PDS Biotechnology Corp - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from____________to_____________

Commission file number 001-37568

	PDS Biotechnology Corporation
	(Exact name of registrant as specified in its charter)

Delaware		26-4231384
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	25B Vreeland Road, Suite 300, Florham Park, NJ 07932
	(Address of principal executive offices)

	(800) 208-3343
	(Registrant’s telephone number)


	(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.00033 per share		PDSB		Nasdaq Capital Market

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

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

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller Reporting Company ☒

Emerging growth company ☐

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

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

The number of shares of the registrant’s Common Stock, par value $0.00033 per share, outstanding as of May 7, 2021 was 22,278,261.

PDS BIOTECHNOLOGY CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021

INDEX

			Page
Part I — Financial Information

	Item 1.	Financial Statements (Unaudited):

		Condensed Consolidated Balance Sheets	1

		Condensed Consolidated Statements of Operations and Comprehensive Loss	2

		Condensed Consolidated Statements of Changes in Stockholders’ Equity	3

		Condensed Consolidated Statements of Cash Flows	4

		Notes to Condensed Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

	Item 4.	Controls and Procedures	23

Part II — Other Information

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	24

	Item 4.	Mine Safety Disclosures	24

	Item 5.	Other Information	24

	Item 6.	Exhibits	24

EXHIBIT INDEX			25

SIGNATURES			26

Index

PART 1.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	March 31, 2021			December 31, 2020
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	25,037,374		$	28,839,565
Prepaid expenses and other		2,219,514			1,497,665
Total current assets		27,256,888			30,337,230

Property and equipment, net		3,583			5,443
Operating lease right-to-use asset		501,194			547,706

Total assets	$	27,761,665		$	30,890,379

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	950,598		$	1,415,224
Accrued expenses		1,854,795			1,735,322
Operating lease obligation-short term		123,654			119,904
Total current liabilities		2,929,047			3,270,450

Noncurrent liability:
Operating lease obligation-long term		458,291			490,353

Total Liabilities:	$	3,387,338		$	3,760,803


STOCKHOLDERS’ EQUITY
Common stock, $0.00033 par value, 75,000,000 shares authorized at March 31, 2021 and December 31, 2020, 22,278,261 shares and 22,261,619 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		7,346			7,346
Additional paid-in capital		71,200,684			70,907,315
Accumulated deficit		(46,833,703	)		(43,785,085	)
Total stockholders’ equity		24,374,327			27,129,576

Total liabilities and stockholders’ equity	$	27,761,665		$	30,890,379

See accompanying notes to the condensed consolidated financial statements.

Index

PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Operating expenses:
Research and development expenses	$	1,413,057		$	1,971,679
General and administrative expenses		1,636,216			2,060,148

Total operating expenses		3,049,273			4,031,827

Loss from operations		(3,049,273	)		(4,031,827	)

Other income
Interest income		655			46,419

Net loss and comprehensive loss	$	(3,048,618	)	$	(3,985,408	)

Per share information:
Net loss per share, basic	$	(0.14	)	$	(0.39	)
Net loss per share, diluted	$	(0.14	)	$	(0.39	)

Weighted average common shares outstanding, basic		22,263,838			10,314,761
Weighted average common shares outstanding, diluted		22,263,838			10,314,761

See accompanying notes to the condensed consolidated financial statements.

Index

PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock				Additional Paid-in Capital
	Shares Issued		Amount		Additional Paid-in Capital		Accumulated Deficit			Total Equity
Balance - December 31, 2019		5,281,237	$	1,742	$	40,633,670	$	(28,937,705	)	$	11,697,707
Stock based compensation expense		–		–		124,992		–			124,992
Issuance of common stock, net of issuance costs		10,000,000		3,299		11,966,703		–			11,970,002
Issuance of common stock for warrant exercise		65,240		22		70,437		–			70,459
Issuance of common stock from 401K match		3,968		1		9,799		–			9,800
Net loss		–		–		–		(3,985,408	)		(3,985,408	)
Balance - March 31, 2020		15,350,445	$	5,064	$	52,805,601	$	(32,923,113	)	$	19,887,552

	Common Stock				Additional Paid-in Capital
	Shares Issued		Amount		Additional Paid-in Capital		Accumulated Deficit			Total Equity
Balance - December 31, 2020		22,261,619	$	7,346	$	70,907,315	$	(43,785,085	)	$	27,129,576
Stock-based compensation expense		–		–		257,622		–			257,622
Issuance of common stock from 401K match		16,642		–		35,747		–			35,747
Net loss		–		–		–		(3,048,618	)		(3,048,618	)
Balance - March 31, 2021		22,278,261	$	7,346	$	71,200,684	$	(46,833,703	)	$	24,374,327

See accompanying notes to the condensed consolidated financial statements.

Index

PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(3,048,618	)	$	(3,985,408	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		257,622			124,992
Stock-based 401K company common match		35,747			9,800
Depreciation expense		1,860			3,902
Operating lease expense		60,257			-
Changes in assets and liabilities:
Prepaid expenses and other assets		(721,849	)		(570,916	)
Accounts payable		(464,626	)		1,358,983
Accrued expenses		119,473			122,551
Restructuring reserve		-			(228,298	)
Operating lease liabilities		(42,057	)		-

Net cash used in operating activities		(3,802,191	)		(3,164,394	)

Cash flows from financing activities:
Proceeds from exercise of warrants		–			70,459
Proceeds from issuance of common stock, net of issuance costs		–			11,970,002

Net cash provided by financing activities					12,040,461

Net increase (decrease) in cash and cash equivalents		(3,802,191	)		8,876,067
Cash and cash equivalents at beginning of period		28,839,565			12,161,739

Cash and cash equivalents at end of period	$	25,037,374		$	21,037,806

See accompanying notes to the condensed consolidated financial statements.

Index

Note 1 – Nature of Operations

PDS Biotechnology Corporation, a Delaware corporation (the “Company” or “PDS”), is a clinical-stage immunotherapy company developing a growing pipeline of cancer immunotherapies and infectious disease vaccines designed to overcome the well-established limitations of current immunotherapy technologies. PDS owns Versamune^®, a proprietary T-cell activating platform designed to train the immune system to better attack and destroy disease. When paired with an antigen, which is a disease-related protein that is recognizable by the immune system, Versamune^® has been shown to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD8+ killer T-cells, a specific sub-type of CD8+ killer T-cell that is more effective at killing infected or target cells. Our immuno-oncology products can potentially be used as a component of combination products with other leading technologies to provide effective treatments across a range of cancer types. We believe our product candidates are of interest for potential in relation to Human Papillomavirus, or HPV,- associated cancers, melanoma, colorectal, lung, breast and prostate cancers or as monotherapies in early-stage disease. PDS is working to expand its infectious disease pandemic development program, which includes novel vaccines for COVID-19 and universal influenza.

On March 15, 2019, the Company, then operating as Edge Therapeutics, Inc. (“Edge”), completed its reverse merger with privately held PDS Biotechnology Corporation (“Private PDS”), pursuant to and in accordance with the terms of the Agreement and Plan of Merger, dated as of November 23, 2018, as amended on January 24, 2019, by and among the Company, Echos Merger Sub, a wholly-owned subsidiary of the Company (“Merger Sub”), and Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as the Company’s wholly-owned subsidiary (the “Merger”). In connection with and immediately following completion of the Merger, the Company effected a 1-for-20 reverse stock split (the “Reverse Stock Split”) and changed its corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation.

For accounting purposes, the Merger was treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Private PDS is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical financial statements of Private PDS became the Company’s historical financial statements, and the historical financial statements of Private PDS are included in the comparative prior periods. As part of the Merger, the Company acquired all of Edge’s assets relating to current and future research and development.

In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared COVID-19 a pandemic and on March 13 the President declared a national emergency in response to the pandemic. The full impact of the COVID-19 pandemic is unknown and rapidly evolving. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and operations. To date, two of the three recently initiated PDS0101 clinical trials were delayed, specifically as a result of the adverse impact the COVID-19 pandemic has had on clinical trial operations for cancer indications in the United States. The FDA issued and since updated guidance to assist sponsors in assuring the safety of trial participants, maintaining compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity. Clinical trial sites have implemented institution-specific measures securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. All three studies have since been initiated despite the pandemic challenges; however, the evolving COVID-19 pandemic has impacted the pace of enrollment in clinical trials in general and we may be negatively affected with our trials. COVID-19 related travel and other restrictions may also impact the potential for on-site monitoring visiting and audits and inspections by us, third parties, and regulators. There may be shortages of site personnel and equipment necessary for the timely completion of our trials. We are providing support to address these challenges, but these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical trials.

Index

Although there is uncertainty related to the anticipated impact of the COVID-19 pandemic on our future results, we believe our current cash reserves, leave us well-positioned to manage our business through this crisis as it continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and continuing and the financial impacts associated with the COVID-19 pandemic are still uncertain.

Despite the economic uncertainty resulting from the COVID-19 pandemic, we intend to continue to focus on the development of our product candidates and we have expanded our infectious disease pipeline since the pandemic brought renewed resources and interest in technologies such as the Versamune® platform in the context of research and development in prevention of COVID-19. We are working with a consortium of partners in Brazil to develop PDS0203; a vaccine for the prevention of COVID-19. This consortium received a commitment from the Secretary for Research and Scientific Training of The Ministry of Science, Technology and Innovation of Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine in Brazil.

Note 2 – Summary of Significant Accounting Policies

(A)	Unaudited interim financial statements:

The interim balance sheet at March 31, 2021, the statements of operations and comprehensive loss and changes in stockholders’ equity for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of its financial information. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The balance sheet as of December 31, 2020 included herein was derived from the audited condensed consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020, filed by the Company with the SEC in its Annual Report on Form 10-K on March 18, 2021.

(B)	Use of estimates:

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses at the date of the consolidated financial statements and during the reporting periods, and to disclose contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.

(C)	Significant risks and uncertainties:

The Company’s operations are subject to a number of factors that may affect its operating results and financial condition. Such factors include, but are not limited to: the clinical and regulatory development of its products, the Company’s ability to preserve its cash resources, the Company’s review of strategic alternatives, the Company’s ability to add product candidates to its pipeline, the Company’s intellectual property, competition from products manufactured and sold or being developed by other companies, the price of, and demand for, Company products if approved for sale, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, the Company’s ability to raise capital, and the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic.

The Company currently has no commercially approved products. As such, there can be no assurance that the Company’s future research and development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and consultants and obtaining and protecting its intellectual property.

Index

(D)	Cash equivalents and concentration of cash balance:

The Company considers all highly liquid securities with a maturity weighted average of less than three months to be cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits.

(E)	Research and development:

Costs incurred in connection with research and development activities are expensed as incurred. These costs include licensing fees to use certain technology in the Company’s research and development projects as well as fees paid to consultants and entities that perform certain research and testing on behalf of the Company.

Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data, such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred.

(F)	Patent costs:

The Company expenses patent costs as incurred and classifies such costs as general and administrative expenses in the accompanying statements of operations and comprehensive loss.

(G)	Stock-based compensation:

The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, directors and non-employees to be recognized as expense in the consolidated statements of operations and comprehensive loss based on their grant date fair values. In order to determine the fair value of stock options on the date of grant, the Company uses the Black-Scholes option-pricing model. Inherent in this model are assumptions related to expected stock-price volatility, option term, risk-free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions that are based on factual data derived from public sources, the expected stock-price volatility and option term assumptions require a greater level of judgment. The Company expenses the fair value of its stock-based compensation awards to employees and directors on a straight-line basis over the requisite service period, which is generally the vesting period. The Company recognizes forfeitures as they occur.

In lieu of higher cash compensation, the Company has granted non-employee options to consultants and expensed $344 and $0 during the three months ended March 31, 2021 and 2020, respectively.

(H)	Net income (loss) per common share:

Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted average common shares outstanding during the periods. For the periods presented, the common shares underlying the preferred stock, common stock options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per common share are the same.

The potentially dilutive securities excluded from the determination of diluted loss per share as their effect is antidilutive, are as follows:

	As of March 31,
	2021		2020
Stock options to purchase Common Stock		1,899,193		1,413,073
Warrants to purchase Common Stock		197,518		197,518
Total		2,096,711		1,610,591

Index

Note 3 – Liquidity

As of March 31, 2021, the Company had $25.0 million of cash and cash equivalents. The Company’s primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change to the Company’s outstanding accounts payable and accrued expenses.

On July 29, 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital pursuant to which, we have the right, in our sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice, directing Aspire Capital (as principal) to purchase up to 100,000 shares of our common stock per business day, in an aggregate amount of up to $20.0 million of our common stock, or the Purchased Shares, over the term of the Aspire Purchase Agreement. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of our outstanding shares of common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. The minimum price at which we can sell shares under the Aspire Purchase Agreement is $0.50. On July 29, 2019, we issued 100,654 shares of our common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. We recorded the fair value of the shares at July 29, 2019 of $603,924 as an expense in the third quarter of 2019. Concurrently with the Aspire Purchase Agreement, we entered into a registration rights agreement with Aspire Capital, or the Registration Rights Agreement. In accordance with the Registration Rights Agreement, on August 20, 2019 we filed a Registration Statement on Form S-1 (File No. 333-232988) to cover the resale of the Commitment Shares and any Purchased Shares issuable to Aspire Capital under the Aspire Purchase Agreement. There is market uncertainty regarding the utilization of financing associated from the Aspire Purchase Agreement. As of March 31, 2021, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement.

In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a public offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $13 million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions.

In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. On August 13, 2020, the Company sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses. Approximately $81,000,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.

Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Our budgeted cash requirements in 2021 and beyond include expenses related to continuing development and clinical studies. Based on our available cash resources and cash flow projections as of the date the consolidated financial statements were available for issuance, we believe there are sufficient funds to continue operations and research and development programs for at least 12 months from the date of this report.

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We plan to continue to fund our operations and capital funding needs through equity and/or debt financings. However, the Company cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its existing stockholders. We may also enter into government funding programs and consider selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market immunotherapies that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects. Failure to obtain adequate financing also may adversely affect its ability to operate as a going concern.

Note 4 – Fair Value of Financial Instruments

There were no transfers among Levels 1, 2, or 3 during 2021 or 2020.

	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets (Level 1)		Quoted Prices in Inactive Markets (Level 2)		Significant Unobservable Inputs (Level 3)
As of March 31, 2021: (unaudited)
Cash and cash equivalents	$	25,037,374	$	25,037,374	$	–	$	–

As of December 31, 2020
Cash and cash equivalents	$	28,839,565	$	28,839,565	$	–	$	–

Note 5 – Leases

On July 8, 2019, the Company entered into a lease termination agreement for its office space located at 300 Connell Drive, Suite 4000, Berkeley Heights, NJ 07922 effective August 31, 2019 (the “Lease Termination Agreement”). Pursuant to the Lease Termination Agreement, the Company was required to pay 50 percent of the remaining lease payments of $665,802 over three installments on September 1, 2019, December 1, 2019, and March 1, 2020, which was recorded as lease termination costs in the third quarter of 2019. The Company entered into a temporary month-to-month lease as of September 1, 2019 for office space located at 830 Morris Turnpike, Short Hills, NJ 07078 until the Company entered into a new lease for permanent office space. This lease was terminated on May 31, 2020.

Effective March 5, 2020, the Company entered into a sublease for approximately 11,200 square feet of office space located at 25B Vreeland Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and will continue for a term of forty (40) months with an option to renew through October 31, 2027. As of March 31, 2021 there are twenty-nine (29) months remaining in the lease term. Upon inception of the lease, the Company recognized approximately $0.7 million of a ROU asset and operating lease liabilities. The discount rate used to measure the operating lease liability as of May 1, 2020 was 9.15%. Throughout the period described above the Company has maintained, and continues to maintain, a month-to-month lease for its research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton NJ, 08540.

Supplemental cash flow information related to operating leases is as follows:

	As of March 31,
	2021		2020
Cash paid for operating lease liabilities	$	42,057	$	-
Right-of use assets recorded in exchange for lease obligations	$	-	$	-

Index

Maturity of the Company’s operating lease liability is as follows:

Year ended December 31,
2021 (remaining nine months)	$	128,779
2022		295,346
2023		239,469
2024		-
2025 and after		-
Total future minimum lease payments		663,594
Less inputed interest		(81,649	)
	$	581,945

Note 6 – Accrued Expenses

Accrued expenses and other liabilities consist of the following:

	As of March 31, 2021		As of December 31, 2020
Accrued research and development costs	$	23,900	$	204,780
Accrued professional fees		320,266		219,822
Accrued compensation		1,510,629		1,310,720
Total	$	1,854,795	$	1,735,322

Note 7 – Stock-Based Compensation

The Company has three equity compensation plans: the 2009 Stock Option Plan, 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan (the “Plans”).

In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 91,367 shares as ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015 and each January 1 thereafter and prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. In March 2019, the Plan was amended and restated which removed the annual increase component and was limited to 826,292 shares.

In 2018, the Company’s stockholders approved the 2018 Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares as (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Preferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards.

Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four year term and NQs generally vest over one to five year terms. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding. As of March 31, 2021, there were 190,799 shares available for grant under the 2018 Stock Incentive Plan.

On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-qualified stock options. The Inducement Plan was recommended for approval by the Compensation Committee of the Board and subsequently approved and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

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On December 9, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 200,000 shares to 500,000 shares. The 2019 Inducement Plan will be administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the 2019 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or following a bona fide period of non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. As March 31, 2021, there were 221,200 shares available for grant under the 2019 Inducement Plan.

The Company’s stock-based compensation expense was recognized in operating expense as follows:

	Three Months Ended March 31,
	2021		2020
	(unaudited)
Stock-Based Compensation
Research and development	$	60,385	$	52,684
General and administrative		197,236		72,308
Total	$	257,622	$	124,992

The fair value of options and warrants granted during the three months ended March 31, 2021 was estimated using the Black-Scholes option valuation model utilizing the following assumptions:

	Three Months Ended March 31,
	2021			2020
	Weighted Average			Weighted Average
	(unaudited)
Volatility		100.38	%		92.56	%
Risk-Free Interest Rate		0.35	%		1.56	%
Expected Term in Years		5.82			6.01
Dividend Rate		0.00	%		0.00	%
Fair Value of Option on Grant Date	$	1.73		$	0.99

The following table summarizes the number of options outstanding and the weighted average exercise price:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options outstanding at December 31, 2020		1,650,897		$	11.87
Granted		267,800			2.32
Exercised		–			–
Forfeited		(19,500	)		23.87
Expired		–			–
Options outstanding at March 31, 2021		1,899,197		$	10.40		7.2	$	1,654,588
Vested and expected to vest at March 31, 2021		1,899,197		$	10.40		7.2	$	1,654,588
Exercisable at March 31, 2021		1,167,963		$	15.10		5.52	$	157,569

At March 31, 2021 there was approximately $1,483,195 of unamortized stock option compensation expense, which is expected to be recognized over a remaining average vesting period of 3 years.

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Note 8 – Income Taxes

In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The Company expects to have a loss for 2021 and there will be no current income tax expense. Additionally, there was a full valuation allowance against the net deferred tax assets as of March 31, 2021 and December 31, 2020. As such, the Company recorded no income tax benefit due to realization uncertainties.

The Company’s U.S. statutory rate is 21%. The primary factor impacting the effective tax rate for the three months ended March 31, 2021 is the anticipated full year operating loss which will require full valuation allowances against any associated net deferred tax assets.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of March 31, 2021, there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the three months ended March 31, 2021 and for the year ended December 31, 2020.

Note 9 – Commitments and Contingencies

Rent

For month-to-month arrangements not impacted by the adoption of ASC 842, rent for the three months ended March 31, 2021 and 2020, rent was $36,017 and $58,641 respectively.

Note 10 – Retirement Plan

The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. The 401(k) employer contributions were $35,747 and $9,800 for the three months ended March 31, 2021 and 2020, respectively.

Note 11– Subsequent Events

Subsequent events have been evaluated through the date these financial statements were issued.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2020 on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 18, 2021.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading “Risk Factors” below. In light of these risks, uncertainties and assumptions, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this Quarterly Report and you should not place undue reliance on these forward-looking statements.

These forward-looking statements may include, but are not limited to, statements about:

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the accuracy of estimates of our expenses, future revenue, capital requirements and our needs for additional financing;

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our ability to obtain funding for our operations in the event we determine the need to raise additional capital;

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our ability to retain key management personnel;

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the accuracy of our estimates regarding expenses, future revenues and capital requirements;

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our ability to maintain our listing on the Nasdaq Stock Market;

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regulatory developments in the United States and foreign countries;

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unforeseen circumstances or other disruptions to normal business operations arising from or related to COVID-19;

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our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”); and

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other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors.

Any forward-looking statements in this Quarterly Report reflect our views and assumptions only as of the date that this report is signed with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Company Overview

We are a clinical-stage immunotherapy company developing a growing pipeline of cancer immunotherapy and infectious disease vaccine candidates designed to overcome the limitations of current immunotherapy technologies. Our Versamune^® technology is a proprietary T-cell activating platform designed to train the immune system to better attack and destroy disease. When paired with an antigen (which is a disease-related protein that is recognizable by the immune system) Versamune^® induces, in vivo, large quantities of high-quality, highly potent polyfunctional CD8+ killer T-cells, a specific sub-type of CD8+ killer T-cell that is more effective at killing infected or target cells.

We believe that the Versamune® platform has the potential to become an industry-leading immuno-oncology technology and is currently being applied to the development of a robust pipeline of valuable “new-generation, multi-functional” immunotherapies, both as single agents and as part of combination therapies with other leading immuno-oncology technologies. We believe our product candidates are of interest for potential combination therapies in relation to Human Papillomavirus (HPV) associated cancers, melanoma, colorectal, lung, breast and prostate cancers in advanced cancer or as monotherapies in early-stage disease.

It is well documented that the most critical attribute of an effective cancer immunotherapy is the induction of high levels of active antigen-specific CD8+ (killer) T-cells. Priming adequate levels of active CD8+ T-cells in-vivo continues to be a major obstacle facing immunotherapy. PDS0101 in its first human clinical trial provided data supporting the earlier promising preclinical study results and demonstrated the unique in-vivo induction of high levels of active HPV-specific CD8+ T-cells in humans.

PDS0101 in Combination with KEYTRUDA^® Clinical Trial:

In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 (Versamune^®with multiple HPV16 antigens) in combination with Merck’s anti-PD-1 therapy, KEYTRUDA^® (pembrolizumab) for first-line treatment of recurrent/ metastatic head and neck cancer opened and is actively recruiting patients. The clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection. In June 2019, the FDA approved using KEYTRUDA^® in combination with platinum and fluorouracil (FU) for all patients for first line treatment of patients with metastatic or unresectable recurrent head and neck squamous cell carcinoma, or HNSCC, and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test.

In this sponsored trial, patients whose cancer has returned or spread following initial treatment, will be able to avoid chemotherapy and take this combination of two immuno-therapy drugs. Enrolling patients with more functional immune systems that have not been compromised by extensive chemotherapy may allow improved efficacy of the combination. Patients in the study will receive a total of 5 cycles of combination therapy in the context of standard of care KEYTRUDA™ therapy administered every three weeks until disease progression. The primary endpoint of VERSATILE-002 is the objective response rate – or ORR – at nine months following initiation of treatment. There will be a lead-in cohort of 12 patients to assess the safety of the combination, and a formal planned interim analysis evaluating response to treatment in the first 38 patients. Sites have implemented institution-specific measures securing the safety of patients and staff to ensure the integrity of the study in the face of the ongoing pandemic. The study’s Lead Principal Investigator is Dr. Jared Weiss, who serves as the section chief of Thoracic and Head and Neck/Neck Oncology at the University of North Carolina School of Medicine Lineberger Comprehensive Cancer Care Center. This trial is actively recruiting patients.

PDS0101 in Combination with Bintrafusp alfa (M7824) and NHS-IL12 Clinical Trial:

In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement, which we refer to as the CRADA, in a National Cancer Institute, or NCI, led Phase 2 clinical study evaluating PDS0101, NHS-IL12, and M7824, owned by EMD Serono (Merck KGaA).

On April 28, 2021 we announced that initial efficacy and safety data from this study was accepted for oral presentation at the 2021 American Society of Clinical Oncology (ASCO) Annual Meeting taking place in early June. Preclinical study results arising from this CRADA were published in the Journal for ImmunoTherapy of Cancer, Immunomodulation to enhance the efficacy of and HPV therapeutic vaccine (Journal for ImmunoTherapy of Cancer 2020;8:e000612. doi:10.1136/ jitc-2020-000612), indicating that PDS0101 generated both HPV-specific T-cells and an associated antitumor response when used as a monotherapy. When PDS0101 was combined with two other novel clinical-stage anti-cancer agents, Bintrafusp alfa (M7824) and NHS-IL12 preclinical data suggested that all three therapeutic agents worked synergistically to provide enhanced tumor T-cell response and subsequent tumor regression and when compared to any of the agents alone or 2-component combinations. If this preclinical data is successfully confirmed in the ongoing Phase 2 trial, this triple combination could form the basis of a unique platform providing improved cancer treatments across multiple cancers.

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This investigator-led study has achieved its initial safety benchmark – meaning that not more than 1 dose-limiting toxicity was observed in the first 6 patients who received the combination. In February 2021, we announced that this trial achieved its preliminary objective response target in patients naïve to checkpoint inhibitors. The trial is progressing to full enrollment of approximately 20 patients in this group. In addition, the trial was amended to allow enrollment of a separate cohort of checkpoint inhibitor-refractory patients, or patients who have received prior treatment with checkpoint inhibitors, for assessment of safety and activity of the triple combination. Preliminary efficacy assessment of the triple combination in this added group of 20 checkpoint inhibitor refractory patients is ongoing.

PDS0101 in Combination with Chemo-Radiotherapy Clinical Trial:

In October 2020, a third PDS0101 Phase 2 clinical trial was initiated with The University of Texas MD Anderson Cancer Center and is actively recruiting patients. This clinical trial is investigating the safety and anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. PDS believes that Versamune^®’s strong T-cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication.

Other Versamune^®Products Under Development:

PDS0102 – Versamune^® + TARP antigens

The TARP antigen is over-expressed in acute myelogenous leukemia (AML), prostate and breast cancers. In the U.S. 450,000 patients are projected to be diagnosed with prostate or breast cancer this year. Approximately 90% of prostate cancers and 50% of breast cancers overexpress the TARP tumor antigen. In the U.S. 19,900 patients are projected to be diagnosed with AML this year. 100% of AML overexpress the TARP tumor antigen. In a human clinical study, the National Cancer Institute demonstrated that its proprietary TARP antigens were effectively recognized by the immune system in prostate cancer patients with PSA biochemical recurrence leading to a notable reduction in tumor growth rate. In preclinical studies, a dramatically enhanced TARP-specific killer T-cell response was observed when our designed TARP antigens were combined with Versamune® (PDS0102). Preclinical development is ongoing.

PDS0103 – Versamune^® + MUC-1 antigens

In April 2020, the PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103. PDS0103 is an investigational immunotherapy owned by us and designed to treat cancers associated with the mucin-1, or MUC-1, oncogenic protein. PDS0103 combines Versamune^® with novel highly immunogenic agonist epitopes of MUC-1 developed by the NCI and licensed by PDS. MUC1 is highly expressed in several types of cancer and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed. In preclinical studies, and similarly to PDS0101, PDS0103 demonstrated the ability to generate powerful MUC-1-specific CD8 killer T-cells. PDS0103 is currently in late preclinical development.

PDS0104 – Versamune^® + TRP-2 and melanoma antigens

The rates of melanoma have been rising rapidly over the past few decades and approximately 96,480 new melanomas will be diagnosed this year alone. More than 7,000 of these will prove fatal. PDS0104 combines Versamune ® with various melanoma antigens including the Tyrosinase-related protein 2 (TRP2) which is highly expressed in melanoma. PDS0104 has been demonstrated in pre-clinical animal models of aggressive melanoma to have unique and significant anti-tumor activity as a monotherapy and has also demonstrated strong anti-tumor synergy in combination with checkpoint inhibitors. Preclinical development is ongoing.

Infectious Diseases

Our focus remains on developing our oncology products and progressing clinical trials described above, however we are also developing preventative vaccines to address several infectious diseases. Based on the key characteristics of Versamune^® we are progressing preclinical development of PDS0202, a universal influenza vaccine candidate, which combines Versamune^® with novel influenza vaccine antigens. PDS0202 pre-clinical development is being supported by an agreement with the National Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation Centers, or CIVICs, program, with a goal of progressing into a human clinical trial.

PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential mutations. This second generation COVID-19 vaccine is based on the understood potential of Versamune^® to prime the immune system to generate both antibodies for near term protection and T-cell responses for long term protection against pathogens. We are jointly developing PDS0203 under a collaboration agreement with Farmacore.

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On March 11, 2021, we announced that the COVID-19 vaccine consortium consisting of PDS, Farmacore Biotechnology and Blanver Farmoquímica, received a commitment from the Secretary for Research and Scientific Training of The Ministry of Science, Technology and Innovation of Brazil (“MCTI”) to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine in Brazil. We are advised that MCTI intends to make a portion of the funding available, upon authorization by the Brazilian regulatory agency, Agência Nacional de Vigilância Sanitária (Anvisa) to initiate a combined Phase 1/2 clinical trial in Brazil. The majority of the capital provided by MCTI will fund the manufacturing process scale up, production and the Phase 3 trial, pending the results of the Phase 1/2 trial. All funding is contingent on the availability of financial resources within the MCTI, understanding that the public health response and political situation in Brazil is constantly evolving.

The pre-Investigational Medicinal Product Dossier, or “pre-IMPD” package for the Phase 1/2 trial is currently under review by Anvisa and the trial is anticipated to begin by the end of this year. The majority of the capital provided by MCTI will fund the manufacturing process scale up, production and the Phase 3 trial, pending the results of the Phase 1/2 trial. The Phase 1 and 2 trials, which will be run together, are anticipated to enroll approximately 360 patients and will assess the safety and efficacy of the vaccine as well as both the antibody and killer T-cell responses induced by the vaccine to the novel coronavirus. The clinical trials are planned to be conducted in Brazil.

As the license holder of PDS0203 in Latin America, Farmacore Biotechnology will continue to lead the regulatory and clinical trial efforts in Brazil and has selected a top clinical research organization, to conduct clinical trials in Brazil. We will continue to contribute scientific expertise and operational support. Blanver Farmoquímica will manufacture, promote, distribute, and commercialize the Versamune®-based COVID-19 vaccine in Latin America.

In December 2019, we entered into an Amended and Restated Material Transfer Agreement (MTA) with Farmacore to develop a novel tuberculosis, or TB, immunotherapy based on a combination of Farmacore’s proprietary TB antigens with Versamune®. In preliminary evaluations, our Versamune®-based TB product, PDS0201, demonstrated highly promising TB-specific T-cell induction in-vivo. Under the Farmacore MTA, we will undertake product development and Farmacore will conduct in-vivo preclinical studies to evaluate product efficacy.

We continue to primarily devote the majority of our resources and attention on the clinical oncology assets and execution of our oncology programs. Our current pipeline of Versamune®-based therapies is as follows:

From the Company’s inception, it has devoted substantially all of its efforts to drug development, business planning, engaging regulatory, manufacturing and other technical consultants, acquiring operating assets, planning and executing clinical trials and raising capital. We currently operate the existing business of Private PDS (as defined below) as a publicly traded company under the name PDS Biotechnology Corporation. We were incorporated as Edge Therapeutics, Inc., or Edge, on January 22, 2009. On March 15, 2019, privately held PDS Biotechnology Corporation, or Private PDS, completed a reverse merger, or the Merger, with Edge, pursuant to which Private PDS survived as a wholly owned subsidiary of Edge. Under the terms of the Merger, Edge changed its name to PDS Biotechnology Corporation and Private PDS changed its name to PDS Biotechnology Corporation.

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We have never been profitable and have incurred net losses in each year since inception. Our net losses were $3.0 million, and $4.0 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $46.8 million. Substantially all of our net losses have resulted from costs incurred in connection with its research and development programs and from general and administrative costs associated with these operations.

As of March 31, 2021, we had $25.0 million in cash and cash equivalents.

Our future funding requirements will depend on many factors, including the following:

●

the timing and costs of our planned clinical trials;

●

the timing and costs of our planned preclinical studies of our Versamune® platform;

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the outcome, timing and costs of seeking regulatory approvals;

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the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;

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the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights; and

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the extent to which we license or acquire other products and technologies.

KEY COMPONENTS OF OUR STATEMENT OF OPERATIONS

Revenue

We have not generated any revenues from commercial product sales and do not expect to generate any such revenue in the near future. We may generate revenue in the future from a combination of research and development payments, license fees and other upfront payments or milestone payments.

Research and Development Expenses

Research and development expenses include employee-related expenses, licensing fees to use certain technology in our research and development projects, costs of acquiring, developing and manufacturing clinical trial materials, as well as fees paid to consultants and various entities that perform certain research and testing on our behalf. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued expenses. Costs incurred in connection with research and development activities are expensed as incurred.

We expect that our research and development expenses will increase significantly over the next several years as we advance our Versamune®-based immuno-oncology, or I-O, candidates into and through clinical trials, pursues regulatory approval of our injectable Versamune® candidates and prepare for a possible commercial launch, all of which will also require a significant investment in contract and internal manufacturing and inventory related costs.

The process of conducting human clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for our injectable I-O candidates. The probability of successful commercialization of our I-O candidates may be affected by numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

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Results of Operations

The following table summarizes the results of our operations for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,						Increase (Decrease)
	2021			2020			$ Amount			%
	(in thousands)
Operating expenses:
Research and development expenses	$	1,413		$	1,971		$	(559	)		(28	)%
General and administrative expenses		1,636			2,060			(424	)		(21	)%
Total operating expenses		3,049			4,031			(983	)		(24	)%
Loss from operations		(3,049	)		(4,031	)		983			(24	)%
Interest income, net		1			46			(45	)		(98	)%
Net loss and comprehensive loss	$	(3,048	)	$	(3,985	)	$	936			(23	)%

Research and Development Expenses

Research and development (R&D) expenses decreased to $1.4 million for the three months ended March 31, 2021 from $2.0 million for the three months ended March 31, 2020. The decrease of $0.6 million in 2021 was primarily attributable to a decrease of $0.3 million in professional services and $0.3 million in clinical studies.

General and Administrative Expenses

General and administrative expenses decreased to $1.6 million for the three months ended March 31, 2021 from $2.1 million for the three months ended March 31, 2020. The decrease of $0.5 million is primarily attributable to a decrease in professional services of $0.7 million which includes legal fees of $0.2 million, offset by an increase of $0.2 million in personnel costs.

Interest income

Interest income, net was $0.001 million during the three months ended March 31, 2021, an decrease of $0.045 million, as compared to $0.046 million during the three months ended March 31, 2020, due primarily to interest received on invested cash and cash equivalents.

Liquidity and Capital Resources

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In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. On August 13, 2020, we sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses. Approximately $81,000,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.

Our operations have also been financed from cash of $29.1 million from the consummation of the Merger in March 2019. As of March 31, 2021, we had $25.0 million of cash and cash equivalents.

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Our budgeted cash requirements in 2021 and beyond include expenses related to continuing development and clinical studies. Based on our available cash resources and cash flow projections as of the date the consolidated financial statements were available for issuance, we believe there are sufficient funds to continue operations and research and development programs for at least 12 months from the date of this Quarterly Report on Form 10-Q.

We plan to continue to fund our operations and capital funding needs through equity and/or debt financings. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders. We may also enter into government funding programs and consider selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market immunotherapies that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects. Failure to obtain adequate financing also may adversely affect its ability to operate as a going concern.

Cash Flows

The following table shows a summary of our cash flows for each of the periods indicated (in thousands):

	Three Months Ended March 31,
	2021			2020
Net cash used in operating activities	$	(3,802	)	$	(3,164	)
Net cash provided by financing activities		–			12,040
Net increase (decrease) in cash and cash equivalents	$	(3,802	)	$	8,876

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Net Cash Used in Operating Activities

Net cash used in operating activities was $3.8 million and $3.2 million for the three months ended March 31, 2021and 2020, respectively. The increase in cash used in operating activities of $0.6 million was primarily due to the increase of prepaid expenses related to the Syneos CRO contract.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2020 was due to the receipt of net proceeds from the issuance of common stock of $12.0 million.

Operating Capital Requirements

To date, we have not generated any product revenue. We do not know when, or if, we will generate any product revenue and we do not expect to generate significant product revenue unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our tablet vaccine candidates, and begin to commercialize any approved vaccine candidates. We are subject to all of the risks incident to the development of new products, and may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect to incur additional costs associated with operating as a public company and anticipate that we will need substantial additional funding in connection with our continuing operations.

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Quarterly Report. Our budgeted cash requirements in 2021 and beyond include expenses related to continuing development and clinical studies. We believe that our existing cash and cash equivalents as of December 31, 2020 are sufficient to continue operations and research and development programs for at least the next 12 months from the date of this Quarterly Report. Until we can generate significant cash from our operations, we expect to continue to fund our operations with available financial resources. These financial resources may not be adequate to sustain our operations.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

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the initiation, progress, timing, costs and results of our planned clinical trials;

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the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, on our business operations, financial condition, results of operations and cash flows;

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the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, and other comparable foreign regulatory authorities;

●

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

●

the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us now or in the future;

●

the effect of competing technological and market developments;

●

the cost of establishing sales, marketing and distribution capabilities in regions where we choose to commercialize our products on our own; and

●

the initiation, progress, timing and results of our commercialization of our product candidates, if approved, for commercial sale.

Please see the section titled “Risk Factors” in this Quarterly Report on Form 10-Q for additional risks associated with our operations.

Index

Contractual Obligations and Commitments

The following is a summary of our contractual obligations as of the date indicated:

As of March 31, 2021	Total		Less than One Year		1-3 Years		3-5 Years		More than 5 Years
Operating lease obligations	$	581,945	$	123,654	$	458,291	$	–	$	–
Total contractual obligations	$	581,945	$	123,654	$	458,291	$	–	$	–

Purchase Commitments

We have no material non-cancelable purchase commitments with service providers as we have generally contracted on a cancelable, purchase order basis.

Critical Accounting Polices and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Impact of the CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses, or NOLs, carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act provides other reliefs and stimulus measures. We have evaluated the impact of the CARES Act, and do not expect that any provision of the CARES Act would result in a material cash benefit to us or have a material impact on our financial statements or internal controls over financial reporting.

Operations and Liquidity

While the potential economic impact brought by and over the duration of the COVID-19 pandemic may be difficult to assess or predict, the COVID-19 pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect our liquidity. In addition, a recession or market volatility resulting from the COVID-19 pandemic could affect our business. We have taken proactive, aggressive action throughout the COVID-19 pandemic to protect the health and safety of our employees and expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees. Given the nature and type of our short-term investments, we do not believe that the COVID-19 pandemic will have a material impact on our current investment liquidity.

Index

Outlook and Impact of COVID-19 on our Business

Despite the economic uncertainty resulting from the COVID-19 pandemic, we intend to continue to focus on the development of our product candidates and we have expanded our infectious disease pipeline since the pandemic brought renewed resources and interest on technologies such as the Versamune® platform in the context of research and development in prevention of COVID-19. We are working with a consortium of partners in Brazil to develop PDS0203; a vaccine for the prevention of COVID-19. This consortium received a commitment from the Secretary for Research and Scientific Training of The Ministry of Science, Technology and Innovation of Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine in Brazil.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Smaller Reporting Company

As of January 1, 2021, we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. However, we remain a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We will cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined on an annual basis. Even though we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. We expect to continue to take advantage of some or all of the available exemptions.

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ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The primary objectives of our investment activities are to ensure liquidity and to preserve principal, while at the same time maximizing the income we receive from our cash and marketable securities without significantly increasing risk. As of March 31, 2021, we had cash equivalents of $25.0 million that were held in a non-interest-bearing money operating account and an institutional U.S. Treasury money market fund. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, we do not believe that an immediate 100 basis point change in interest rates would have a material effect on the fair market value of our cash equivalents. To minimize the risk in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in institutional market funds that are comprised of U.S. Treasury and Treasury backed repurchase agreements.

ITEM 4:

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out, under the supervision of and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15 (e)) under the Securities Exchange Act of 1934, or the Exchange Act, as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time, PDS may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Litigation, regardless of the outcome, could have an adverse impact on PDS because of defense and settlement costs, diversion of management resources and other factors. PDS is not currently a party to any legal proceedings, the adverse outcome of which, in PDS’s management’s opinion, individually or in the aggregate, would have a material adverse effect on PDS’s results of operations or financial position.

ITEM 1A.

RISK FACTORS

There have been no material changes from our risk factors as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2020. However, any investment in our business involves a high degree of risk. Before making an investment decision, you should carefully consider the information we include in this Quarterly Report on Form 10-Q, including our unaudited interim condensed consolidated financial statements and accompanying notes, our Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 18, 2021, including our financial statements and related notes contained therein, and the additional information in the other reports we file with the Securities and Exchange Commission. These risks may result in material harm to our business and our financial condition and results of operations. In this event, the market price of our common stock may decline and you could lose part or all of your investment. Additional risks that we currently believe are immaterial may also impair our business operations. Our business, financial conditions and future prospects and the trading price of our common stock could be harmed as a result of any of these risks.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2021.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

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EXHIBIT INDEX

Exhibit Number		Exhibit Description
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 *		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2 *		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith (unless otherwise noted as being furnished herewith)

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PDS Biotechnology Corporation

May 13, 2021	By:	/s/ Frank Bedu-Addo
		Frank Bedu-Addo
		President and Chief Executive Officer (Principal Executive Officer)

May 13, 2021	By:	/s/ Seth Van Voorhees
		Seth Van Voorhees
		Chief Financial Officer
		(Principal Financial and Accounting Officer)