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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

Or

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

For the transition period from              to

Commission File Number 001-36193

Trevena, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

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

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

19087
(Zip Code)

Registrant’s telephone number, including area code: (610354-8840

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

TRVN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

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

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

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

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

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

Common Stock, $0.001 par value

Shares outstanding as of October 30, 2020: 157,030,012

Table of Contents

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements

iii

PART I- FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

1

Balance Sheets

1

Statements of Operations and Comprehensive Loss

2

Statement of Stockholders’ Equity

3

Statements of Cash Flows

5

Notes to Unaudited Financial Statements

6

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II- OTHER INFORMATION

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

30

Item 6.

Exhibits

30

SIGNATURES

31

ii

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this “Quarterly Report,” contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but also are contained elsewhere in this Quarterly Report, as well as in sections such as “Risk Factors” that are incorporated by reference into this Quarterly Report from our most recent Annual Report on Form 10-K, or the “Annual Report” and our Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. In particular, we caution you that our forward-looking statements are subject to the ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

our ability to successfully commercialize OLINVYK™ (oliceridine) injection, or “OLINVYK” and our other product candidates;

our ability to generate sales and other revenues from OLINVYK or any of our other product candidates, if and when approved, including setting an acceptable price for and obtaining adequate coverage and hospital formulary acceptance of such products;

the size and growth potential of the markets for OLINVYK and our ability to serve those markets;

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

the extent of future clinical trials potentially required by the United States Food and Drug Administration, or the FDA, for our product candidates;

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

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

the direct and indirect impact of the COVID-19 pandemic on our business and operations, including research and development costs and our clinical trial timelines;

the performance of third-parties upon which we may depend, including third-party manufacturers, distributors and logistics providers;

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

our sales, marketing, and manufacturing capabilities and strategies;

our intellectual property position;

ongoing litigation; and

iii

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

You should refer to the “Risk Factors” section of this Quarterly Report, our Annual Report and our Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

iv

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PART I

ITEM 1. FINANCIAL STATEMENTS

TREVENA, INC.

Balance Sheets

(in thousands, except share and per share data)

    

September 30, 2020

    

December 31, 2019

(unaudited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

112,682

$

32,305

Marketable securities

 

 

3,500

Prepaid expenses and other current assets

 

1,008

 

1,683

Total current assets

 

113,690

 

37,488

Restricted cash

 

1,310

 

1,309

Property and equipment, net

 

2,337

 

2,705

Right-of-use lease asset

5,213

5,472

Other assets

 

15

 

20

Total assets

$

122,565

$

46,994

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable, net

$

714

$

1,047

Accrued expenses and other current liabilities

 

2,653

 

2,403

Current portion of loans payable, net

 

 

5,037

Lease liability

682

620

Total current liabilities

 

4,049

 

9,107

Leases, net of current portion

 

7,286

 

7,804

Warrant liability

 

22

 

5

Total liabilities

 

11,357

 

16,916

Commitments and contingencies (Note 8)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock—$0.001 par value; 200,000,000 shares authorized at September 30, 2020 and December 31, 2019; 157,030,012 and 94,213,760 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

157

 

94

Preferred stock—$0.001 par value; 5,000,000 shares authorized, none issued or outstanding at September 30, 2020 and December 31, 2019

 

 

Additional paid-in capital

 

541,829

 

443,129

Subscription receivable

(135)

Accumulated deficit

 

(430,643)

 

(413,145)

Total stockholders’ equity

 

111,208

 

30,078

Total liabilities and stockholders’ equity

$

122,565

$

46,994

See accompanying notes to financial statements.

1

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TREVENA, INC.

Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Revenue:

  

  

  

  

License revenue

$

3,000

$

$

3,000

$

Operating expenses:

 

  

 

  

 

  

 

  

General and administrative

 

4,089

 

3,201

 

11,021

 

9,572

Research and development

 

4,301

 

5,554

 

9,450

 

10,430

Impairment of property and equipment

108

Total operating expenses

 

8,390

 

8,755

 

20,471

 

20,110

Loss from operations

 

(5,390)

 

(8,755)

 

(17,471)

 

(20,110)

Other income (expense):

 

  

 

  

 

  

 

  

Change in fair value of warrant liability

 

(14)

 

1

 

(17)

 

(5)

Other income, net

 

75

 

279

 

170

 

2,152

Interest income

 

78

 

109

 

146

 

360

Interest expense

 

 

(190)

(29)

 

(814)

(Loss) gain on foreign currency exchange

(10)

3

(9)

Total other income

 

139

 

189

 

273

 

1,684

Loss before income tax expense

(5,251)

(8,566)

(17,198)

(18,426)

Foreign income tax expense

(300)

(300)

Net loss attributable to common stockholders

$

(5,551)

$

(8,566)

$

(17,498)

$

(18,426)

Other comprehensive (loss) gain, net:

 

  

 

  

 

  

 

  

Unrealized (loss) gain on marketable securities

 

 

(5)

 

 

14

Other comprehensive (loss) gain, net

 

 

(5)

 

 

14

Comprehensive loss

$

(5,551)

$

(8,571)

$

(17,498)

$

(18,412)

Per share information:

 

  

 

  

 

  

 

  

Net loss per share of common stock, basic and diluted

$

(0.04)

$

(0.09)

$

(0.15)

$

(0.20)

Weighted average common shares outstanding, basic and diluted

 

144,335,143

 

92,569,993

 

117,420,221

 

91,307,429

See accompanying notes to financial statements.

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TREVENA, INC.

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

Stockholders' Equity

Accumulated

Common Stock

Other

Number

$0.001

Additional

Comprehensive

Total

of

Par

Paid-in

Subscription

Accumulated

Income

Stockholders'

    

Shares

    

Value

    

Capital

    

Receivable

    

Deficit

    

(Loss)

    

Equity

Balance, January 1, 2020

 

94,213,760

$

94

$

443,129

$

$

(413,145)

$

$

30,078

Stock-based compensation expense

 

891

 

891

Issuance of common stock, net of issuance costs

 

4,816,244

5

3,546

 

3,551

Net loss

 

(5,725)

 

(5,725)

Balance, March 31, 2020

 

99,030,004

$

99

$

447,566

$

$

(418,870)

$

$

28,795

Stock-based compensation expense

 

766

 

766

Issuance of common stock, net of issuance costs

 

28,135,057

28

32,001

 

32,029

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

 

45,211

(40)

 

(40)

Net loss

 

(6,222)

 

(6,222)

Balance, June 30, 2020

 

127,210,272

$

127

$

480,293

$

$

(425,092)

$

$

55,328

Stock-based compensation expense

 

787

 

787

Subscription receivable

197,640

135

(135)

Issuance of common stock, net of issuance costs

29,420,175

30

60,614

60,644

Net exercise of common stock warrant

 

201,925

 

Net loss

 

(5,551)

 

(5,551)

Balance, September 30, 2020

 

157,030,012

$

157

$

541,829

$

(135)

$

(430,643)

$

$

111,208

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Stockholders' Equity

Accumulated

Common Stock

Other

Number

$0.001

Additional

Comprehensive

Total

of

Par

Paid-in

Subscription

Accumulated

Income

Stockholders'

    

Shares

    

Value

    

Capital

    

Receivable

    

Deficit

    

(Loss)

    

Equity

Balance, January 1, 2019

 

82,323,413

$

82

$

429,727

$

$

(388,274)

$

(9)

$

41,526

Stock-based compensation expense

 

754

 

754

Exercise of stock options

 

30,225

21

 

21

Issuance of warrants to underwriters in connection with equity offering

 

347

 

347

Issuance of common stock, net of issuance costs

 

10,000,000

10

8,886

 

8,896

Unrealized gain on marketable securities

 

12

 

12

Net loss

 

(5,169)

 

(5,169)

Balance, March 31, 2019

 

92,353,638

$

92

$

439,735

$

$

(393,443)

$

3

$

46,387

Stock-based compensation expense

 

793

 

793

Shares repurchased by the Company

 

(122)

 

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

 

213,679

(104)

 

(104)

Unrealized gain on marketable securities

 

7

 

7

Net loss

 

(4,691)

 

(4,691)

Balance, June 30, 2019

 

92,567,195

$

92

$

440,424

$

$

(398,134)

$

10

$

42,392

Stock-based compensation expense

 

768

 

768

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

 

14,301

(5)

 

(5)

Unrealized loss on marketable securities

 

(5)

 

(5)

Net loss

 

(8,566)

 

(8,566)

Balance, September 30, 2019

 

92,581,496

$

92

$

441,187

$

$

(406,700)

$

5

$

34,584

See accompanying notes to financial statements.

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TREVENA, INC.

Statements of Cash Flows (Unaudited)

(in thousands)

Nine Months Ended

September 30, 

    

2020

    

2019

Operating activities:

Net loss

$

(17,498)

$

(18,426)

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

 

  

 

Depreciation and amortization

 

368

 

431

Stock-based compensation

 

2,444

 

2,315

Noncash interest expense on loans

 

8

 

285

Impairment of property and equipment

 

 

108

Revaluation of warrant liability

 

17

 

5

(Accretion) amortization of bond (discount) premium on marketable securities

 

 

(442)

Change in right-of-use asset

259

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other assets

 

680

 

(1,766)

Operating lease liabilities

(448)

(118)

Accounts payable, accrued expenses and other liabilities

 

(92)

 

746

Net cash used in operating activities

 

(14,262)

 

(16,862)

Investing activities:

 

  

 

  

Maturities of marketable securities

 

3,500

 

67,390

Purchases of marketable securities

 

 

(53,805)

Net cash provided by investing activities

 

3,500

 

13,585

Financing activities:

 

  

 

  

Proceeds from exercise of common stock options

 

 

21

Proceeds from issuance of common stock, net

 

96,233

 

9,243

Payment of employee withholding taxes on vested restricted stock units

(40)

(109)

Capital lease payments

 

(8)

 

(10)

Repayments of loans payable, net

(5,045)

(9,500)

Net cash provided by (used in) financing activities

 

91,140

 

(355)

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

 

80,378

 

(3,632)

Cash, cash equivalents and restricted cash—beginning of period

 

33,614

 

34,195

Cash, cash equivalents and restricted cash—end of period

$

113,992

$

30,563

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid for interest

$

19

$

529

Subscription receivable on exercise of options

$

135

$

Fair value of common stock warrants issued to underwriters

$

$

347

See accompanying notes to financial statements.

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TREVENA, INC.

Notes to Unaudited Financial Statements

September 30, 2020

1. Organization and Description of the Business

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

Since commencing operations in 2007, the Company has devoted substantially all of its financial resources and efforts to research and development, including nonclinical studies and clinical trials. The Company has never been profitable. In late 2017, the Company submitted a new drug application, or NDA, for OLINVYK™ (oliceridine) injection, or OLINVYK, to the United States Food and Drug Administration, or the FDA. On August 7, 2020, the FDA approved the NDA for OLINVYK. The Company expects to make OLINVYK available by the end of November 2020.

Since its inception, the Company has incurred losses and negative cash flows from operations. At September 30, 2020, the Company had an accumulated deficit of $430.6 million. The Company’s net loss was $17.5 million and $18.4 million for the nine months ended September 30, 2020 and 2019, respectively. The Company follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The Company expects that its existing balance of cash and cash equivalents as of September 30, 2020 is sufficient to fund operations for more than one year after the date of this filling, through the fourth quarter of 2022. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses, or that the COVID-19 pandemic will not have an impact on the Company’s ability to raise capital or fund its operations as planned. If the Company is unable to raise sufficient additional capital or defer sufficient operating expenses, the Company may be compelled to reduce the scope of its operations and planned capital expenditures.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s balance sheets as of September 30, 2020, its results of operations and its comprehensive loss for the three and nine months ended September 30, 2020 and 2019, its statement of stockholders’ equity for the period from January 1, 2020 to September 30, 2020 and for the period January 1, 2019 to September 30, 2019, and its statements of cash flows for the nine months ended September 30, 2020 and 2019. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2019. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

We have been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally. The financial results for the nine months ended September 30, 2020 were not significantly impacted by COVID-19. Remote working arrangements and travel restrictions imposed by various jurisdictions have had limited impact on our ability to

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maintain operations during the quarter. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19.

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 expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the recording expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Fair Value of Financial Instruments

The carrying amount of the Company’s financial instruments, which include cash and cash equivalents, marketable securities, restricted cash, accounts payable and accrued expenses approximate their fair values, given their short-term nature. The carrying amount of the Company’s loans payable at December 31, 2019 was the nominal value of the loan payable, net of debt discount and deferred charges. The nominal value approximated fair value because the interest rate was reflective of the rate the Company could obtain on debt with similar terms and conditions. Certain of the Company’s common stock warrants are carried at fair value, as disclosed in Note 3.

Leases

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

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

Income Taxes

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

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will

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more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. To date, the Company has not taken any uncertain tax position or recorded any reserves, interest or penalties.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act makes the following changes to the U.S. tax code that will affect 2018, 2019 and 2020, including, but not limited to, (1) temporary modification of the adjusted taxable income limitation under Section 163(j) from 30% to 50% for tax years 2019 and 2020 only; (2) modification to the net operating loss rules surrounding the ability to now carryback five years net operating losses generated in 2018, 2019, and 2020; (3) temporary repeal of the net operating loss taxable income limitation of 80%; and (4) temporary enhancement of corporate charitable contribution limitation to 25% of taxable income for tax year 2020 only. There is no impact to the Company’s tax provision for the nine months ended September 30, 2020 for these tax law changes.

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements related to fair value measurements in Topic 820, Fair Value Measurement, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and modifying certain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The effective date for this standard was January 1, 2020. The Company adopted this standard on January 1, 2020. There was no impact to the Company’s financial statements upon the adoption.

Recent Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which removed certain exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification of other areas when accounting for income taxes. The guidance will be effective for the Company beginning in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is evaluating the effect this standard will have on its financial statements and related disclosures.

3. Fair Value of Financial Instruments

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

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

Level 1-Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2-Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the

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Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Cash, Cash Equivalents and Marketable Securities

The following table presents fair value of the Company’s cash, cash equivalents, and marketable securities as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

    

Adjusted 

   

Unrealized

   

Unrealized

   

   

Cash and Cash

   

Restricted

   

Marketable

Cost

Gains

Losses

Fair Value

Equivalents

Cash

Securities

Cash

$

9,472

$

$

$

9,472

$

8,162

$

1,310

$

Level 1 (1):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Money market funds

 

104,520

 

 

 

104,520

 

104,520

 

 

U.S. treasury securities

 

 

 

 

 

 

 

Subtotal

 

104,520

 

 

 

104,520

 

104,520

 

 

Level 2 (2):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government agency securities

 

 

 

 

 

 

 

Total

$

113,992

$

$

$

113,992

$

112,682

$

1,310

$

December 31, 2019

Adjusted 

Unrealized

Unrealized

Cash and Cash

Restricted

Marketable

    

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

    

Securities

Cash

$

9,302

$

$

$

9,302

$

7,993

$

1,309

$

Level 1 (1):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Money market funds

 

18,306

 

 

 

18,306

 

18,306

 

 

U.S. treasury securities

5,996

5,996

2,496

3,500

Subtotal

 

24,302

 

 

 

24,302

 

20,802

 

 

3,500

Level 2 (2):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government agency securities

 

3,510

 

 

 

3,510

 

3,510

 

 

Total

$

37,114

$

$

$

37,114

$

32,305

$

1,309

$

3,500

(1)The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.
(2)The fair value of Level 2 securities is estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

The Company classifies investments available to fund current operations as current assets on its balance sheets. As of September 30, 2020, the Company did not hold any investment securities exceeding a one-year maturity.

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

Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive income (loss) included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive income (loss) on a specific identification basis. The Company did not record any realized gains or losses during the three and nine months ended September 30, 2020 and 2019. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

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Accretion of bond discount on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. Interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 2 and Level 3 during the nine months ended September 30, 2020, or the year ended December 31, 2019.

4. Loans Payable

In September 2014, the Company entered into a loan and security agreement with Oxford Finance LLC and Pacific Western Bank (formerly Square 1 Bank) (together, the lenders), pursuant to which the lenders agreed to lend the Company up to $35.0 million in a three-tranche series of term loans (Term Loans A, B, and C). The Company was required to make payments of interest only on borrowings under the loan agreement on a monthly basis through and including January 1, 2018; payments of principal in equal monthly installments and accrued interest began on January 1, 2018 and continued until the loan matured on March 1, 2020. On March 2, 2020, the Company made its final payment under the loan and security agreement with Oxford Finance LLC and Pacific Western Bank. Upon the last payment date of the amounts borrowed under the agreement, the Company was required to pay a final payment fee of $1.9 million, equal to 6.6% of the aggregate amounts borrowed.

In connection with entering into the agreement, the Company issued to the lenders and the placement agent warrants to purchase an aggregate of 7,678 shares of Trevena’s common stock, of which 5,728 shares remain outstanding as of September 30, 2020. These detachable warrant instruments have qualified for equity classification and have been allocated upon the relative fair value of the base instrument and the warrants, according to the guidance of ASC 470-20-25-2. These warrants were exercisable immediately and have an exercise price of $5.8610 per share. The warrants may be exercised on a cashless basis and will terminate on the earlier of September 19, 2024 or the closing of a merger or consolidation transaction in which the Company is not the surviving entity. In connection with the draw of Term Loan B, the Company issued to the lenders and the placement agent additional warrants to purchase an aggregate of 34,961 shares of Trevena common stock. These warrants have substantially the same terms as those noted above, have an exercise price of $10.6190 per share and an expiration date of December 23, 2025. In connection with draw of Term Loan C, the Company issued to the lenders and placement agent additional warrants to purchase an aggregate of 62,241 shares of the Company’s common stock. These warrants have substantially the same terms as those noted above and have an exercise price of $3.6150 per share and an expiration date of March 31, 2027. These detachable warrant instruments have qualified for equity classification and have been allocated upon the relative fair value of the base instrument and the warrants, according to the guidance of ASC 470-20-25-2.

As of September 30, 2020, there are no borrowings outstanding attributable to Term Loans A, B, or C. Interest expense of $0.02 million and $0.5 million was recorded during the nine months ended September 30, 2020 and 2019, respectively. The Company incurred lender and third-party costs of $1.0 million related to the issuance of its term loans. Per ASU 2015-03, Interest-Imputation of Interest, debt discount and debt issuance costs are to be presented as a contra-liability to the debt on the balance sheet. These costs were amortized to interest expense over the life of the loans using the effective interest method. Immaterial amounts of debt discount and debt issuance cost were amortized to interest expense during the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes how the issuance of Term Loans A, B, and C are reflected on the balance sheet at September 30, 2020 and December 31, 2019 (in thousands):

    

September 30, 

December 31, 

    

2020

2019

Gross proceeds

$

$

3,167

Debt discount and debt issuance costs (1)

 

 

1,870

Carrying value

 

 

5,037

Current portion of loans payable, net

 

 

5,037

Loans payable, net

$

$

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

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5. Stockholders’ Equity

Equity Offerings

Under its certificate of incorporation, the Company was authorized to issue up to 200,000,000 shares of common stock as of September 30, 2020. The Company also was authorized to issue up to 5,000,000 shares of preferred stock as of September 30, 2020. The Company is required, at all times, to reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the conversion of the shares of the preferred stock and all outstanding stock options and warrants.

Registered Underwritten Public Offering

In August 2020, the Company closed a registered underwritten public offering of 25,000,000 shares of its common stock at a public offering price of $2.30 per share for net proceeds to the Company of approximately $53.7 million, after deducting underwriting discounts and commissions and offering expenses.

ATM Programs

On April 17, 2019, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which the Company may offer and sell through Wainwright, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million, or the ATM Program. Sales of the shares of common stock are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act. The Company intends to use the net proceeds from the offering primarily for the development of its lead product candidate, OLINVYK, and for general corporate purposes. In the third quarter of 2020, the Company issued and sold 4.4 million shares of common stock under the ATM Program. The net offering proceeds for sales under the ATM Program for the quarter ended September 30, 2020 were $6.9 million after deducting related expenses, including commissions. As of September 30, 2020, there was $5.0 million remaining available for future issuances under the ATM Program.

Registered Direct Offering and Concurrent Warrant Issuance

On January 29, 2019, the Company entered into securities purchase agreements with two institutional investors wherein the Company agreed to sell to the investors an aggregate of 10,000,000 shares of its common stock, at an offering price of $1.00 per share, in a registered direct offering made pursuant to the Company’s existing registration statement on Form S-3. The net proceeds to the Company from the offering were $9.2 million, after deducting fees and the expenses of the placement agent. Pursuant to a letter agreement dated January 28, 2019, the Company engaged H.C. Wainwright & Co., LLC, or Wainwright, to act as its exclusive placement agent in connection with the issuance and sale of the shares. The Company paid Wainwright 7.0% of the aggregate gross proceeds in the offering and $50,000 for certain expenses, and it issued warrants to purchase 500,000 shares of common stock to certain designees of Wainwright. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. During the three months ended September 30, 2020, 327,500 of these warrants were exercised in a cashless exercise for 201,925 common shares. The warrants are classified as equity and were recorded at fair value as of the date of issuance on the Company’s Consolidated Balance Sheets and no further adjustments to their valuation are made. The letter agreement also includes indemnification obligations of the Company and other provisions customary for transactions of this nature.

Equity Incentive Plans

In 2008, the Company adopted the 2008 Equity Incentive Plan, as amended on February 29, 2008, January 7, 2010, July 8, 2010, December 10, 2010, June 23, 2011 and June 17, 2013, collectively, the 2008 Plan, that authorized the Company to grant restricted stock and stock options to eligible employees, directors and consultants to the Company.

In 2013, the Company adopted the 2013 Equity Incentive Plan, as amended on May 14, 2014, collectively, 2013 Plan. The 2013 Plan became effective upon the Company’s entry into the underwriting agreement related to its IPO in January 2014 and, as of such date, no further grants were permitted under the 2008 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity compensation (collectively,

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stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company. Additionally, the 2013 Plan provides for the grant of cash and stock-based performance awards. The 2013 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock available for issuance under the plan automatically increases on January 1 of each year beginning in 2015.

On December 15, 2016, the Company adopted the Trevena, Inc. Inducement Plan, or the Inducement Plan, effective January 1, 2017, pursuant to which the Company reserved 500,000 shares of the Company’s common stock for issuance under the Inducement Plan. The Plan provides for nonstatutory stock options and restricted stock unit awards. The only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company.

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

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

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

    

Research and development

$

203

$

179

$

616

$

603

General and administrative

 

584

 

589

 

1,828

 

1,712

Total stock-based compensation

$

787

$

768

$

2,444

$

2,315

Stock Options

A summary of stock option activity and related information through September 30, 2020 follows:

Options Outstanding

    

    

    

Weighted 

Average 

Weighted 

Remaining 

Average 

Contractual 

Number of 

Exercise 

Term 

Shares

Price

(in years)

Balance, December 31, 2019

 

7,568,304

$

3.40

 

7.01

Granted

 

742,824

 

0.97

Exercised

 

(197,640)

 

(0.68)

Forfeited/Cancelled

 

(264,750)

 

(3.39)

Balance, September 30, 2020

 

7,848,738

$

3.24

 

6.85

Vested or expected to vest at September 30, 2020

 

7,848,738

$

3.24

 

6.85

Exercisable at September 30, 2020

 

5,134,274

$

4.09

 

6.09

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