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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
x☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172023
 
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 001-35558
 
TROVAGENE,CARDIFF ONCOLOGY, INC.
(Exact Name of registrant as specified in its charter)
Delaware27-2004382
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11055 Flintkote Avenue, Suite B, San Diego, California92121
(Address of principal executive offices)(Zip Code)
(858) 952-7570
(Registrant’s telephone number, including area code)
Title of each class:Trading Symbol(s)Name of each exchange on which registered:
Common StockCRDFNasdaq Capital Market
 
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 ☐
o
Non-accelerated filer ☒

o(Do not check if a smaller reporting company)Smaller reporting company ☒x
Emerging growth companyo
☐
  
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 October 31, 2017,26, 2023, the issuer had 38,106,46044,677,169 shares of Common Stock issued and outstanding.


Table of Contents

TROVAGENE,CARDIFF ONCOLOGY, INC.
 
Table of Contents
 
Page
Page
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2017 and December 31, 2016
3
Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2017 and 2016
4
Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2017 and 2016
5
Condensed ConsolidatedStatements of Stockholders’ Equity
6
Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30, 2017 and 2016
68
Notes to Condensed Consolidated Financial Statements (unaudited)
79
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SIGNATURES



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PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


TROVAGENE,CARDIFF ONCOLOGY, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
 
September 30, 2017 December 31, 2016September 30,
2023		December 31,
2022
Assets   Assets
Current assets:   Current assets:
Cash and cash equivalents$7,434,298
 $13,915,094
Cash and cash equivalents$15,233 $16,347 
Short-term investments—
 23,978,022
Short-term investments66,130 88,920 
Accounts receivable178,127
 100,460
Accounts receivable and unbilled receivableAccounts receivable and unbilled receivable198 771 
Prepaid expenses and other current assets939,200
 956,616
Prepaid expenses and other current assets2,344 5,246 
Total current assets8,551,625
 38,950,192
Total current assets83,905 111,284 
Property and equipment, net3,126,969
 3,826,915
Property and equipment, net1,317 1,269 
Operating lease right-of-use assetsOperating lease right-of-use assets1,843 2,251 
Other assets539,309
 1,173,304
Other assets1,387 1,387 
Total Assets$12,217,903
 $43,950,411
Total Assets$88,452 $116,191 
   
Liabilities and Stockholders’ Equity   Liabilities and Stockholders’ Equity
Current liabilities:   Current liabilities:
Accounts payable$675,499
 $1,130,536
Accounts payable$2,179 $1,956 
Accrued expenses2,620,250
 4,021,365
Deferred rent298,213
 285,246
Current portion of long-term debt (in default)1,488,041
 2,360,109
Accrued liabilitiesAccrued liabilities6,151 5,177 
Operating lease liabilitiesOperating lease liabilities688 675 
Total current liabilities5,082,003
 7,797,256
Total current liabilities9,018 7,808 
Long-term debt, less current portion—
 14,176,359
Derivative financial instruments—warrants2,037,712
 834,940
Deferred rent, net of current portion1,153,316
 1,373,717
Operating lease liabilities, net of current portionOperating lease liabilities, net of current portion1,607 2,040 
Total Liabilities8,273,031
 24,182,272
Total Liabilities10,625 9,848 
   
Commitments and contingencies (Note 9)

 

Commitments and contingencies (Note 6)Commitments and contingencies (Note 6)
   
Stockholders’ equity   Stockholders’ equity
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, 201660
 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, respectively3,811
 3,070
Preferred stock, 20,000 shares authorized; 277,100 designated as Series A Convertible Preferred Stock; 60,600 shares outstanding at September 30, 2023 and December 31, 2022 with liquidation preference of $1,062 and $1,044 at September 30, 2023 and December 31, 2022, respectively (Note 5)Preferred stock, 20,000 shares authorized; 277,100 designated as Series A Convertible Preferred Stock; 60,600 shares outstanding at September 30, 2023 and December 31, 2022 with liquidation preference of $1,062 and $1,044 at September 30, 2023 and December 31, 2022, respectively (Note 5)— — 
Common stock, $0.0001 par value, 150,000 shares authorized; 44,677 shares issued and outstanding at September 30, 2023 and December 31, 2022Common stock, $0.0001 par value, 150,000 shares authorized; 44,677 shares issued and outstanding at September 30, 2023 and December 31, 20224 4 
Additional paid-in capital174,426,891
 167,890,984
Additional paid-in capital408,434 404,834 
Accumulated other comprehensive loss(15,194) (10,773)Accumulated other comprehensive loss(407)(395)
Accumulated deficit(170,470,696) (148,115,202)Accumulated deficit(330,204)(298,100)
Total stockholders’ equity3,944,872
 19,768,139
Total stockholders’ equity77,827 106,343 
Total liabilities and stockholders’ equity$12,217,903
 $43,950,411
Total liabilities and stockholders’ equity$88,452 $116,191 
 
See accompanying notes to the unaudited condensed consolidated financial statements.

3
TROVAGENE,
Table of Contents
CARDIFF ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Royalties$58,779
 $47,236
 $169,415
 $207,869
Diagnostic services58,119
 37,978
 142,482
 69,558
Clinical research services6,431
 3,900
 8,481
 35,573
Total revenues123,329
 89,114
 320,378
 313,000
Costs and expenses:       
Cost of revenues473,202
 424,559
 1,427,831
 1,143,293
Research and development1,414,706
 3,937,398
 6,676,251
 11,221,876
Selling and marketing419,927
 2,940,862
 2,442,931
 9,127,450
General and administrative3,659,587
 2,710,782
 9,915,359
 9,183,761
Restructuring (benefit) charges(46,472) —
 1,669,526
 —
Total operating expenses5,920,950
 10,013,601
 22,131,898
 30,676,380
        
Loss from operations(5,797,621) (9,924,487) (21,811,520) (30,363,380)
        
Net interest expense(16,473) (354,993) (877,741) (967,522)
Gain from change in fair value of derivative financial instruments—warrants1,528,669
 88,208
 2,012,747
 674,834
Loss on extinguishment of debt—
 —
 (1,655,825) —
Other loss, net(6,541) —
 (4,975) —
Net loss(4,291,966) (10,191,272) (22,337,314) (30,656,068)
        
Preferred stock dividend(6,060) (6,060) (18,180) (18,180)
        
Net loss attributable to common stockholders$(4,298,026) $(10,197,332) $(22,355,494) $(30,674,248)
        
Net loss per common share — basic$(0.12) $(0.34) $(0.68) $(1.02)
Net loss per common share — diluted$(0.12) $(0.34) $(0.68) $(1.04)
        
Weighted-average shares outstanding — basic36,465,672
 30,339,774
 32,826,306
 30,018,841
Weighted-average shares outstanding — diluted36,465,672
 30,339,774
 32,826,306
 30,136,572
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Royalty revenues$141 $93 $332 $258 
Costs and expenses:
Research and development8,022 6,009 25,094 20,665 
Selling, general and administrative2,939 3,077 10,318 10,103 
Total operating expenses10,961 9,086 35,412 30,768 
Loss from operations(10,820)(8,993)(35,080)(30,510)
Other income (expense), net:
Interest income, net1,068 458 3,061 841 
Other income (expense), net21 (36)(85)(338)
Total other income (expense), net1,089 422 2,976 503 
Net loss(9,731)(8,571)(32,104)(30,007)
Preferred stock dividend payable on Series A Convertible Preferred Stock(6)(6)(18)(18)
Net loss attributable to common stockholders$(9,737)$(8,577)$(32,122)$(30,025)
Net loss per common share — basic and diluted$(0.22)$(0.20)$(0.72)$(0.69)
Weighted-average shares outstanding — basic and diluted44,677 43,333 44,677 43,291 
 
See accompanying notes to the unaudited condensed consolidated financial statements.

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TROVAGENE,
CARDIFF ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)


Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net loss$(9,731)$(8,571)$(32,104)$(30,007)
Other comprehensive loss:
  Unrealized gain (loss) on securities available-for-sale24 203 (12)(637)
Total comprehensive loss(9,707)(8,368)(32,116)(30,644)
Preferred stock dividend payable on Series A Convertible Preferred Stock(6)(6)(18)(18)
Comprehensive loss attributable to common stockholders$(9,713)$(8,374)$(32,134)$(30,662)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net loss$(4,291,966) $(10,191,272) $(22,337,314) $(30,656,068)
Other comprehensive income (loss):       
  Foreign currency translation loss(1,544) (81) (13,486) (1,877)
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(4,293,510) (10,199,350) (22,341,735) (30,660,810)
        
Preferred stock dividend(6,060) (6,060) (18,180) (18,180)
        
Comprehensive loss attributable to common stockholders$(4,299,570) $(10,205,410) $(22,359,915) $(30,678,990)


See accompanying notes to the unaudited condensed consolidated financial statements.

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TROVAGENE,CARDIFF ONCOLOGY, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)

 Preferred Stock
Shares		Preferred Stock
Amount		Common Stock
Shares		Common Stock
Amount		Additional
Paid-In Capital		Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
Balance, January 1, 202361 $— 44,677 $4 $404,834 $(395)$(298,100)$106,343 
Stock-based compensation— — — — 1,064 — — 1,064 
Other comprehensive gain— — — — — 319 — 319 
Net loss— — — — — — (11,223)(11,223)
Balance, March 31, 202361 $— 44,677 $4 $405,898 $(76)$(309,323)$96,503 
Stock-based compensation— — — — 1,581 — — 1,581 
Other comprehensive loss— — — — — (355)— (355)
Net loss— — — — — — (11,150)(11,150)
Balance, June 30, 202361 $— 44,677 $4 $407,479 $(431)$(320,473)$86,579 
Stock-based compensation— — — — 955 — — 955 
Other comprehensive gain— — — — — 24 — 24 
Net loss— — — — — — (9,731)(9,731)
Balance, September 30, 202361 $— 44,677 $4 $408,434 $(407)$(330,204)$77,827 


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 Preferred Stock
Shares		Preferred Stock
Amount		Common Stock
Shares		Common Stock
Amount		Additional
Paid-In Capital		Service ReceivableAccumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
Balance, January 1, 2022716 $1 41,964 $4 $400,503 $(139)$(142)$(259,810)$140,417 
Stock-based compensation— — — — 1,152 — — — 1,152 
Other comprehensive loss— — — — — — (606)— (606)
Issuance of common stock upon conversion of Series E Convertible Preferred Stock(328)(1)1,342 — — — — — (1)
Preferred stock dividend— — — — — — — (6)(6)
Release of clinical trial funding commitment— — — — — 139 — — 139 
Net loss— — — — — — — (10,993)(10,993)
Balance, March 31, 2022388 $— 43,306 $4 $401,655 $— $(748)$(270,809)$130,102 
Stock-based compensation— — — — 1,055 — — — 1,055 
Other comprehensive loss— — — — — — (234)— (234)
Preferred stock dividend— — — — — — — (6)(6)
Net loss— — — — — — — (10,443)(10,443)
Balance, June 30, 2022388 $— 43,306 $4 $402,710 $— $(982)$(281,258)$120,474 
Stock-based compensation— — — — 1,037 — — — 1,037 
Issuance of common stock upon exercise of stock options    — — 29 — 75 — — — 75 
Other comprehensive gain— — — — — — 203 — 203 
Preferred stock dividend— — — — — — — (6)(6)
Net loss— — — — — — — (8,571)(8,571)
Balance, September 30, 2022388 $— 43,335 $4 $403,822 $— $(779)$(289,835)$113,212 

See accompanying notes to the unaudited condensed financial statements.
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CARDIFF ONCOLOGY, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended
September 30,
 2017 2016
Operating activities   
Net loss$(22,337,314) $(30,656,068)
Adjustments to reconcile net loss to net cash used in operating activities:   
Loss on disposal of assets28,199
 —
Impairment loss485,000
 —
Depreciation and amortization956,995
 693,485
Stock based compensation expense3,117,364
 5,942,392
Loss on extinguishment of debt1,655,825
 —
Accretion of final fee premium293,614
 266,423
Amortization of discount on debt113,780
 105,710
Net realized loss on short-term investments6,400
 —
Amortization of premiums on short-term investments9,230
 61,719
Deferred rent(207,435) (133,378)
Interest income accrued on short-term investments(90,330) 10,122
Change in fair value of derivative financial instruments—warrants(2,012,747) (674,834)
Changes in operating assets and liabilities:   
Decrease in other assets—
 2,761
(Increase) decrease in accounts receivable(77,667) 13,584
Decrease (increase) in prepaid expenses and other current assets18,230
 (157,051)
(Decrease) increase in accounts payable and accrued expenses(1,908,796) 2,490,137
Net cash used in operating activities(19,949,652) (22,034,998)
    
Investing activities:   
Capital expenditures, net(136,251) (797,781)
Maturities of short-term investments16,431,837
 —
Purchases of short-term investments(8,804,604) (24,451,611)
Sales of short-term investments16,434,553
 —
Net cash provided by (used in) investing activities23,925,535
 (25,249,392)
    
Financing activities:   
Proceeds from sales of common stock and warrants, net of expenses6,634,803
 2,293,857
Proceeds from exercise of options—
 366,966
Borrowings under equipment line of credit—
 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(15,000,000) (8,896,166)
Repayments of equipment line of credit(469,578) —
Net cash (used in) provided by financing activities(10,447,842) 2,361,994
Effect of exchange rate changes on cash and cash equivalents(8,837) (1,544)
Net change in cash and equivalents(6,480,796) (44,923,940)
Cash and cash equivalents—Beginning of period13,915,094
 67,493,047
Cash and cash equivalents—End of period$7,434,298
 $22,569,107
    
Supplementary disclosure of cash flow activity:   
Cash paid for taxes$800
 $4,560
Cash paid for interest$650,331
 $806,228
Supplemental disclosure of non-cash investing and financing activities:   
Preferred stock dividends accrued$18,180
 $18,180
Leasehold improvements paid for by lessor$—
 $1,860,000
Nine Months Ended September 30,
20232022
Operating activities
Net loss$(32,104)$(30,007)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation295 150 
Stock-based compensation expense3,600 3,244 
Amortization of premiums (discounts) on short-term investments(716)672 
Release of clinical trial funding commitment— 139 
Changes in operating assets and liabilities:
Other assets— 55 
Accounts receivable and unbilled receivable573 (115)
Prepaid expenses and other current assets3,188 4 
Operating lease right-of-use assets408 408 
Accounts payable and accrued expenses1,428 1,325 
Operating lease liabilities(420)(271)
Other liabilities— (34)
Net cash used in operating activities(23,748)(24,430)
Investing activities:
Capital expenditures(574)(931)
Insurance proceeds from casualty loss— 114 
Maturities of short-term investments80,534 61,229 
Purchases of short-term investments(67,491)(80,428)
Sales of short-term investments10,165 51,145 
Net cash provided by investing activities22,634 31,129 
Financing activities:
Proceeds from exercise of options— 75 
Net cash provided by financing activities— 75 
Net change in cash and cash equivalents(1,114)6,774 
Cash and cash equivalents—Beginning of period16,347 11,943 
Cash and cash equivalents—End of period$15,233 $18,717 
Supplementary disclosure of cash flow activity:
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property and equipment included in accounts payable and accrued expenses$— $255 
 
See accompanying notes to the unaudited condensed consolidated financial statements.

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TROVAGENE,
Table of Contents
CARDIFF ONCOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1. Organization and Basis of Presentation
 
Business Organization and Overview
 
Trovagene,Cardiff Oncology, Inc. (“Trovagene”Cardiff Oncology” or the “Company”) headquartered in San Diego, 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 bybiotechnology company leveraging its proprietary Precision Cancer Monitoring® (“PCM”) diagnostic technology in tumor genomics.

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 asinhibition to develop novel therapies across a single agent and synergyrange of cancers. The Company’s lead asset is onvansertib, a PLK1 inhibitor that is being evaluated in combination with more than ten different chemotherapeutics and targetedstandard-of-care therapies in clinical programs targeting indications such as Zytiga® (abiraterone acetate), Beleodaq® (belinostat), Quizartinib (AC220), aRAS-mutated metastatic colorectal cancer, metastatic pancreatic cancer, as well as investigator-initiated trials in small cell lung cancer and triple negative breast cancer. These programs and the Company’s broader development stage FLT3 inhibitor,strategy are designed to target tumor vulnerabilities in order to overcome treatment resistance 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 approximately 24 hoursdeliver superior clinical benefit compared to other PLK inhibitors. PCM-075 has completed a safety study in patients with advanced metastatic solid tumors with a phase 1b/2 clinical trial in patients with AML underway.the standard-of-care alone. The Company's common stock is listed on the Nasdaq Capital Market under the ticker symbol "CRDF".
 
Basis of Presentation
 
The accompanying unaudited interim condensed consolidated financial statements of Trovagene, which include all accounts of its wholly owned subsidiary, Trovagene, Srl,Cardiff Oncology 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. The unaudited condensed balance sheet at December 31, 20162022, has been derived from the audited financial statements at that date but does not include all of the information and 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, 20162022, included in the Company’s annual report on Form 10-K filed with the SEC on March 15, 2017.2, 2023.


Liquidity

Trovagene’s condensed consolidated financial statements as of September 30, 2017 have been prepared under the assumption that Trovagene will continue as a going 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.
However, the Company has incurred net losses since its inception and has negative operating cash flows. TheAs of September 30, 2023, the Company also received a default letter from Silicon Valley Bank (“SVB”) regardinghad $81.4 million in cash, cash equivalents and short-term investments and believes it has sufficient cash to meet its funding requirements for at least the Loan and Security Agreement entered in November 2015 which stated that eventsnext 12 months following the issuance date 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,these financial statements.

For the foreseeable future, 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 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 significantadditional 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 consisted of corporate debt securities, U.S. treasury securities, and commercial paper. The Company 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 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 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 was recognized when earned. Realized gains and losses on investments in securities were included in other income (loss) within the consolidated statements of operations. 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 loss of approximately $6,400 forDuring the nine months ended 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 above2023, there have been metno changes to the Company’s significant accounting policies as well asdescribed in its Annual Report on Form 10-K for 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 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.

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”) 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 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 September 30, 2017 andfiscal year ended December 31, 2016, the fair value of these warrants was $2,037,712 and $834,940, respectively, and was recorded as a liability under the caption “derivative financial instruments—warrants” on the consolidated balance sheets.2022.

Net Loss Per Share
 
Basic and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share, for all periods presented. In accordance with this guidance, basic net loss per common share wasis 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 availablenet loss attributable 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 number

9
Table of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive.Contents

The following table sets forth the computation of basic and diluted earnings per share:
 Three Months
Ended September 30,		 Nine Months
Ended September 30,
 2017 2016 2017 2016
Numerator: Net loss attributable to common shareholders$(4,298,026) $(10,197,332) $(22,355,494) $(30,674,248)
Adjustment for gain from change in fair value of derivative financial instruments—warrants
—
 —
 —
 (533,750)
Net loss used for diluted loss per share$(4,298,026) $(10,197,332) $(22,355,494) $(31,207,998)
Denominator for basic and diluted net loss per share:       
Weighted-average shares used to compute basic loss per share36,465,672
 30,339,774
 32,826,306
 30,018,841
Adjustments to reflect assumed exercise of warrants—
 —
 —
 117,731
Weighted-average shares used to compute diluted net loss per share36,465,672
 30,339,774
 32,826,306
 30,136,572
Net loss per share attributable to common stockholders:       
Basic$(0.12) $(0.34) $(0.68) $(1.02)
Diluted$(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:
 
September 30,
20232022
Options to purchase Common Stock6,652,427 5,101,572 
Warrants to purchase Common Stock2,807,948 4,490,159 
Series A Convertible Preferred Stock877 877 
Series E Convertible Preferred Stock— 1,342,250 
9,461,252 10,934,858 
 September 30,
 2017 2016
Options to purchase Common Stock4,257,031
 6,051,186
Warrants to purchase Common Stock8,972,503
 4,546,939
Restricted Stock Units1,277,302
 392,000
Series A Convertible Preferred Stock63,125
 63,125
 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 DisposalCost 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 last quarter of 2017. See Note 10 to the condensed consolidated financial statements for further information.


Recent Accounting PronouncementsPronouncement Not Yet Adopted

In August 2016,2020, the FASB issued Accounting Standards Update (“ASU”) 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”No. 2020-06 ("ASU 2020-06"), which includes amendments that clarify how certain cash receiptsDebt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash paymentsconversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are presentedcurrently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact 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.diluted EPS computation. The new amendments and guidancein this update are effective for public business entities for fiscal years beginning after December 15, 2017, including2021 (or December 15, 2023, for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within those fiscal years. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted provided that all amendments are adopted in the same period.permitted. 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 newthis 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 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 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 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 new standards would be recognized at the date of initial application. 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 these agreements has unique terms that are being evaluated separately under the new standards. 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 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. The Company is also continuing to assess the potential impact that the new standards may have with respect to its diagnostic service revenue which is currently recognized on a cash collection basis. Under the new standards, the Company may recognize diagnostic service revenue 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 uncertainty associated with the variable consideration is subsequently resolved. The Company is continuing to assess the impact the new standards will have on its financial statements and expects to complete the assessmentrelated disclosures, and will adopt this standard on or before the year-end 2017. The Company does not expect a significant change in the timing and recognition of its revenue 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.January 1, 2024.


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 September 30, 20172023, and December 31, 2016:2022:
 

Fair Value Measurements at
September 30, 2023
(in thousands)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$14,928 $— $— $14,928 
Total included in cash and cash equivalents14,928 — — 14,928 
Available for sale investments:
Certificate of deposit— 9,181 — 9,181 
Corporate debt securities— 22,368 — 22,368 
    Commercial paper— 7,613 — 7,613 
U.S. government agencies— 6,821 — 6,821 
U.S. treasury securities20,147 — — 20,147 
Total available for sale investments20,147 45,983 — 66,130 
Total assets measured at fair value on a recurring basis$35,075 $45,983 $— $81,058 

10
Table of Contents
 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
Assets:       
Money market fund (1)$6,510,214
 $—
 $—
 $6,510,214
Total Assets$6,510,214
 $—
 $—
 $6,510,214
Liabilities:       
Derivative financial instruments—warrants
$—
 $—
 $2,037,712
 $2,037,712
Total Liabilities$—
 $—
 2,037,712
 $2,037,712
Fair Value Measurements at
December 31, 2022
(in thousands)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$15,722 $— $— $15,722 
Total included in cash and cash equivalents15,722 — — 15,722 
Available for sale investments:
Certificate of deposit— 16,023 — 16,023 
Corporate debt securities— 49,535 — 49,535 
    Commercial paper— 13,187 — 13,187 
U.S. government agencies— 2,288 — 2,288 
U.S. treasury securities7,887 — — 7,887 
Total available for sale investments7,887 81,033 — 88,920 
Total assets measured at fair value on a recurring basis$23,609 $81,033 $— $104,642 
 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) $0 and $1,198,504 of commercial paper was included as a component of cash and cash equivalents at 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 summaryCompany’s policy is to recognize transfers between levels of changes in the fair value hierarchy on the date of the Company’sevent or change in circumstances that caused the transfer. There were no transfers into or out of Level 3 liabilities forduring the nine months ended September 30, 2017:2023.

11
Description Balance at
December 31, 2016		 Issuance of Derivative Financial Instruments 
Realized
Gain
 Balance at
September 30, 2017
Derivative financial instruments—warrants
 $834,940
 3,215,519
 $(2,012,747) $2,037,712
Table of Contents
4. Supplementary Balance Sheet Information
The realized gains
Investments available for sale

Investments available for sale consist of the following:

As of September 30, 2023
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Maturity less than 1 year:
Certificate of deposit$9,181 $3 $(3)$9,181 
Corporate debt securities12,194 3 (28)12,169 
Commercial paper7,616 — (3)7,613 
U.S. government agencies6,852 — (31)6,821 
U.S. treasury securities1,935 — (13)1,922 
Total maturity less than 1 year37,778 6 (78)37,706 
Maturity 1 to 2 years:
Corporate debt securities10,281 3 (85)10,199 
U.S. treasury securities18,478 — (253)18,225 
Total maturity 1 to 2 years28,759 3 (338)28,424 
Total short-term investments$66,537 $9 $(416)$66,130 


As of December 31, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Maturity less than 1 year:
Certificate of deposit$16,101 $3 $(81)$16,023 
Corporate debt securities44,806 8 (275)44,539 
Commercial paper13,203 4 (20)13,187 
Non U.S. government2,284 4 — 2,288 
U.S. treasury securities7,905 — (18)7,887 
Total maturity less than 1 year84,299 19 (394)83,924 
Maturity 1 to 2 years:
Corporate debt securities5,016 1 (21)4,996 
Total maturity 1 to 2 years5,016 1 (21)4,996 
Total short-term investments$89,315 $20 $(415)$88,920 

We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or losses onother potential valuation concerns. For debt securities where 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’sinvestment is less than the amortized cost basis, we have assessed at the individual security level within the fair value hierarchy is based on the lowest level of any input that is significantfor various quantitative factors including, but not limited to, the fair value measurement. At each reporting period,nature of the Company reviewsinvestments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the assets and liabilities that are subject to ASC Topic 815-40. At each reporting period, all assets and liabilitiesseverity of impairment. Unrealized losses in investments available 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 ofsale debt securities at September 30, 2017, all short-term2023, were substantially due to increases in interest rates, not due to increased credit risks associated with specific securities. Accordingly, we have not recorded an allowance for credit losses. It is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.


12
Table of Contents
Investments available for sale that have been sold to satisfyin a continuous unrealized loss position for greater than one-year consist of the Company’s outstanding obligations under the Loan and Security Agreement dated as of June 30, 2014 upon demanding repayment by the lenders.following:

As of September 30, 2023
(in thousands)Fair Market ValueGross Unrealized Loss
Corporate debt securities$1,794 $(10)
The following table sets forth the composition of short-term investments as of December 31, 2016.

 December 31, 2016
     Unrealized  
 Maturity in Years Cost Gains Losses Fair Value
Corporate debt securitiesLess than 1 year $14,165,915
 $44
 $(5,273) $14,160,686
Commercial paperLess than 1 year 1,195,444
 —
 —
 1,195,444
U.S. treasury securitiesLess 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 Equipmentequipment

Property and equipment consist of the following:
(in thousands)As of September 30,
2023		As of December 31,
2022
Furniture and office equipment$1,081 $1,066 
Leasehold improvements2,568 2,560 
Laboratory equipment1,332 1,056 
4,981 4,682 
Less—accumulated depreciation and amortization(3,664)(3,413)
Property and equipment, net$1,317 $1,269 

 As of September 30,
2017		 As of December 31,
2016
Furniture and office equipment$1,076,709
 $1,144,741
Leasehold improvements1,994,514
 1,994,514
Laboratory equipment2,584,363
 2,449,645
 5,655,586
 5,588,900
Less—accumulated depreciation and amortization(2,528,617) (1,761,985)
Property and equipment, net$3,126,969
 $3,826,915
Accrued Liabilities


6. Debt
Equipment Line of Credit
In November 2015, the Company entered into a Loan and Security Agreement (“Equipment Line of Credit”) with SVB that provided for cash borrowings for equipment (“Equipment Advances”) of up to $2.0 million, secured by the equipment financed. Under the termsAccrued liabilities consisted of the agreement, interest is equal to 1.25% above the Prime Rate. At September 30, 2017, the interest rate was 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.following:


On June 20, 2017, the Company received a Notice of Event of Default (“Default Letter”) from SVB which stated that Events of Default had occurred and SVB will decide in its sole discretion whether or not to exercise rights and remedies. Pursuant to the Default Letter, the Company has classified the entire balance of $1,488,041 as a current liability as of September 30, 2017 and also started recording accrued interest at a default rate. The Company recorded $209,082 in interest expense related to the Equipment Line of Credit during the nine months ended September 30, 2017. The Company is currently working with lender for resolution.
(in thousands)As of September 30,
2023		As of December 31,
2022
Accrued compensation$2,455 $1,849 
Clinical trials2,878 2,333 
Research agreements and services591 509 
Director fees125 125 
Patent, license and other fees33 24 
Other accrued liabilities69 337 
Total accrued liabilities$6,151 $5,177 


Loan and Security Agreement
In June 2014, the Company entered into a $15,000,000 Loan and Security Agreement (“Agreement”) under which the lenders provided the Company a term loan. On July 20, 2016, the Company signed the 5th Amendment to Loan and Security Agreement 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%. 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.

On June 1, 2017, the Company received a Notice of Event of Default from the lenders 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 bank accounts which satisfied all of the Company’s outstanding obligations under the Agreement. Accordingly, the Agreement was terminated in June 2017. Upon termination of the Agreement, the prepayment fee of $450,000, unamortized debt discount of $400,562 and unamortized final fee of $738,196 were recorded as loss on debt extinguishment. The Company recorded total interest expense of $801,173 related to the Agreement during the nine months ended September 30, 2017.
7. Derivative Financial 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 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:
 Nine Months Ended September 30,
 2017 2016
Estimated fair value of Trovagene common stock0.73-1.26
 4.49-4.65
Expected warrant term1.3-5.5 years
 2.3-2.8 years
Risk-free interest rate1.27-1.95%
 0.71-0.87%
Expected volatility86-109%
 82-89%
Dividend yield0% 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 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
December 31, 2016 
Balance of derivative financial instruments—warrants liability
 967,295
 $834,940
  Issuance of derivative financial instruments 4,643,626
 3,215,519
  
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
8.5. Stockholders’ Equity
Common Stock
During the nine months ended September 30, 2017, the Company issued a total of 7,408,460 shares of Common Stock. The Company received gross proceeds of 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 TrovageneCardiff Oncology equity awards have been recognized in operating results as follow:follows:
 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Included in research and development expense$219,480
 $872,792
 $798,143
 $1,862,069
Included in cost of revenue15,633
 42,639
 56,998
 99,164
Included in selling and marketing expense118,434
 476,865
 550,317
 1,493,744
Included in general and administrative expense1,067,633
 437,075
 1,837,128
 2,487,415
Benefit from restructuring—
 —
 (125,222) —
Total stock-based compensation expense$1,421,180
 $1,829,371
 $3,117,364
 $5,942,392
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2023202220232022
Included in research and development expense$294 $286 $985 $746 
Included in selling, general and administrative expense661 751 2,615 2,498 
Total stock-based compensation expense$955 $1,037 $3,600 $3,244 
 
The unrecognized compensation cost related to non-vested stock options outstanding at September 30, 2017 and 2016,2023, net of expectedestimated forfeitures, was $3,271,046 and $10,416,565, respectively,$7.5 million, which is expected to be recognized over a weighted-average remaining vesting period of 2.2 and 3.0 years, respectively.2.3 years. The weighted-average remaining contractual term of outstanding options as of September 30, 20172023, was approximately 7.28.1 years. The total fair value of stock options vested during the nine months ended September 30, 20172023 and 2016 was $3,378,2432022, were $4.0 million and $5,416,168,$4.0 million, respectively.



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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:
 
Nine Months Ended September 30,
20232022
Risk-free interest rate3.62 %1.87 %
Dividend yield0 %0 %
Expected volatility of Cardiff Oncology common stock109 %106 %
Expected term(1)
5.3 years6.0 years
 Nine Months Ended
September 30,
 2017 2016
Risk-free interest rate1.82% 1.48%
Dividend yield0% 0%
Expected volatility87% 103%
Expected term5.2 years
 5.5 years
(1)The expected term for options granted after January 1, 2023 is estimated based on the Company's historical employee data. Prior to January 1, 2023, the Company used the "simplified method" to estimate expected term.


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
Balance outstanding, December 31, 20165,528,628
 $5.49
 $—
Granted823,106
 $0.84
  
Canceled / Forfeited(2,077,246) $6.24
  
Expired(17,457) $4.74
  
Balance outstanding, September 30, 20174,257,031
 $4.23
 $381
Exercisable at September 30, 20172,492,242
 $4.79
 $—
Total OptionsWeighted-Average
Exercise Price
Per Share		Intrinsic
Value
Balance outstanding, December 31, 20225,069,458 $5.92 $19,322 
Granted2,138,624 $1.70  
Forfeited and expired(555,655)$8.40  
Balance outstanding, September 30, 20236,652,427 $4.36 $18,747 
Exercisable at September 30, 20232,944,474 $5.88 $18,169 
Vested and expected to vest at September 30, 20236,459,779 $4.42 $18,718 
 
On2021 Equity Incentive Plan

In June 13, 2017,2021 the Company's stockholders approved the 2021 Omnibus Equity Incentive Plan ("2021 Plan"). The number of authorized shares in the Trovagene2021 Plan is equal to the sum of (i) 3,150,000 shares, plus (ii) the number of shares of Common Stock reserved, but unissued under the 2014 Equity IncentivePlan; and (iii) the number of shares of Common Stock underlying forfeited awards under the 2014 Plan. On June 9, 2022, the shareholders approved an increase of shares authorized in the 2021 Plan (“2014 EIP”) was increasedto 5,150,000 from 7,500,000 to 9,500,000.3,150,000. As of September 30, 20172023, there were 3,670,2322,013,871 shares available for issuance under the 2021 Plan.

2014 EIP.Equity Incentive Plan


Restricted Stock UnitsSubsequent to the adoption of the 2021 Plan, no additional equity awards can be made under the terms of the 2014 Plan.


Inducement Grants

The weighted-averageCompany issues equity awards to certain new employees as inducement grants outside of its 2021 Plan. As of September 30, 2023, an aggregate of 1,435,256 shares were issuable upon the exercise of inducement grant date fair valuestock options approved by the Company.

Modification of Stock Options

In June 2023 the RSU was $1.59 and $4.06 per shareCompany modified stock options for a departing employee. The modification resulted in an incremental stock-based compensation expense of $0.6 million during the nine monthsmonth period ended September 30, 2017 and 2016, respectively.2023.

A summary of the RSU activity is presented below:
14
 Number of Shares 
Weighted-Average
Grant Date Fair Value
Per Share
 Intrinsic Value
Non-vested RSU outstanding, December 31, 2016272,000
 $3.99
 $571,200
Granted2,249,242
 $1.59
  
Vested(369,487) $3.48
 $645,775
Forfeited(874,453) $1.75
  
Non-vested RSU outstanding, September 30, 20171,277,302
 $1.44
 $932,430

At September 30, 2017, total unrecognized compensation cost related to non-vested RSU was $1,011,494, which is expected to be recognized over a weighted-average periodTable of 2.5 years. The total fair value of vested RSU during the nine months ended September 30, 2017 was $1,285,578.Contents

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 WarrantsWeighted-Average
Exercise Price
Per Share		Weighted-Average
Remaining Contractual
Term
Balance outstanding, December 31, 20224,360,968 $5.33 2.1 years
Expired(1,553,020)$10.54  
Balance outstanding, September 30, 20232,807,948 $2.45 2.2 years

Preferred Stock

On August 8, 2023, the Company filed, with the Secretary of State of the State of Delaware, a Certificate of Elimination (the “Certificate of Elimination”) of Series B, Series C, Series D and Series E Convertible Preferred Stock removing the designation and other references to its Series B, Series C, Series D and Series E Convertible Preferred Stock from the Company’s Amended and Restated Certificate of Incorporation, as amended. The Certificate of Elimination eliminates and returns the 8,860 Series B, 200,000 Series C, 154,670 Series D and 865,824 Series E shares of preferred stock previously designated, and no longer issued and outstanding, to the status of authorized but unissued shares of preferred stock, without designation.

 Total Warrants 
Weighted-Average
Exercise Price
Per Share
 
Weighted-Average
Remaining Contractual
Term
Balance outstanding, December 31, 20165,505,901
 $3.83
 1.6
Granted4,643,626
 $1.41
  
Expired(1,177,024) $5.32
  
Balance outstanding, September 30, 20178,972,503
 $2.38
 3.3

9.6. Commitments and Contingencies
 
Executive and Consulting Agreements
 
The Company has longer-term contractual commitments with various consultants and employees. Certain employmentexecutive agreements provide for severance payments.
Lease Agreements
The Company leases approximately 26,100 square feetpayments in case of office and laboratory space at a monthly rental rateterminations without cause or certain change 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 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 2017.control scenarios.
 
Research and Development and Clinical Trial Agreements


In March 2017, the Company entered into a license agreement with Nerviano which granted the Company development and commercialization rights to NMS-1286937, which TrovageneCardiff Oncology refers to as PCM-075. PCM-075 is an oral, investigative drug and a highly-selective adenosine triphosphate competitive inhibitor of the serine/threonine PLK 1. The Company plans to develop PCM-075 initially in patients with 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 nine months ended 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.onvansertib. Terms of the agreement also provide for the Company to pay development and commercial milestones, and royalties based on certainsales volume. These potential development milestones include: (a) dosing of the first subject in the first Phase III Clinical Trial for the first Product, a registration enabling Phase II Clinical Trial, or after completion of a Phase II Clinical Trial that is used as the basis for an NDA submission; and sales milestones.
The Company has entered into a variety(b) upon filing of clinical trial and collaboration agreements relating to its drug development efforts. Included in research and development expense, the Company has recorded approximately $291,000first NDA or equivalent for the first product candidate. During the nine months ended September 30, 2017 relating to services provided in connection with these agreements.2023 and 2022 no milestone or royalty payments were made.

The Company is a party to various agreements under which it licenses technology on an exclusive basis in the field of human diagnostics.oncology therapeutics. These agreements include License fees, Royalties and Milestone payments. The Company also has a legacy license agreement in the field of oncology diagnostics under which royalty payments are generallydue. These royalty payments are calculated as a percentagepercent of product revenues, with rates that vary by agreement. To date,revenue. For the nine months ended September 30, 2023 and 2022, payments have not been material.


Litigation

TrovageneCardiff Oncology does not believe that the Companyit 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 (the “Complaint”). The 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 (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 involved. The net cost to Trovagene in connection with the settlement is approximately $2.1 million. Of that amount, $975,000 was the net amount paid directly to the former CEO and CFO.disclosure. From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in 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
15

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
Table 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%. Gross proceeds of approximately $110,000 have been raised in 2017.Contents

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 last quarter of 2017. The Company estimates that it will incur approximately $2.0 million in charges related to this Restructuring. During the nine months ended 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 September 30, 2017, approximately $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 nine months ended September 30, 2017 and 2016, the Company has incurred approximately $763,075 and $377,464 of legal expenses, net of insurance reimbursements, for services performed by Rutan & Tucker, 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, 2016,2022, 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, 2017.2, 2023. 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 lookingforward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward lookingforward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward lookingforward-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 medicineclinical-stage biotechnology company developingleveraging PLK1 inhibition, a well-validated oncology therapeutics for improveddrug target, to develop novel therapies across a range of cancers with the greatest unmet medical need. Our goal is to target tumor vulnerabilities with treatment combinations of onvansertib, our oral and highly selective PLK1 inhibitor, and standard-of-care therapeutics. We are focusing our clinical program in indications such as RAS-mutated metastatic colorectal cancer care, optimizing drug("mCRC") and metastatic pancreatic ductal adenocarcinoma ("mPDAC"), as well as in investigator-initiated trials in small cell lung cancer ("SCLC") and triple negative breast cancer ("TNBC"). Our clinical development by leveraging our proprietary PCM technology inprograms incorporate tumor genomics. Our broad intellectual propertygenomics and proprietary technology enables usbiomarker assays to measure ctDNA in urine and blood to identify and quantify clinically actionable markers for predictingrefine assessment of patient 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 technologytreatment.

Our Lead Drug Candidate, Onvansertib

Onvansertib is an oral, small molecule drug candidate that is highly specific for PLK1 inhibition with the development of precision cancer therapeutics.a 24-hour half-life.


We believe wethe attributes of onvansertib described below, as well as clinical evidence of favorable safety and efficacy, with expected on-target, easy to manage and reversible side effects, may prove beneficial in addressing clinical therapeutic needs across a variety of cancers:

•Onvansertib is highly potent and highly selective against the PLK1 enzyme (IC50 = 2nM; IC50 is the concentration for 50% inhibition), compared to prior PLK1 inhibitors that were pan-inhibitors of several PLK targets. Low or no activity of onvansertib was observed on a panel of 63 kinases (IC50>500 nM), including the PLK members PLK2 and PLK3 (IC50>10,000 nM);

•Onvansertib is orally bioavailable, allowing for relative ease and flexibility of dosing.
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•Onvansertib has a relatively short drug half-life of 24 hours, allowing for flexible dosing and scheduling which has shown favorable safety and tolerability across multiple clinical trials;

In vitro studies have an opportunity to utilize precision diagnostics to improveshown synergistic effects when onvansertib was administered in combination with different cytotoxic agents including microtubule-targeting agents, topoisomerase 1 inhibitors, antimetabolites, alkylating agents, proteasome inhibitors, kinase inhibitors, PARP inhibitors, BCL-2 inhibitors, and androgen biosynthesis inhibitors.

In addition, in vivo combination studies have confirmed the positive results obtained in vitro and synergistic effects have been observed in xenograft models of onvansertib in combination with irinotecan, 5-fluorouracil ("5-FU"), abiraterone, PARP inhibitors, venetoclax, and paclitaxel, while additive effects in combination with cytarabine or bevacizumab have been demonstrated. Combining onvansertib with standard-of-care cancer agents provides opportunities for synergy with many cancer therapies.

There are five ongoing and planned clinical trials of onvansertib: one trial (CRDF-004) in first line 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, 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 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 RAS-mutated mCRC, one trial (TROV-054) in second line treatment in patients with KRAS-mutated mCRC, one trial in second line treatment in patients with mPDAC, and two investigator-initiated trials in patients with relapsed extensive-stage SCLC and locally advanced or metastatic solid tumors and we received notification from the U.S. Food and Drug Administration (“FDA”) that ourTNBC.

RAS-mutated mCRC Program:

CRDF-004 Clinical Trial in RAS-mutated mCRC

CRDF-004 is a Phase 1b/2 open-label, randomized multi-center clinical trial of PCM-075 in patients with AML may proceed. PCM-075 has positive preclinical data as a single agent andonvansertib in combination with select chemotherapeuticsstandard-of-care FOLFIRI and targeted agents used in many hematologicbevacizumab or FOLFOX and solid cancers, including AML, Non-Hodgkin Lymphoma, mCRPC, Adrenocortical Carcinoma, and Triple Negative Breast Cancer.

We have significant experience and expertisebevacizumab for the first line treatment of patients with biomarkers and technology in cancer, including AML. We are oneRAS-mutated mCRC. The primary objectives of the patent holders of NPM1 for diagnosisCRDF-004 trial are to evaluate onvansertib’s safety and monitoring of patients. NPM1-mutated AML is a genetic markerefficacy 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,combination with the standard-of-care, as well as to measure PLK1 enzymatic activity to potentially identify patients most likely to respond to PCM-075evaluate two doses of onvansertib, 20mg and to measure patient therapy response.

Our accumulated deficit through September 30, 201730mg, given in combination with standard-of-care, against standard-of-care alone. The primary endpoint of the trial is $170,470,696. To date, we have generated minimal revenuesobjective response rate. Progression-free survival and duration of response will be secondary endpoints. We expect to incur additional lossesbegin enrollment during the fourth quarter of 2023, with interim data anticipated in mid-2024. Pfizer Ignite is responsible for the clinical execution of the trial and it is expected to perform further researchenroll approximately 90 evaluable patients. For more information, please visit NCT06106308 at www.clinicialtrials.gov.

Contingent upon the results of CRDF-004, Cardiff Oncology plans to initiate CRDF-005, a Phase 3, randomized trial with registrational intent. The FDA has agreed that a seamless trial with objective response rate (ORR) at an interim point is an acceptable endpoint to pursue accelerated approval, with progression-free survival and development activitiestrend in overall survival being the endpoints for full approval.

Phase 1b/2 Clinical Trial in KRAS-mutated mCRC

TROV-054 is a Phase 1b/2 open-label multi-center clinical trial of onvansertib in combination with standard-of-care FOLFIRI and expand commercial operations. During 2017, we have advanced our business withbevacizumab for the following activities:

Announced preclinical research demonstrating synergy of PCM-075 with Zytiga® (abiraterone acetate) in Castration-Resistant Prostate Cancer tumor cells.

Announced that the FDA granted Orphan Drug Designation to PCM-075 for thesecond line treatment of patients with AML.KRAS-mutated mCRC. This trial completed enrollment in October 2022.



AnnouncedThe primary objectives of this trial are to evaluate the expansionDose-Limiting Toxicities ("DLTs"), maximum tolerated dose ("MTD") and strengtheningrecommended Phase 2 dose ("RP2D") of its Board of Directors with the appointment of Athena Countouriotis, M.D. Dr. Countouriotis brings significant experience in oncology clinical development and orphan indications

Announced PCM-075 synergy with a HDAC Inhibitor in Non-Hodgkin Lymphoma Cell Lines. Additionally, PCM-075 demonstrates synergyonvansertib in combination with more than ten chemotherapeuticFOLFIRI and targeted therapies across a broad range of solid tumorbevacizumab (Phase 1b) and hematologic cancers.

Announced preclinical AML data shows PCM-075 significantly enhancesto continue to assess the safety and preliminary efficacy of a FLT3 inhibitoronvansertib in combination therapy.with FOLFIRI and bevacizumab patients with KRAS-mutated mCRC (Phase 2). For more information, please visit NCT03829410 at www.clinicialtrials.gov.


AnnouncedData presented on August 7, 2023, provided an update of the ongoing TROV-054 Phase 1b/2 single arm clinical trial in KRAS-mutated metastatic colorectal cancer:

•Objective response rate ("ORR") across all evaluable patients was 29%, with 19 of 66 evaluable patients achieving an objective response. Responses have been observed across multiple KRAS variants;

•Median duration of response ("mDoR") across all evaluable patients was 12.0 months (95% confidence interval ("CI"): 8.9 – not reached);

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•Median progression free survival ("mPFS") across all evaluable patients was 9.3 months (95% CI: 7.8 – 14). Historical control trials of different drug combinations, including the standard-of-care of FOLFIRI with bevacizumab, in similar patient populations have shown ORR and mPFS of 5 – 13% and ~4.5 – 6.7 months, respectively.

•A subgroup analysis of patients who were bevacizumab naïve when they entered 2nd line therapy vs patients who had received prior bevacizumab in 1st line therapy showed that patients who were bevacizumab naïve (n=15) had an ORR of 73% and mPFS of 15 months, which is well above historical controls. In contrast, patients previously treated with bevacizumab (n=51) had an ORR of 16% and mPFS of 7.8 months.

In reviewing the TROV-054 clinical data, we originally designed the ONSEMBLE trial (CRDF-003) as the next phase of our mCRC program. Upon review of the clinical data from the bevacizumab naïve subgroup (those patients who did not receive bevacizumab in their 1st line therapy), the preclinical data on the mechanism of action and the feedback from the FDA approvalon our clinical development strategy, we made the decision to discontinue enrollment in the ONSEMBLE trial and to initiate the CRDF-004 clinical trial.

mDPAC Program:

Phase 2 Clinical Trial in mPDAC

CRDF-001 is a Phase 2 open-label multi-center clinical trial of INDonvansertib in combination with nanoliposomal irinotecan (Onivyde®), leucovorin, and fluorouracil for 2nd line treatment of patients with mPDAC, which is being conducted at six clinical trial sites across the U.S. – The Mayo Clinic Cancer Centers (Arizona, Minnesota, and Florida), Kansas University Medical Center, Inova Schar Cancer Institute, and the University of Nebraska Medical Center.The first patient was dosed in June 2021. Enrollment for this trial closed in October 2023.

The objective of this trial is to assess the safety and preliminary efficacy of onvansertib in combination with nanoliposomal irinotecan (Onyvide®), 5-FU and leucovorin as a 2nd line treatment in patients with mPDAC who have failed 1st line gemcitabine-based therapy. For more information, please visit NCT04752696 at www.clinicialtrials.gov.

Preliminary data presented on September 26, 2023 provided an update of the ongoing CRDF-001 Phase 2 open label clinical trial in mPDAC:

•Preliminary data from 21 patients evaluable for radiographic response showed 1 patient achieving a confirmed partial response (“PR”) and 3 patients achieving a partial response that are awaiting confirmatory scans;

•19% objective response rate (“ORR”) achieved compared to historical control of 7.7% in 2nd line setting;

•5.0 months median progression-free survival (“mPFS”) achieved compared to historical control of 3.1 months with standard of care (“SoC”);

mPDAC biomarker discovery trial

The investigator-initiated biomarker discovery trial is exploring the impact of onvansertib 10-day monotherapy on tumors in mPDAC patients, and is currently enrolling at the Oregon Health & Science University (OHSU) Knight Cancer Institute. Two patients have been enrolled as of September 13, 2023.

Preliminary data were presented on September 26, 2023. One patient demonstrated an 86% decrease in Ki67, a well-established biomarker of tumor proliferation, and a 28% decrease in CA 19-9, a clinically-used biomarker to monitor treatment response.

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Other Clinical Programs:

Phase 2 Investigator-Initiated Clinical Trial in SCLC

A single-arm, two-stage, Phase 2 trial of onvansertib monotherapy in patients with relapsed SCLC is open for enrollment at the University of Pittsburgh Medical Center ("UPMC"). The trial is designed to enroll 15 patients in Stage 1, with the study proceeding to Stage 2 if 2 or more Stage 1 patients achieve an objective response. Stage 2 is designed to enroll an additional 20 patients. The primary endpoint of the trial is ORR, while key secondary endpoints include PFS and overall survival. For more information, please visit NCT05450965 at www.clinicialtrials.gov.

An examination of the safety data from the first six patients by the institutional review board confirmed the trial can continue to enroll as planned. Preliminary efficacy data for seven patients presented on September 26, 2023, showed 1 confirmed partial response (“PR”), three stable disease (“SD”) and three progressive disease (“PD”). The disease control rate, including PR and SD, is 57% (4 of 7 patients).

Phase 1b/2 Investigator-Initiated Clinical Trial in TNBC

A single-arm, Phase 1b/2 trial of PCM-075onvansertib in combination with paclitaxel in patients with AML.unresectable locally advanced or metastatic TNBC is open for enrollment at Dana Farber Cancer Institute ("DFCI"). In Phase 1b, approximately 14-16 patients will be treated with different doses of onvansertib in combination with a fixed dose of paclitaxel to determine the maximum tolerated dose and RP2D of onvansertib. In Phase 2, approximately 34 patients will be treated with the selected onvansertib RP2D in combination with paclitaxel.


Announced peer-reviewed publicationThe primary endpoint of first-in-human Phase 1 trial results with PCM-075 in the journal Investigational New Drugs. The data from2 of the trial demonstrated PCM-075’s potentialis ORR, with PFS included as safea secondary endpoint. For more information, please visit NCT05383196 at www.clinicialtrials.gov.

Critical Accounting Policies
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 effective treatment for solid tumorthe year ended December 31, 2022, filed with the SEC on March 2, 2023. There have been no changes to our critical accounting policies since December 31, 2022.

RESULTS OF OPERATIONS
Three Months Ended September 30, 2023 and hematological malignancies.2022

Completed a registered direct offering of 6,191,500 shares of common stock and a concurrent private placement issuing warrantsRevenues
Total revenues were $141,000 for the three months ended September 30, 2023, as compared to purchase up$93,000 for the prior period. Revenues are from our sales-based or usage-based royalties on other intellectual property licenses, unrelated 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 Duke VAMC, Dr. Filip Janku, of City of Hope Cancer Center, and Dr. David Berz,onvansertib. Revenue recognition of the Beverly Hills Cancer Center. Dr. Cortesroyalty depends on the timing and Dr. Silberman have extensive experienceoverall sales activities of the licensees.
Research and Development Expenses
Research and development expenses consisted of the following:
Three Months Ended September 30,
(in thousands)20232022Increase (Decrease)
Salaries and staff costs$1,615 $1,000 $615 
Stock-based compensation294 286 8 
Clinical trials, outside services, and lab supplies5,603 4,279 1,324 
Facilities and other510 444 66 
Total research and development$8,022 $6,009 $2,013 
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Research and development expenses increased by $2.0 million for the three months ended September 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily due to costs associated with clinical programs and outside service costs related to the development of novel therapiesour lead drug candidate, onvansertib. The increase in salaries and staff costs from additional hires in senior management and our clinical operations team (research and development average headcount grew by 50% over the comparative period).

Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following:
Three Months Ended September 30,
(in thousands)20232022Increase (Decrease)
Salaries and staff costs$731 $808 $(77)
Stock-based compensation661 751 (90)
Outside services and professional fees1,011 840 171 
Facilities and other536 678 (142)
Total selling, general and administrative$2,939 $3,077 $(138)
Selling, general and administrative expenses decreased by $0.1 million for the treatmentthree months ended September 30, 2023, compared to the same period in 2022. Salary and staff costs and stock-based compensation decreased due to lower headcount. Facilities and other costs were lower as a result of hematologic cancers. Dr. Cortes will serve asa reduction of insurance costs compared to the Principal Investigatorprior period. The increase in outside services and professional fees was due mainly to additional legal fees for contract reviews.

Interest Income, Net

Interest income, net was $1.1 million for the Phase 1b/2 clinical trial in AML.

Entered into a license agreement with Nerviano that grants us exclusive global development and commercialization rightsthree months ended September 30, 2023 as compared to NMS-1286937, which we refers to as PCM-075.  PCM-075 is an oral, investigative drug and a highly-selective PLK 1 inhibitor$0.5 million for the treatmentsame period of AML.2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the three months ended September 30, 2023 as compared to the same period of 2022.


Nine Months Ended September 30, 2023 and 2022

Revenues
Total revenues were $332,000 for the nine months ended September 30, 2023, as compared to $258,000 for the same period in 2022. Revenues are from our sales-based or usage-based royalties on other intellectual property licenses, unrelated to onvansertib. Revenue recognition of the royalty depends on the timing and overall sales activities of the licensees.
Research and Development Expenses
Research and development expenses consisted of the following:
Nine Months Ended September 30,
(in thousands)20232022Increase (Decrease)
Salaries and staff costs$4,475 $3,131 $1,344 
Stock-based compensation985 746 239 
Clinical trials, outside services, and lab supplies18,118 15,699 2,419 
Facilities and other1,516 1,089 427 
Total research and development$25,094 $20,665 $4,429 
Research and development expenses increased by $4.4 million for the nine months ended September 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily due to costs associated with clinical programs and outside service costs related to the development of our lead drug candidate, onvansertib. Salaries and staff costs increased primarily from additional hires in senior management and our clinical operations team (research and development average headcount grew by 37% over the comparative period). The increase in facilities and other costs is primarily due to increased allocation of facilities cost resulting from headcount growth compared to the prior period.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following:
Nine Months Ended September 30,
(in thousands)20232022Increase (Decrease)
Salaries and staff costs$2,888 $2,460 $428 
Stock-based compensation2,615 2,498 117 
Outside services and professional fees3,102 3,119 (17)
Facilities and other1,713 2,026 (313)
Total selling, general and administrative$10,318 $10,103 $215 
Selling, general and administrative expenses increased by $0.2 million for the nine months ended September 30, 2023, compared to the same period in 2022. Salaries and staff costs increased due to an employee severance agreement. The decrease in facilities and other costs was primarily due to reduced insurance costs compared to the prior period.

Interest Income, Net

Interest income, net was $3.1 million for the nine months ended September 30, 2023 as compared to $0.8 million for the same period of 2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the nine months ended September 30, 2023 as compared to the same period of 2022.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the nine months ended September 30, 2023, was $23.7 million, compared to $24.4 million for the nine months ended September 30, 2022. Our use of cash was primarily a result of the net loss of $32.1 million for the nine months ended September 30, 2023, adjusted for non-cash items related to stock-based compensation of $3.6 million. The net change in our operating assets and liabilities decreased cash used in operations by $5.2 million. 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 $22.6 million primarily related to sales and maturities in excess of purchases of marketable securities for the nine months ended September 30, 2023, compared to net cash provided by investing activities of $31.1 million primarily related to sales and maturities in excess of purchases of marketable securities during the same period in 2022.

Net cash provided in financing activities was $0 for the nine months ended September 30, 2023, compared to net cash provided by financing activities of $0.1 million during the same period of 2022.

As of September 30, 2023, and December 31, 2022, we had working capital of $74.9 million and $103.5 million, respectively.

We have incurred net losses since our inception and have negative operating cash flows. As of September 30, 2023, we had $81.4 million in cash, cash equivalents and short-term investments and we believe we have sufficient cash to meet our funding requirements for at least the next 12 months following the issuance date of this Quarterly Report on Form 10-Q. Based on our current projections we expect that our capital resources are sufficient to fund our operations into 2025.

Our drug development 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 drugs.drug candidates. The risk of completion of any program is high because of the many uncertainties involved in developing new drug candidates to market, including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, 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 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 September 30, 2017 and 2016
Revenues
Our total revenues were $123,329 and $89,114 for the three months ended September 30, 2017 and 2016, respectively. The components of our revenues were as follows:

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 Three Months Ended September 30,
 2017 2016 Increase (Decrease)
Royalties$58,779
 $47,236
 $11,543
Diagnostic services58,119
 37,978
 20,141
Clinical research services6,431
 3,900
 2,531
Total revenues$123,329
 $89,114
 $34,215
The increase in royalty income related primarily to higher receipts of payments in excess of minimum royalties in comparison toFor the same period of the prior year. Revenue from diagnostic services is recognized when payment is received for the test results. The number of payments received 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 $473,202 for the three months ended September 30, 2017, compared to $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 which could result in negative gross margins. 

Research and Development Expenses
Research and development expenses consisted of the following:
 Three Months Ended September 30,
 2017 2016 Increase (Decrease)
Salaries and staff costs$301,919
 $1,407,529
 $(1,105,610)
Stock-based compensation219,480
 872,792
 (653,312)
Outside services, consultants and lab supplies604,140
 1,215,889
 (611,749)
Facilities254,681
 372,891
 (118,210)
Travel and scientific conferences28,000
 51,203
 (23,203)
Other6,486
 17,094
 (10,608)
Total research and development$1,414,706
 $3,937,398
 $(2,522,692)
Research and development expenses decreased by $2,522,692 to $1,414,706 for the three months ended September 30, 2017 from $3,937,398 for the same period in 2016. 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-four to 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 the clinical collaborations, as well as lab supplies, decreased 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 September 30,
 2017 2016 Increase (Decrease)
Salaries and staff costs$158,097
 $1,427,254
 $(1,269,157)
Stock-based compensation118,434
 476,865
 (358,431)
Outside services and consultants51,717
 441,699
 (389,982)
Facilities51,388
 112,573
 (61,185)
Trade shows, conferences and marketing31,017
 243,692
 (212,675)
Travel54
 212,375
 (212,321)
Other9,220
 26,404
 (17,184)
Total sales and marketing$419,927

$2,940,862

$(2,520,935)
Selling and marketing expenses decreased by $2,520,935 to $419,927 for the three months ended September 30, 2017 from $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. During the three months ended September 30, 2017 we decreased the number of our field sales, customer support and marketing personnel, bringing our average headcount to two from 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 as a result of the reduction in force.

General and Administrative Expenses
General and administrative expenses consisted of the following:
 Three Months Ended September 30,
 2017 2016 Increase (Decrease)
Personnel and outside services costs$1,450,261
 $1,136,266
 $313,995
Board of Directors’ fees120,085
 122,187
 (2,102)
Stock-based compensation1,067,633
 437,075
 630,558
Legal and accounting fees595,194
 695,061
 (99,867)
Facilities and insurance291,547
 149,921
 141,626
Travel14,185
 47,769
 (33,584)
Fees, licenses, taxes and other120,682
 122,503
 (1,821)
Total general and administrative$3,659,587

$2,710,782
 $948,805
General and administrative expenses increased by $948,805 to $3,659,587 for the three months ended September 30, 2017, from $2,710,782 for the same period in 2016. The significant components of the increase were primarily due to the increase in personnel and outside services cost and stock-based compensation. In August 2017, a total of 745,392 shares of immediately vested RSA were granted to our CEO. Per the agreement, the CEO’s income taxes associated with the RSA were also paid by our Company. Therefore, personnel costs and stock-based compensation expenses were increased. Our general and administrative costs may increase inforeseeable future, periods in order to support fundraising activities 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 expansion 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. The $46,472 restructuring benefit for the three months ended September 30, 2017 was primarily due to certain employee termination costs expensed was less than estimated.

Net Interest Expense
Net interest expense was $16,473 and $354,993 for the three months ended September 30, 2017 and 2016, respectively. The decrease of net interest expense is primarily due to a decrease in interest expense, resulting from pay-off of our $15.0 million term loan. We expect net interest expense to decrease as a result of repayment of our 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 September 30, 2017, the derivative financial instruments—warrants liabilities were revalued to $2,037,712, resulting in an increase in value of $1,686,850 from 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 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 September 30,
 2017 2016 Increase (Decrease)
Net loss attributable to common shareholders$(4,298,026) $(10,197,332) $(5,899,306)
Net loss per common share — basic$(0.12) $(0.34) $(0.22)
Net loss per common share — diluted$(0.12) $(0.34) $(0.22)
      
Weighted average shares outstanding — basic36,465,672
 30,339,774
 6,125,898
Weighted average shares outstanding — diluted36,465,672
 30,339,774
 6,125,898
The $5,899,306 decrease in net loss attributable to common shareholders and the $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 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 services142,482
 69,558
 72,924
Clinical research services8,481
 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 compensation798,143
 1,862,069
 (1,063,926)
Outside services, consultants and lab supplies1,456,504
 3,837,485
 (2,380,981)
Facilities842,196
 1,042,682
 (200,486)
Travel and scientific conferences72,901
 157,445
 (84,544)
Fees, licenses and other2,038,016
 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 compensation550,317
 1,493,744
 (943,427)
Outside services and consultants219,800
 1,117,368
 (897,568)
Facilities220,860
 362,339
 (141,479)
Trade shows, conferences and marketing357,233
 1,082,883
 (725,650)
Travel71,865
 716,473
 (644,608)
Other45,816
 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’ fees347,205
 345,240
 1,965
Stock-based compensation1,837,128
 2,487,415
 (650,287)
Legal and accounting fees3,358,411
 2,077,585
 1,280,826
Facilities and insurance742,405
 551,382
 191,023
Travel81,106
 151,355
 (70,249)
Fees, licenses, taxes and other278,970
 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 — basic32,826,306
 30,018,841
 2,807,465
Weighted average shares outstanding — diluted32,826,306
 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 September 30, 2017, we had $7,434,298 in cash and cash equivalents. Net cash used in operating activities for the nine months ended September 30, 2017 was $19,949,652, compared to $22,034,998 for the nine months ended September 30, 2016. Our use of cash was primarily a result of the net loss of $22,337,314 for the nine months ended September 30, 2017, adjusted for non-cash items related to stock-based compensation of $3,117,364, loss on extinguishment of debt of $1,655,825, impairment loss of $485,000, depreciation and amortization of $956,995, and the gain from the change in fair value of derivative financial instruments—warrants of $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 decreased prepaid 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 $23,925,535 during the nine months ended September 30, 2017, compared to $25,249,392 used in investing activities for the same period in 2016. Investing activities during the nine months ended September 30, 2017 consisted of net sales and maturities of short-term investments of $24,061,786 offset by net purchases for capital equipment of $136,251.
Net cash used in financing activities was $10,447,842 during the nine months ended September 30, 2017, compared to $2,361,994 provided in financing activities for the same period in 2016. Financing activities during the nine months ended September 30, 2017 related primarily to the pay-off of long-term debt resulting in debt extinguishment offset by the sale of common stock, while financing activities during the same period of the prior year consisted primarily of sales of common stock offset by repayment of long-term 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 the Loan and Security Agreement dated as of 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 September 30, 2017, and December 31, 2016, we had working capital of $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. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience significantadditional 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 RiskNot applicable.

Our primary exposure to market risk 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 could affect the amounts of interest 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 investment policy are preservation of capital, fulfillment of liquidity needs and 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 have significant risk of default 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.

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 nine months ended 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 officer (CEO) and principal financial officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 20172023, 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 Companyour 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 September 30, 20172023, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
 
See Note 9 to the unaudited Condensed Consolidated Financial Statements for a summary of legal proceedings.None.


ITEM 1A. RISK FACTORS
 
There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, 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:2022.


Our financial statements include an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to operate in the future.

Primarily as a result of our losses incurred to date, our expected continued future losses, and limited cash balances, we have included an explanatory paragraph in our financial statements expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of our common stock or 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.


ITEM 6. EXHIBITS
 
Exhibit
Number		Description of Exhibit
Exhibit
Number
Description of Exhibit
4.1
Stock Award Agreement dated August 15, 2017 by and between Trovagene, Inc. and William J. Welch.
31.1
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
104Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, is formatted in Inline XBRL


#    Portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).
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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.
 
CARDIFF ONCOLOGY, INC.
November 2, 2023TROVAGENE, INC.By:/s/ Mark Erlander
Mark Erlander
November 9, 2017By:/s/ William J. Welch
William J. Welch
Chief Executive Officer (Principal Executive
CARDIFF ONCOLOGY, INC.
November 2, 2023By:/s/ James Levine
James Levine
Chief Financial Officer and Principal Financial Officer)



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