Business Overview and Going Concerns

Trovagene, Inc. (“Trovagene” or the “Company”) is a molecular diagnostics company headquartered in San Diego, California. The Company’s primary focus is to leverage its PCM technology in an effort to enable itself, through its CLIA/CAP - certified laboratory, and others, through the distribution of research use kits and systems, to detect and monitor ctDNA in urine and blood. The Company’s PCM technology allows for detection and quantitation of oncogene mutations in cancer patients for improved disease management. Trovagene’s Trovera™ liquid biopsy test, which utilizes PCM technology, is designed to provide important clinical information beyond the current standard of care, and is protected by significant intellectual property, including multiple issued patents and pending patent applications worldwide.

To date, Trovagene’s efforts have been principally devoted to research and development, securing and protecting patents and raising capital. Through December 31, 2016, the Company sustained cumulative net losses attributed to common stockholders of $148,115,202. The Company’s losses have resulted primarily from expenditures incurred in connection with research and development activities, stock-based compensation expense, patent filing and maintenance expenses, outside accounting and legal services and regulatory, scientific and financial consulting fees, amortization and liquidated damages. To date, the Company has generated only limited revenue from operations and expects to incur additional losses to perform further research and development activities as well as expenses related to the commercialization of the diagnostic tests the Company had commercially available as of December 31, 2016.

Liquidity

The Company will need to continue to raise funds until it is able to generate revenues from operations sufficient to fund its development and commercial operations. Cash used in operating activities was $31,039,855, $22,119,025, and $12,727,385 for the years ended December 31, 2016, 2015, and 2014, respectively. During the years ended December 31, 2016, 2015, and 2014, the Company incurred a net loss attributable to common stockholders of $39,227,959, $27,495,334, and $14,348,499, respectively. The Company believes that it currently has adequate capital to continue operations for the next twelve months. However, to carry the Company forward beyond the next twelve months, and until it can generate adequate cash flow from operations, additional cash resources will be necessary.

To date, Trovagene’s sources of cash have been primarily limited to the sale of debt and equity securities and debt financing. Net cash provided by financing activities for the years ended December 31, 2016, 2015, and 2014 was $2,301,376, $64,551,740 and $14,484,036, respectively. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company’s stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct its business.

On March 15, 2017, the Company announced a restructuring in connection with the addition of precision medicine therapeutics to its business. The Company estimates that this restructuring will reduce annual pre-tax expenses by approximately $8.0 million per year (excluding one-time separation costs), primarily through a reduction of approximately 30 employees and expenses primarily linked to research, clinical studies, and operations.

The Company plans to continue providing access to its ctDNA collection, extraction and analysis technology in urine and blood to strategic accounts, including pharmaceutical companies and third party reference laboratories, by internal strategic executives. The Company intends to maintain its CLIA/CAP-certified laboratory for clinical testing services for pharmaceutical companies, third party reference laboratories and physicians and for internal programs.

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. 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 itself.

The Company is evaluating the following options to both raise additional capital 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;


•	Reducing operating costs by identifying internal synergies;


•	Engaging in strategic partnerships; and


•	Taking actions to reduce or delay capital expenditures.

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.