PDSB 10-Q Quarter ended June 30, 2020

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

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

	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, Florham Park, NJ 07932
	(Address of principal executive offices)

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

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller Reporting Company ☒

Emerging growth company ☒

			Page
Part I — Financial Information			3
	Item 1.	Financial Statements (Unaudited):	3
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations and Comprehensive Loss	4
		Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	5
		Condensed Consolidated Statements of Cash Flows	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4.	Controls and Procedures	31
Part II — Other Information			33
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 3.	Defaults Upon Senior Securities	37
	Item 4.	Mine Safety Disclosures	37
	Item 5.	Other Information	37
	Item 6.	Exhibits	37
EXHIBIT INDEX			38
SIGNATURES			39

		June 30, 2020				December 31, 2019
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	16,934,495			$	12,161,739
Prepaid expenses and other			2,506,646				2,308,462
Total current assets			19,441,141				14,470,201
Property and equipment, net			13,247				21,051
Right-to-use asset			638,831				–
Total assets		$	20,093,219			$	14,491,252
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable		$	1,092,527			$	1,197,720
Accrued expenses			1,194,358				1,097,640
Restructuring reserve			126,862				498,185
Operating lease liability - short term			112,657				–
Total current liabilities			2,526,404				2,793,545
Noncurrent liability:
Operating lease liability - long term			552,326				–
STOCKHOLDERS’ EQUITY
Common stock, $0.00033 par value, 75,000,000 shares authorized at June 30, 2020 and December 31, 2019, 15,361,619 shares and 5,281,237 shares issued and outstanding at June 30, 2020 and  December 31, 2019, respectively			5,064				1,742
Additional paid-in capital			52,861,882				40,633,670
Accumulated deficit			(35,852,457	)			(28,937,705	)
Total stockholders’ equity			17,014,489				11,697,707
Total liabilities and stockholders’ equity		$	20,093,219			$	14,491,252

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Operating expenses:
Research and development expenses		$	1,414,225			$	1,886,934			$	3,385,904			$	2,916,937
General and administrative expenses			1,521,736				2,383,972				3,581,884				6,289,848
Total operating expenses			2,935,961				4,270,906				6,967,788				9,206,785
Loss from operations			(2,935,961	)			(4,270,906	)			(6,967,788	)			(9,206,785	)
Other income (expense):
Gain on bargain purchase upon merger			–				209,449				–				11,939,331
Interest income			6,617				175,605				53,036				198,907
Interest expense			–				–				–				(606	)
Net (loss) income and comprehensive (loss) income			(2,929,344	)			(3,885,852	)			(6,914,752	)			2,930,847
Per share information:
Net (loss) income per share, basic		$	(0.19	)		$	(0.75	)		$	(0.54	)		$	0.66
Net (loss) income per share, diluted		$	(0.19	)		$	(0.75	)		$	(0.54	)		$	0.52

Weighted average common shares outstanding, basic		$	15,357,199			$	5,175,837			$	12,835,980			$	4,466,025
Weighted average common shares outstanding, diluted		$	15,357,199			$	5,175,837			$	12,835,980			$	5,677,360

		Common Stock								Additional Paid-in Capital				Accumulated				Total Equity (Deficit)
		Shares Issued				Amount								Deficit
Balance - March 31, 2019			5,172,938			$	1,707			$	38,642,411			$	(14,196,475	)		$	24,447,643
Stock based compensation expense			–				–				18,580				–				18,580
Issuance of common stock, net of issuance costs			4,549				2				25,242				–				25,244
Net loss			–				–				–				(3,885,852	)			(3,885,852	)
Balance - June 30, 2019			5,177,487			$	1,709			$	38,686,233			$	(18,082,327	)		$	20,605,615

		Common Stock								Additional Paid-in Capital				Accumulated				Total Equity (Deficit)
		Shares Issued				Amount								Deficit
Balance - March 31, 2020			15,350,445			$	5,064			$	52,805,601			$	(32,923,113	)		$	19,887,552
Stock-based compensation expense			–				–				46,113				–				46,113
Issuance of common stock from 401K match			11,174				–				10,168				–				10,168
Net loss			–				–				–				(2,929,344	)			(2,929,344	)
Balance - June 30, 2020			15,361,619			$	5,064			$	52,861,882			$	(35,852,457	)		$	17,014,489

		Common Stock								Additional Paid-in Capital				Accumulated				Total Equity (Deficit)
		Shares Issued				Amount								Deficit
Balance - December 31, 2018			3,417,187			$	1,128			$	19,311,529			$	(21,013,174	)		$	(1,700,517	)
Stock based compensation expense			–				–				2,773,451				–				2,773,451
Issuance of common stock, net of issuance costs			48,930				16				749,984				–				750,000
Issuance of common stock for antidilution			97,960				32				(32	)			–				–
Issuance of common stock for convertible debt			9,683				3				32,950				–				32,953
Issuance of common stock from 401K match			4,549				2				25,241				–				25,243
Equity from merger transaction			1,599,178				528				15,793,110				–				15,793,638
Net income			–				–				–				2,930,847				2,930,847
Balance - June 30, 2019			5,177,487			$	1,709			$	38,686,233			$	(18,082,327	)		$	20,605,615

		Common Stock								Additional Paid-in Capital				Accumulated				Total Equity (Deficit)
		Shares Issued				Amount								Deficit
Balance - December 31, 2019			5,281,237			$	1,742			$	40,633,670			$	(28,937,705	)		$	11,697,707
Stock-based compensation expense			–				–				171,106				–				171,106
Issuance of common stock, net of issuance costs			10,000,000				3,299				11,966,703				–				11,970,002
Issuance of common stock for convertible debt			65,240				22				70,437				–				70,459
Issuance of common stock from 401K match			15,142				1				19,966				–				19,967
Net loss			–				–				–				(6,914,752	)			(6,914,752	)
Balance - June 30, 2020			15,361,619			$	5,064			$	52,861,882			$	(35,852,457	)		$	17,014,489

		Six Months Ended June 30,
		2020				2019
Cash flows from operating activities:
Net (loss) income		$	(6,914,752	)		$	2,930,847
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation expense			171,106				2,773,451
Stock-based 401K company common match			19,967				25,244
Depreciation expense			7,805				62,706
Amortization of the right-to-use asset			41,800				–
Bargain purchase gain from merger			–				(11,939,331	)
Changes in assets and liabilities:
Prepaid expenses and other assets			(198,184	)			157,273
Accounts payable			(105,193	)			(1,157,171	)
Accrued expenses			96,718				(292,678	)
Restructuring reserve			(371,323	)			(786,396	)
Cash payments for expenses:
Payments made for operating lease			(15,649	)			–
Net cash used in operating activities			(7,267,705	)			(8,226,055	)
Cash flows from investing activities:
Cash received in reverse merger transaction			–				29,106,512
Net cash provided by investing activities			–				29,106,512
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				750,000
Net cash provided by financing activities			12,040,461				750,000
Net increase in cash and cash equivalents			4,772,756				21,630,457
Cash and cash equivalents at beginning of period			12,161,739				103,695
Cash and cash equivalents at end of period		$	16,934,495			$	21,734,152
Supplemental disclosure of cash flow information:
Cash paid for:
Interest		$	–			$	606
Supplemental cash flow information:
Conversion of convertible notes and accrued interest into common stock		$	–			$	32,953
Consideration in connection with reverse merger transaction		$	–			$	15,793,638

(A)	Unaudited interim financial statements:

(C)	Significant risks and uncertainties:

(D)	Business acquisition:

●

Income approach, which is based on the present value of a future stream of net cash flows.

●

Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

●

Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.

●

Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).

●

Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).

●

Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).

(G)	Patent costs:

(H)	Intangible asset and impairment:

(I)	Stock-based compensation:

		As of June 30,
		2020				2019
Stock options to purchase Common Stock			1,639,753				1,418,301
Warrants to purchase Common Stock			197,518				262,758
Total			1,837,271				1,681,059

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Numerator
Basic and diluted net (loss) income		$	(2,929,344	)		$	(3,885,852	)		$	(6,914,752	)		$	2,930,847
Denominator
Shares used in computing basic net (loss) income per share			15,357,199				5,175,837				12,835,980				4,466,025
Shares from dilutive securities			–				–				–				1,211,335
Shares used in computing diluted net (loss) income per share			15,357,199				5,175,837				12,835,980				5,677,360
Net (loss) income per share, basic		$	(0.19	)		$	(0.75	)		$	(0.54	)		$	0.66
Net (loss) income per share, diluted		$	(0.19	)		$	(0.75	)		$	(0.54	)		$	0.52

(K)	Accounting standards adopted:

Number of shares of the combined company to be owned by Edge security holders (1)			1,600,166
Multiplied by the price per share of Edge’s common stock as of March 15, 2019		$	9.87
Purchase price (in thousands)		$	15,794

(1)

The amount includes 1,576,916 shares of Edge’s common stock outstanding as of March 15, 2019 plus 23,250 stock options of Edge that were in the money and vested immediately upon closing of the Merger. At the closing of the Merger, 753 of in-the-money options and 235 fractional shares paid out in cash to shareholders were not issued as common stock, resulting in 1,599,178 common shares issued.

Cash and cash equivalents		$	29,106,513
Prepaid expense and other assets			1,585,482
Right to use asset			1,384,810
Intangible assets-IPR&D			2,974,000
Total identifiable assets acquired			35,050,805
Accounts payable, accrued expenses, other liabilities			(4,595,934	)
Lease liability			(945,152	)
Deferred tax liability			(381,513	)
Total liabilities assumed			(5,922,599	)
Net identifiable assets acquired			29,128,206
Bargain purchase gain (1)			(13,334,568	)
Purchase price		$	15,793,638

(1)	Due to the aforementioned purchase price adjustments subsequent to March 31, 2019, the preliminary estimate of the bargain purchase gain was adjusted from $11,729,882 and finalized for the year ended December 31, 2019 at $13,334,568.

		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 June 30, 2020: (unaudited)
Cash and cash equivalents		$	16,934,495			$	16,934,495			$	–			$	–
As of December 31, 2019:
Cash and cash equivalents		$	12,161,739			$	12,161,739			$	–			$	–

		Six Months Ended June 30, 2020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows for operating lease		$	15,649
Right-of use asset obtained in exchange for new operating lease liability		$	638,831
Remaining lease term - operating lease liability			38.0
Discount rate - operating lease			9.15	%
Reported as of June 30, 2020
Current portion of operating lease liability		$	112,657
Operating leases, net of current portion			552,326
Total		$	664,983

		As of June 30, 2020				As of December 31, 2019
Accrued research and development costs		$	147,841			$	16,415
Accrued professional fees			135,641				256,062
Accrued compensation			910,876				603,229
Accrued rent			–				221,934
Total		$	1,194,358			$	1,097,640

		As of June 30, 2020				As of December 31, 2019
Restructuring reserve (1)		$	126,862			$	498,185
Total		$	126,862			$	498,185

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
		(unaudited)								(unaudited)
Stock-Based Compensation
Research and development		$	53,842			$	9,387			$	106,526			$	450,087
General and administrative			(7,728	)			9,193				64,580				2,323,364
Total		$	46,113			$	18,580			$	171,106			$	2,773,451

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
		Weighted Average				Weighted Average				Weighted Average				Weighted Average
		(unaudited)								(unaudited)
Volatility			97.13	%			94.43	%			97.00	%			88.87	%
Risk-Free Interest Rate			0.34	%			2.19	%			0.38	%			2.34	%
Expected Term in Years			6.07				6.08				6.07				6.17
Dividend Rate			0.00	%			0.00	%			0.00	%			0.00	%
Fair Value of Option on Grant Date		$	1.11			$	4.77			$	1.10			$	5.31

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life in Years				Aggregate Intrinsic Value
Options outstanding at December 31, 2019			1,421,797			$	15.95
Granted			319,907				1.43
Exercised			–				–
Forfeited			(84,227	)			41.34
Expired			(17,724	)			4.69
Options outstanding at June 30, 2020			1,639,753			$	11.94				7.17			$	184,693–
Vested and expected to vest at June 30, 2020			1,639,753			$	11.94				7.17			$	184,693–
Exercisable at June 30, 2020			1,047,284			$	16.73				5.84			$	–

ITEM 2.

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

●

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

●

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

●

our ability to retain key management personnel;

●

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

●

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

●

regulatory developments in the United States and foreign countries;

●

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

●

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

●

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

•

Prolonged and localized induction of chemokines and cytokines within lymph nodes, resulting in sustained recruitment of B cells and T cells, enhanced potency, and minimized risk of systemic toxicity, resulting in an improved safety profile in clinical and preclinical safety/toxicology studies.

•

Dramatic enhancement of antibody titers in the context of dose sparing of multiple antigens.

•

Induction of polyfunctional, highly potent antigen-specific CD8+ T-cells associated with the type of long-term memory responses necessary to for effective cancer immunotherapy and also to provide long term protection against viral infection.

•

Demonstrated high levels of antigen-specific antibody, and CD8+ and CD4+ T cell responses within 2 weeks of a single vaccination in human clinical studies.

•

Spontaneously forming spherical nanoparticles composed of a single synthetic lipid; a process that results in relatively low projected commercial cost of goods and potential for rapid commercial scale-up.

●

the timing and costs of our planned clinical trials;

●

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

●

the outcome, timing and costs of seeking regulatory approvals;

●

the impact of COVID-19 on company operations ;

●

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

●

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

●

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

		Three Months Ended June 30,								Increase (Decrease)
		2020				2019								$	%
		(in thousands)
Operating expenses:
Research and development expenses		$	1,414			$	1,887			$	(473	)			(25	)%
General and administrative expenses			1,522				2,384				(862	)			(36	)%
Total operating expenses			2,936				4,271				(1,335	)			(31	)%
Loss from operations			(2,936	)			(4,271	)			1,335				(31	)%
Gain on bargain purchase			–				209				(209	)			(100	)%
Interest income, net			7				176				(169	)			(96	)%
Net loss and comprehensive loss		$	(2,929	)		$	(3,886	)		$	957				(25	)%

		Six Months Ended June 30,								Increase (Decrease)
		2020				2019								$	%
		(in thousands)
Operating expenses:
Research and development expenses		$	3,386			$	2,917			$	469				16	%
General and administrative expenses			3,582				6,290				(2,708	)			(43	)%
Total operating expenses			6,968				9,207				(2,239	)			(24	)%
Loss from operations			(6,968	)			(9,207	)			2,239				(24	)%
Gain on bargain purchase			–				11,939				(11,939	)			(100	)%
Interest income, net			53				198				(145	)			(73	)%
Net (loss) income and comprehensive (loss) income		$	(6,915	)		$	2,931			$	(9,845	)			(336	)%

		Six Months Ended June 30,
		2020				2019
Net cash used in operating activities		$	(7,268	)		$	(8,226	)
Net cash provided by investing activities			–				29,106
Net cash provided by financing activities			12,040				750
Net increase in cash and cash equivalents		$	4,772			$	21,630

●

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

●

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;

●

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 tablet vaccines on our own; and

●

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

ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

●

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

●

the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authority;

●

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 any 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 PDS0101 on our own; and

●

the initiation, progress, timing and results of the commercialization of PDS0101, if approved, for commercial sale.

●

delays or difficulties in enrolling patients in our clinical trials;

●

delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff;

●

increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine;

●

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

●

interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

●

interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;

●

delays or disruptions in preclinical experiments and investigational new drug application-enabling studies due to restrictions of on-site staff and unforeseen circumstances at contract research organizations and vendors;

●

interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

●

limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions and “shelter in place” orders;

●

limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and

●

interruption or delays to our sourced discovery and clinical activities.

Exhibit Number		Exhibit Description
10.1		Consulting Agreement made as of June 23, 2020 by and between PDS Biotechnology Corporation and King Partners II (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on June 24, 2020 and incorporated herein by reference).
31.1		Certification of Principal Executive and 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 (filed herewith).
31.2		Certification of Principal Accounting 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 (filed herewith).
32.1 *		Certification of Principal Executive and 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).
32.2 *		Certification of Principal Accounting 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

*

The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

	PDS Biotechnology Corporation
August 13, 2020	By:	/s/ Frank Bedu-Addo
		Frank Bedu-Addo
		President and Chief Executive Officer
August 13, 2020	By:	/s/ Michael King
		Michael King
		Interim Chief Financial Officer