of the government to grant pre-market approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.

In the event that we need to change our third-party contract manufacturers, our preclinical studies, clinical trials or the commercialization of our product candidate could be delayed, adversely affected or terminated, or such a change may result in significantly higher costs.

Due to regulatory restrictions inherent in an IND, NDA or BLA, various steps in the manufacture of our product candidate may need to be sole-sourced. In accordance with cGMPs, changing manufacturers may require the re-validation of manufacturing processes and procedures, and may require further preclinical studies or clinical trials to show comparability between the materials produced by different manufacturers. Changing our current or future contract manufacturers may be difficult for us and could be costly, which could result in our inability to manufacture our product candidate for an extended period of time and therefore a delay in the development of our product candidate. Further, in order to maintain our development time lines in the event of a change in our third-party contract manufacturer, we may incur significantly higher costs to manufacture our product candidate.

We do not currently have any internal drug discovery capabilities, and therefore we are dependent on in-licensing or acquiring development programs from third parties in order to obtain additional product candidates.

If in the future we decide to further expand our pipeline, we will be dependent on in-licensing or acquiring product candidates as we do not have significant internal discovery capabilities at this time. Accordingly, in order to generate and expand our development pipeline, we have relied, and will continue to rely, on obtaining discoveries, new technologies, intellectual property and product candidates from third-parties through sponsored research, in-licensing arrangements or acquisitions. We may face substantial competition from other biotechnology and pharmaceutical companies, many of which may have greater resources then we have, in obtaining these in-licensing, sponsored research or acquisition opportunities. Additional in-licensing or acquisition opportunities may not be available to us on terms we find acceptable, if at all. In-licensed compounds that appear promising in research or in preclinical studies may fail to progress into further preclinical studies or clinical trials.

If a product liability claim is successfully brought against us for uninsured liabilities, or such claim exceeds our insurance coverage, we could be forced to pay substantial damage awards that could materially harm our business.

~~The use of any of our existing or future product candidates in clinical trials and~~factors, the sale of any approved pharmaceutical products may expose us to significant product liability claims. We currently do not have product liability insurance coverage for our proposed clinical trials but we intend to obtain such insurance. Such insurance coverage may not protect us against any or all of the product liability claims that may be brought against us in the future. We may not be able to acquire or maintain adequate product liability insurance coverage at a commercially reasonable cost or in sufficient amounts or scope to protect us against potential losses. In the event a product liability claim is brought against us, we may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against us. In the event our product candidate is approved for sale by the FDA and commercialized, we may need to substantially increase the amountshares of our ~~product liability coverage. Defending any product liability claim~~common stock or ~~claims could require us to expend significant financial and managerial resources, which could have an adverse effect on our business.~~

If we materially breach or default under the Nerviano Agreements, Nerviano will have the right to terminate the agreement and we could lose critical license rights, which would materially harm our business.

Our business is substantially dependent upon certain intellectual property rights that we license from Nerviano. Therefore, our commercial success will depend to a large extent on our ability to maintain and comply with our obligations under the Agreement. The Agreement provides the right to terminate if the Agreement for an uncured breach by us, or if we are insolvent or the subject of a bankruptcy proceeding, or potentially other reasons. We expect that other technology in-licenses that we may enter into in the future will contain similar provisions and impose similar obligations on us. If we fail to comply

with any such obligations such licensor will likely terminate their out-licenses to us, in which case we would not be able to market products covered by these licenses, including our PCM-075 asset. The loss of our license with Nerviano with respect to the PCM-075, and potentially other licenses that we enter into in the future, would have a material adverse effect on our business. In addition, our failure to comply with obligations under our material in-licenses may cause us to become subject to litigation or other potential disputes under any such license agreements.

In addition, the Nerviano Agreement requires us to make certain payments, including license fees, milestone payments royalties, and other such terms typically required under licensing agreements and these types of technology in-licenses generally could make it difficult for us to find corporate partners and less profitable for us to develop product candidates utilizing these existing product candidates and technologies.

We may delay or terminate the development of a product candidate at any time if we believe the perceived market or commercial opportunity does not justify further investment, which could materially harm our business.

Even though the results of preclinical studies and clinical trials that have been conducted or may conduct in the future may support further development of our product candidate, we may delay, suspend or terminate the future development of a product candidate at any time for strategic, business, financial or other reasons, including the determination or belief that the emerging profile of the product candidate is such that it may not receive FDA approval, gain meaningful market acceptance, generate a significant return to shareholders, or otherwise provide any competitive advantages in its intended indication or market.obtaining alternate financing.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None~~.None.

ITEM 6. EXHIBITS



Exhibit Number		Description of Exhibit

~~31.1~~ 4.1		Stock Award Agreement dated August 15, 2017 by and between Trovagene, Inc. and William J. Welch.

31.1		Certification of Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act.

32.1		Certification of Principal Executive Officer and 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.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.LAB		XBRL Taxonomy Extension Labels Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

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.

~~May 10,~~November 9, 2017	By:	/s/ William J. Welch
		William J. Welch
		Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)

4031



March 31,
2018	$	626,104
2019	626,104
2020	417,403
Total principal	1,669,611
Plus final fee premium accretion	41,030
Total long-term obligations	$	1,710,641



March 31,
2018	$	3,500,000
2019	6,000,000
2020	5,500,000
Total principal	15,000,000
Less discount	(446,118		)
Plus final fee premium accretion	308,654
Total long-term obligations	$	14,862,536



	Three Months Ended March 31,
	2017 (1)		2016
Risk-free interest rate	0	%	1.77	%
Dividend yield	0	%	0	%
Expected volatility	0	%	76	%
Expected term	0		6.1 years