Stockholders' (Deficit) Equity

9 Months Ended

Sep. 30, 2024

6. Stockholders’ (Deficit) Equity

Equity Offerings

Under its Amended and Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”), the Company was authorized to issue up to 200,000,000 shares of common stock as of September 30, 2024. The Company also was authorized to issue up to 5,000,000 shares of preferred stock as of September 30, 2024. The Company is required, at all times, to reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the conversion of the shares of the preferred stock and all outstanding stock options and warrants.

December 2023 Equity Offering and Warrant Issuance

On December 28, 2023, the Company and a single investor entered into a securities purchase agreement whereby the Company issued 111,196 pre-funded warrants (the “Pre-Funded Warrants”) with an initial exercise price of $0.025 per share for $17.50 per Pre-Funded Warrant, which are exercisable immediately and do not expire. In addition, the investor received 111,196 common stock warrants with an initial exercise price of $17.50 per share, which were exercisable through April 19, 2029. As of September 30, 2024, all Pre-Funded Warrants have been exercised in full.

Concurrent with the execution of the securities purchase agreement above, the Company and the investor entered into an inducement agreement whereby the Company agreed to reduce the exercise price of 117,375 warrants (the “Existing Warrants”) held by the investor from prior equity offerings. The weighted average exercise price of the Existing Warrants was $83.75 per share and was reduced to $17.50 per share in exchange for the investor agreeing to immediately exercise the Existing Warrants. Of the Existing Warrants exercised, 49,375 were held in abeyance for the benefit of the holder due to certain beneficial ownership limitations and these shares were subsequently issued to the investor on June 26, 2024. In addition to reducing the exercise price, the Company issued 234,750 common stock warrants (the “Inducement Warrants”) to the investor with an initial exercise price of $17.50 per share, which are exercisable through April 19, 2029. The fair value of the Inducement Warrants and the change in fair value of the Existing Warrants resulting from the reduction in the exercise price totaling $4.2 million was accounted for as equity issuance costs in the consolidated statement of operations.

The Company received $3.5 million in total, after deducting underwriter fees and other third-party costs, as a result of the sale of pre-funded warrants and exercise of the warrants as part of the inducement.

The warrants issued did not meet the requirements to be indexed to equity and equity classified and, as such, are classified as liabilities at fair value with changes in fair value recorded within other income (expense), net on the consolidated statements of operations and comprehensive loss.

Equity Incentive Plan

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


	Nine Months Ended September 30,
	2024		2023
Research and development	$	391	$	444
Selling, general and administrative		1,434		1,753
Total stock-based compensation	$	1,825	$	2,197

Stock Options

A summary of stock option activity and related information through September 30, 2024 follows:


	Options Outstanding
					Weighted
					Average
			Weighted		Remaining
			Average		Contractual
	Number of		Exercise		Term
	Shares		Price		(in years)
Balance, December 31, 2023	16,123		$	891.21	6.81
Granted	3,288			10.00
Exercised	—			—
Forfeited/Cancelled	(2,276)	`		938.30
Balance, September 30, 2024	17,135		$	715.86	6.58
Vested or expected to vest at September 30, 2024	17,135		$	715.86	6.58
Exercisable at September 30, 2024	12,654		$	947.24	5.59

The aggregate intrinsic value of options exercisable as of September 30, 2024, was zero, based on the difference between the Company’s closing stock price of $3.740 and the exercise price of each stock option.

The Company uses the Black Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s common stock, assumptions related to the expected price volatility of the Company’s common stock, the period during which the options will be outstanding, the rate of return on risk free investments and the expected dividend yield for the Company’s stock.

The per-share weighted-average grant date fair value of the options granted to employees and directors during the nine months ended September 30, 2024 and 2023 was estimated at $8.24 and $20.50 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	September 30,
	2024		2023
Expected term of options (in years)	5.5		5.7
Risk-free interest rate	4.2	%	3.9	%
Expected volatility	118.5	%	110.3	%
Dividend yield	—	%	—	%

Restricted Stock Units (“RSUs”)

RSU-related expense is recognized on a straight-line basis over the vesting period. Upon vesting, these awards may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock.

The following is a summary of changes in the status of non-vested RSUs during the nine months ended September 30, 2024:



		Weighted
		Average
	Number of	Grant Date
	Awards	Fair Value
Non-vested at December 31, 2023	64,101	$	51.28
Granted	—		—
Vested	(4,373)		106.24
Forfeited/Cancelled	(10,473)		43.61
Non-vested at September 30, 2024	49,255	$	48.04

For the nine months ended September 30, 2024, the Company recorded $1.2 million in stock-based compensation expense related to RSUs, which is reflected in the consolidated statements of operations and comprehensive loss.

As of September 30, 2024, there was $1.3 million of total unrecognized compensation expense related to unvested RSUs that will be recognized over the weighted average remaining period of 1.99 years.

Shares Available for Future Grant

At September 30, 2024, the Company has the following shares available to be granted under its equity incentive plans:


		Inducement
	2023 Plan	Plan
Available at December 31, 2023	10,257	480
Authorized	—	—
Granted	(3,288)	—
Shares withheld for taxes not issued	1,280	—
Forfeited/Cancelled	12,749	—
Available at September 30, 2024	20,998	480

Shares Reserved for Future Issuance

At September 30, 2024, the Company has reserved the following shares of common stock for issuance:


Stock options outstanding under 2013 Plan		9,417
Stock options outstanding under 2023 Plan		7,398
Restricted stock units outstanding under 2013 Plan		49,255
Stock options outstanding under Inducement Plan		320
Warrants outstanding		354,100
Total shares of common stock reserved for future issuance		420,490

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

TREVENA INC 10-Q