UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to_____________ Commission file number 001-37568 PDS Biotechnology Corporation (Exact name of registrant as specified in its charter) Delaware 26-4231384 (Sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to_____________ Commission file number 001-37568 PDS Biotechnology Corporation (Exact name of registrant as specified in its charter) Delaware 26-4231384 (800) 208 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Address of principal executive offices) (800) 208-3343 (Registrant's telephone number) Edge Therapeutics, Inc. For the transition period from____________to_____________ Commission file number 001-37568 P ...

PART I [ITEM 1. Business](index=4&type=section&id=Item%201%20Business) Edge Therapeutics discontinued its lead drug EG-1962, now pursuing a merger with PDS Biotechnology to pivot to cancer immunotherapy - Edge Therapeutics, a clinical-stage biotechnology company, discontinued its lead product candidate, **EG-1962**, after a Phase 3 study (NEWTON 2) showed a low probability of achieving its primary endpoint[14](index=14&type=chunk)[15](index=15&type=chunk)[189](index=189&type=chunk) - The company entered into a Merger Agreement with **PDS Biotechnology Corporation** on November 23, 2018; if completed, Edge's business will transition to PDS's cancer immunotherapy focus[12](index=12&type=chunk)[24](index=24&type=chunk)[191](index=191&type=chunk) - If the merger with PDS is not completed, Edge will reconsider strategic alternatives, which include pursuing another strategic transaction or dissolving and liquidating its assets[13](index=13&type=chunk)[18](index=18&type=chunk)[74](index=74&type=chunk) - Edge has ceased all research and development on **EG-1962** and its other product candidates and has reduced its workforce to preserve cash resources[23](index=23&type=chunk)[71](index=71&type=chunk)[192](index=192&type=chunk) - The company holds wholly-owned U.S. and international patents related to **EG-1962**, a microparticulate formulation of nimodipine, with some patents co-owned with Evonik Industries[25](index=25&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) - Edge has no current plans to manufacture **EG-1962** or other products and has ceased work under existing manufacturing and supply agreements[35](index=35&type=chunk)[36](index=36&type=chunk) - The drug development process in the U.S. involves extensive regulation by the **FDA**, including preclinical tests, IND application, clinical trials, NDA submission, and manufacturing facility inspections[39](index=39&type=chunk)[42](index=42&type=chunk) - As of December 31, 2018, Edge had **10** full-time employees[45](index=45&type=chunk) [ITEM 1A. Risk Factors](index=10&type=section&id=Item%201A%20Risk%20Factors) Edge's stock faces risks from merger failure, capital needs, dilution, regulatory unpredictability, and IP challenges - The Exchange Ratio for the merger with PDS is not adjustable based on Edge's market price, meaning PDS stockholders could receive a different value than negotiated if Edge's stock price changes[51](index=51&type=chunk) - Failure to complete the merger could result in Edge paying a **$1.75 million** termination fee to PDS and incurring approximately **$3.5 million** in merger-related expenses, even if the merger is not completed[52](index=52&type=chunk)[55](index=55&type=chunk)[86](index=86&type=chunk) - The combined company will likely need to raise additional capital, which could dilute existing stockholders' ownership or impose restrictive covenants through debt financing[57](index=57&type=chunk) - Certain Edge and PDS executive officers and directors have interests in the merger that differ from stockholders, including continued service, severance benefits, and accelerated stock options[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - If the merger is not completed, Edge may be unable to find an alternative transaction or reestablish an operating business, potentially leading to dissolution and liquidation of assets, with uncertain returns for stockholders[70](index=70&type=chunk)[74](index=74&type=chunk) - Failure to obtain stockholder approval for a reverse stock split may lead to delisting from Nasdaq[75](index=75&type=chunk) - The issuance of Edge common stock to PDS stockholders will substantially dilute the voting power of current Edge stockholders, with Edge securityholders expected to own approximately **30%** of the combined company[77](index=77&type=chunk) - Edge has ceased all R&D activities for **EG-1962** and other product candidates, and any future resumption would face unpredictable and lengthy regulatory approval processes[83](index=83&type=chunk)[86](index=86&type=chunk) - The pharmaceutical industry is highly competitive and subject to rapid technological change, posing risks that Edge's technologies could become obsolete[99](index=99&type=chunk) - Edge relies on patents, trade secrets, and confidentiality agreements, but intellectual property protection is uncertain, expensive, and subject to challenges and potential infringement[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[114](index=114&type=chunk) - Edge has incurred significant losses since inception (**$40.9 million** in 2018, **$50.9 million** in 2017) and expects to continue incurring losses, requiring additional capital that may dilute stockholders or restrict operations[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk) - Edge's common stock trading market has been limited and illiquid, and failure to meet Nasdaq listing requirements (e.g., audit committee, minimum bid price) could lead to delisting[131](index=131&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The combined company's stock price is expected to be volatile due to factors like clinical trial results, regulatory approvals, competition, and general market conditions[156](index=156&type=chunk)[163](index=163&type=chunk) - The merger will result in an ownership change under Section 382 of the Code for Edge, limiting the use of pre-merger U.S. net operating loss carryforwards[166](index=166&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - No unresolved staff comments[170](index=170&type=chunk) [ITEM 2. Properties](index=36&type=section&id=Item%202%20Properties) Edge's Berkeley Heights, NJ headquarters (**20,410 sq ft**, lease ends Nov 2021) is deemed adequate for near-term needs - Corporate headquarters: **20,410 sq ft** office space in Berkeley Heights, NJ[171](index=171&type=chunk) - Lease term: Ends **November 2021**[171](index=171&type=chunk) - Adequacy: Existing facilities are believed to be adequate for near-term needs[171](index=171&type=chunk) [ITEM 3. Legal Proceedings](index=36&type=section&id=Item%203%20Legal%20Proceedings) Edge faces merger-related lawsuits alleging material omissions, deemed meritless, following a prior securities class action dismissal - A securities class action complaint (Sanfilippo v. Edge Therapeutics, Inc.) filed in April 2018, alleging misleading statements regarding **EG-1962**, was voluntarily dismissed without prejudice on **February 14, 2019**[173](index=173&type=chunk)[473](index=473&type=chunk) - Edge and its Board are defendants in four lawsuits (Condon, Franchi, Prince, Foldenauer Actions) filed in January 2019, alleging material omissions in the Form S-4 registration statement related to the proposed merger[174](index=174&type=chunk)[474](index=474&type=chunk) - Plaintiffs in these merger-related lawsuits seek injunctive relief, rescissory damages, and attorneys' fees and expenses[175](index=175&type=chunk)[475](index=475&type=chunk) - Edge believes the merger-related litigation is without merit and has been rendered moot by subsequent disclosures[176](index=176&type=chunk)[476](index=476&type=chunk) [ITEM 4. Mine Safety Disclosures](index=36&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Edge Therapeutics, Inc - Not applicable[177](index=177&type=chunk) PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities](index=37&type=section&id=Item%205%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuers%20Purchases%20of%20Equity%20Securities) Edge's common stock (IPO **$11.00** in 2015, **$0.39** by Feb 2019) saw no equity purchases; **$17.4 million** from a 2017 offering was invested in short-term assets - Edge's common stock (EDGE) began trading on Nasdaq Global Market on **October 1, 2015**, at an IPO price of **$11.00** per share[180](index=180&type=chunk) - As of **February 14, 2019**, the closing price for common stock was **$0.39**[181](index=181&type=chunk) Common Stock High and Low Sales Prices | Year Ended December 31, 2018 | High | Low | | :--------------------------- | :--- | :-- | | Fourth Quarter | $1.09 | $0.31 | | Third Quarter | $1.10 | $0.70 | | Second Quarter | $1.28 | $0.87 | | First Quarter | $17.47 | $1.18 | | Year Ended December 31, 2017 | High | Low | | Fourth Quarter | $11.16 | $9.07 | | Third Quarter | $11.51 | $9.20 | | Second Quarter | $10.72 | $8.81 | | First Quarter | $12.99 | $7.62 | - As of **February 14, 2019**, there were **36** stockholders of record[183](index=183&type=chunk) - The company did not purchase any of its registered equity securities during the period[184](index=184&type=chunk) - Net proceeds of **$17.4 million** from a registered direct common stock offering on **April 21, 2017**, were invested in short-term, investment-grade cash equivalents[185](index=185&type=chunk)[227](index=227&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2018) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) | | :----------------------------------------------- | :---------------------------------------------------------------------------------------- | :---------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 7,238,787 | 5.41 | 136,228 | | Equity compensation plans not approved by security holders | 315,003 | 8.35 | - | | Total | 7,553,787 | 5.68 | 136,228 | [ITEM 6. Selected Financial Data](index=37&type=section&id=Item%206%20Selected%20Financial%20Data) As a smaller reporting company, Edge Therapeutics is not required to provide selected financial data disclosures - Edge Therapeutics is a smaller reporting company and is not required to report selected financial data disclosures[187](index=187&type=chunk) [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Edge discontinued EG-1962, pursuing a PDS merger; reported net losses of **$40.9 million** (2018) and **$50.9 million** (2017), with **$34.6 million** cash - Edge Therapeutics is a clinical-stage biotechnology company that has discontinued its lead product candidate **EG-1962** and is exploring strategic alternatives, including a merger with **PDS Biotechnology Corporation**[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) Net Loss and Accumulated Deficit | Metric | 2018 (in millions) | 2017 (in millions) | | :----------------- | :----------------- | :----------------- | | Net Loss | $(40.9) | $(50.9) | | Accumulated Deficit (as of Dec 31) | $(192.8) | $(151.9) | - The company has never been profitable and has ceased all R&D on **EG-1962** and other product candidates, with future operations highly dependent on the PDS merger[192](index=192&type=chunk) - As of **December 31, 2018**, the company had **$34.6 million** in cash and cash equivalents[194](index=194&type=chunk)[225](index=225&type=chunk) - The company has not generated any revenue from commercial product sales and does not expect to in the near future[195](index=195&type=chunk) Research and Development Expenses (in thousands) | Category | 2018 | 2017 | Change ($) | Change (%) | | :------------------------ | :------ | :------ | :--------- | :--------- | | EG-1962 product candidate | $9,504 | $22,075 | $(12,571) | (57)% | | EG-1964 product candidate | $5 | $640 | $(635) | (99)% | | Pipeline | $188 | $371 | $(183) | (49)% | | Internal Operating Expenses | $6,372 | $11,226 | $(4,854) | (43)% | | **Total** | **$16,069** | **$34,312** | **$(18,243)** | **(53)%** | - The decrease in R&D expenses is primarily due to the discontinuance of clinical studies for **EG-1962** and a reduction in force[199](index=199&type=chunk)[218](index=218&type=chunk) General and Administrative Expenses (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :------------------------------ | :------ | :------ | :--------- | :--------- | | General and administrative expenses | $14,291 | $17,655 | $(3,364) | (19)% | - The decrease in G&A expenses was due to reductions in personnel costs, facilities, travel, marketing, and legal/professional fees[219](index=219&type=chunk) Restructuring Expenses and Impairment Charges (in thousands) | Expense Category | 2018 | 2017 | Change ($) | Change (%) | | :------------------ | :----- | :--- | :--------- | :--------- | | Restructuring expenses | $9,914 | $0 | $9,914 | 100% | | Impairment charges | $2,823 | $0 | $2,823 | 100% | - Restructuring expenses in 2018 included **$4.4 million** for severance, **$2.3 million** for financial advisory fees, **$1.4 million** for legal fees, and **$1.8 million** for retention compensation[220](index=220&type=chunk) - Impairment charges in 2018 reflect the write-down of machinery and equipment no longer needed after ceasing **EG-1962** R&D[221](index=221&type=chunk)[441](index=441&type=chunk) Interest Income (Expense), Net (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :------------------------- | :----- | :----- | :--------- | :--------- | | Interest income (expense), net | $(553) | $(1,479) | $926 | (63)% | - The decrease in net interest expense was due to reduced interest expense from paying off a loan in **June 2018**, partially offset by increased interest income from cash and cash equivalents[223](index=223&type=chunk) Benefit for Income Taxes (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :---------------------- | :----- | :----- | :--------- | :--------- | | Benefit for income taxes | $2,782 | $2,586 | $196 | 8% | - The increase in tax benefit was due to selling additional New Jersey Net Operating Losses in 2018[224](index=224&type=chunk) - Total cash and cash equivalents decreased by **$53.5 million** from **$88.1 million** in 2017 to **$34.6 million** in 2018, primarily due to debt repayment and funding operations[225](index=225&type=chunk) - The company repaid its **$20.0 million** Hercules loan in full in **June 2018**, including **$0.9 million** in back-end fees and **$0.1 million** in accrued interest[233](index=233&type=chunk)[484](index=484&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(33,153) | $(40,697) | | Net cash used in investing activities | $0 | $(188) | | Net cash (used in) provided by financing activities | $(20,269) | $22,554 | | Net decrease in cash | $(53,422) | $(18,331) | - Net cash used in operating activities decreased by **$7.5 million** in 2018 due to reduced operating activities[236](index=236&type=chunk) - Net cash used in financing activities in 2018 was primarily due to **$21.0 million** in debt repayment and fees, offset by **$0.7 million** from stock option exercises[238](index=238&type=chunk) - The company believes its existing cash and cash equivalents are sufficient for at least the next **12 months**, but this forecast is subject to risks and uncertainties[240](index=240&type=chunk)[241](index=241&type=chunk) Contractual Obligations (as of December 31, 2018, in thousands) | Obligation Category | Total | Less than One Year | 1-3 Years | 3-5 Years | More than 5 Years | | :---------------------- | :------- | :----------------- | :-------- | :-------- | :---------------- | | Operating lease obligations | $1,739 | $605 | $1,134 | $0 | $0 | | **Total** | **$1,739** | **$605** | **$1,134** | **$0** | **$0** | - The company has no material non-cancelable purchase commitments[245](index=245&type=chunk) - Milestone and royalty payments under license agreements (Evonik, Oakwood) are unlikely unless R&D activities for **EG-1962** resume[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Edge has irrevocably elected not to use the extended transition period for complying with new or revised accounting standards under the **JOBS Act**[249](index=249&type=chunk) - The company does not have any off-balance sheet arrangements[251](index=251&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=49&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) The financial statements and supplementary data are appended to this report, with an index found in Item 15 - Financial statements and supplementary data are appended to the report, with an index in **Item 15**[253](index=253&type=chunk) [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=49&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[254](index=254&type=chunk) [ITEM 9A. Controls and Procedures](index=49&type=section&id=Item%209A%20Controls%20and%20Procedures) Edge's management concluded disclosure controls and internal control over financial reporting were effective as of **December 31, 2018**, exempt from external attestation - Disclosure controls and procedures were effective as of **December 31, 2018**[255](index=255&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of **December 31, 2018**, using the **COSO 2013 Framework**[258](index=258&type=chunk) - As an 'emerging growth company,' Edge is exempt from the independent registered public accounting firm's attestation report on internal control over financial reporting[259](index=259&type=chunk) - No significant changes to internal control over financial reporting occurred during the period[260](index=260&type=chunk) [ITEM 9B. Other Information](index=49&type=section&id=Item%209B%20Other%20Information) No other information is required to be reported under this item - Not applicable[261](index=261&type=chunk) PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=50&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Edge's Board, led by Dr. Sol Barer, oversees risk; CEO is Brian A. Leuthner; Audit Committee is non-compliant with Nasdaq rules Board of Directors (as of December 31, 2018) | Name | Age | Director Since | | :------------------------ | :-- | :------------- | | **Class A (Term expiring 2019)** | | | | Rose Crane | 59 | 2017 | | Liam Ratcliffe, M.D., Ph.D. | 55 | 2016 | | Robert Spiegel, M.D. | 69 | 2013 | | **Class B (Term expiring 2020)** | | | | Isaac Blech | 69 | 2013 | | James Loughlin | 75 | 2011 | | R. Loch Macdonald, M.D., Ph.D. | 57 | 2009 | | **Class C (Term expiring 2021)** | | | | Sol Barer, Ph.D. | 71 | 2011 | | Brian A. Leuthner | 54 | 2009 | - Dr. Sol Barer serves as Chairman of the Board, and Mr. Isaac Blech as Vice Chairman, separating the Chairman and CEO roles to enhance Board independence[290](index=290&type=chunk) - All directors, except Brian A. Leuthner (President & CEO) and R. Loch Macdonald (former Chief Scientific Officer), are deemed independent under Nasdaq listing standards[289](index=289&type=chunk) - The Board performs risk oversight directly and through its Audit, Compensation, and Nominating and Corporate Governance Committees[291](index=291&type=chunk) Executive Officers (as of December 31, 2018) | Name | Age | Position | | :---------------------- | :-- | :------------------------------------- | | Brian A. Leuthner | 54 | President, Chief Executive Officer and Director | | Andrew Saik | 49 | Chief Financial Officer | | W. Bradford Middlekauff | 57 | Senior Vice President, General Counsel and Secretary | - The Audit Committee currently consists of **two** members (Mr. Loughlin and Dr. Spiegel), which is not in compliance with Nasdaq's audit committee requirements. The company has until **June 19, 2019**, to regain compliance[296](index=296&type=chunk)[298](index=298&type=chunk) - The Nominating and Corporate Governance Committee considers diversity of business experience, background, talents, and perspectives when recommending board candidates, though it does not have a formal diversity policy[308](index=308&type=chunk) [ITEM 11. Executive Compensation](index=59&type=section&id=Item%2011%20Executive%20Compensation) Edge's 2018 executive compensation included significant option awards and retention pay, with enhanced severance benefits upon change in control Summary Compensation Table (2017-2018) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards (1) ($) | Restricted Stock Units ($) | All Other Compensation (2) ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :-------------------- | :------------------------- | :----------------------------- | :-------- | | Brian A. Leuthner, CEO | 2018 | 530,000 | 318,000 | 3,356,300 | 143,846 | 10,800 | 4,358,946 | | | 2017 | 500,000 | 255,000 | 1,761,831 | - | 10,800 | 2,527,631 | | R. Loch Macdonald, M.D., Ph.D., CSO (3) | 2018 | 150,750 | - | 11,578 | 8,510 | 272,179 | 443,017 | | | 2017 | 402,000 | 153,765 | 724,493 | - | 10,800 | 1,291,059 | | Herbert J. Faleck, CMO (4) | 2018 | 416,000 | 187,200 | 646,945 | 50,918 | 10,800 | 1,311,863 | | | 2017 | 400,000 | 153,000 | 724,493 | - | 10,800 | 1,288,293 | | Andrew Saik, CFO | 2018 | 370,000 | 166,500 | 660,490 | 70,632 | - | 1,267,622 | | | 2017 | 61,667 | - | 1,594,402 | - | - | 1,656,069 | | W. Bradford Middlekauff, SVP, General Counsel and Secretary | 2018 | 347,700 | 156,470 | 791,426 | 42,351 | 10,800 | 1,348,747 | | | 2017 | 328,000 | 97,580 | 345,782 | - | 10,800 | 782,162 | - Named executive officers were not entitled to cash bonus compensation for 2018, but received retention arrangements including stock options, RSUs, and cash compensation[319](index=319&type=chunk)[365](index=365&type=chunk) - Equity awards generally vest over **four years**, with a 'double trigger' vesting approach (requiring both a change in control and a qualifying termination) for options granted in **March 2017** and later[320](index=320&type=chunk)[321](index=321&type=chunk)[333](index=333&type=chunk) Potential Payments Upon Termination Without Cause or Resignation for Good Reason (No Change in Control, as of Dec 31, 2018) | Name | Cash Payment ($) | Other ($) (COBRA) | Accelerated Equity Vesting ($) | Total ($) | | :---------------------- | :--------------- | :---------------- | :----------------------------- | :-------- | | Brian A. Leuthner | 795,000 | 38,105 | - | 833,105 | | Herbert J. Faleck, D.O. | 416,000 | 25,403 | - | 441,403 | | Andrew Saik | 370,000 | 25,403 | - | 395,403 | | W. Bradford Middlekauff | 347,700 | 25,403 | - | 373,103 | Potential Payments Upon Termination Without Cause or Resignation for Good Reason (With Change in Control, as of Dec 31, 2018) | Name | Cash Payment ($) | Accelerated Equity Vesting (1) ($) | Other (2) ($) (COBRA) | Total ($) | | :---------------------- | :--------------- | :--------------------------------- | :-------------------- | :-------- | | Brian A. Leuthner | 1,510,500 | 4,041,238 | 38,105 | 5,589,843 | | Herbert J. Faleck, D.O. | 416,000 | 1,770,053 | 25,403 | 2,211,456 | | Andrew Saik | 370,000 | 1,662,394 | 25,403 | 2,057,797 | | W. Bradford Middlekauff | 347,700 | 1,036,037 | 25,403 | 1,409,140 | Non-Employee Director Compensation (Year Ended December 31, 2018) | Name | Fees Earned or Paid in Cash ($) | Option Awards (1) ($) | Total ($) | | :------------------------ | :------------------------------ | :-------------------- | :-------- | | Sol Barer, Ph.D. | 92,500 | 40,175 | 132,675 | | Isaac Blech | 41,750 | 20,088 | 61,838 | | Kurt Conti (2) | 21,500 | - | 21,500 | | Rose Crane | 51,750 | 20,088 | 71,838 | | James I. Healy, M.D., Ph.D. (3) | 21,500 | - | 21,500 | | James Loughlin | 54,250 | 20,088 | 74,338 | | Liam Ratcliffe, M.D., Ph.D. | 44,500 | 20,088 | 64,588 | | Robert Spiegel, M.D. | 69,250 | 20,088 | 89,338 | - Non-employee directors receive annual cash retainers (**$40,000** base, plus additional for committee roles) and equity grants (new directors: **30,000** options; continuing directors: **15,000** options; Chairman: **30,000** options)[344](index=344&type=chunk)[345](index=345&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=68&type=section&id=Item%2012%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of **December 31, 2018**, Edge had **31,449,989** shares outstanding; beneficial owners and management held approximately **24.69%** of voting stock - As of **December 31, 2018**, there were **31,449,989** shares of Edge common stock outstanding[350](index=350&type=chunk) Beneficial Ownership (as of December 31, 2018) | Name of Beneficial Owner | Shares | % | | :--------------------------------------------- | :---------- | :--- | | **Greater than 5% Stockholders:** | | | | Sofinnova Venture Partners IX, L.P. (1) | 2,852,711 | 9.07 | | Entities affiliated with New Leaf Ventures III, L.P. (2) | 2,379,668 | 7.57 | | **Named Executive Officers and Directors:** | | | | Sol Barer, Ph.D. (3) | 1,318,911 | 4.19 | | Isaac Blech (4) | 798,950 | 2.54 | | Brian Leuthner (5) | 1,622,719 | 5.16 | | Rosemary Crane (6) | 9,900 | 0.03 | | James Loughlin (7) | 115,564 | 0.37 | | R. Loch Macdonald, M.D., Ph.D. (8) | 1,165,194 | 3.70 | | Liam Ratcliffe, M.D., Ph.D. (2) | 2,379,668 | 7.57 | | Robert Spiegel, M.D., FACP (9) | 129,329 | 0.41 | | W. Bradford Middlekauff (10) | 145,406 | 0.46 | | Andrew Saik (11) | 79,172 | 0.25 | | All current executive officers and directors as a group (10 persons) | 7,764,816 | 24.69| - Executive officers, directors, and **5%** beneficial owners, along with their affiliates, collectively owned approximately **41%** of Edge's outstanding voting stock as of **December 31, 2018**, allowing them significant control over stockholder-approved matters[143](index=143&type=chunk)[352](index=352&type=chunk) [ITEM 13. Certain Relationships and Related Transactions and Director Independence](index=69&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Edge has indemnification and employment agreements, implemented 2018 retention arrangements, and its Audit Committee reviews related-party transactions exceeding **$120,000** - Edge has indemnification agreements with its executive officers and directors, providing indemnification against expenses from their service to the fullest extent permitted by Delaware law[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) - Employment agreements with named executive officers detail base salary, bonus opportunities, and severance benefits upon termination, with enhanced benefits in connection with a change in control[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - In 2018, Edge approved retention arrangements for executive officers, including stock options, RSUs, and cash compensation, to be paid upon termination (other than for cause), consummation of a strategic transaction, or the one-year anniversary of the grant date[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Edge's Audit Committee reviews and approves all related-party transactions exceeding **$120,000**, ensuring they are in the company's best interests and managing potential conflicts of interest[368](index=368&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=71&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20and%20Services) Edge paid KPMG LLP **$456.45 thousand** (2018) and **$510.65 thousand** (2017) for audit, audit-related, and tax services, all pre-approved by the Audit Committee Aggregate Fees Billed by KPMG LLP (in thousands) | Fee Category | 2018 | 2017 | | :---------------- | :----- | :----- | | Audit fees | $398 | $398 | | Audit-related fees | $58.45 | $15 | | Tax fees | $0 | $97.65 | | All Other Fees | $0 | $0 | | **Total** | **$456.45** | **$510.65** | - All KPMG LLP services and fees for 2018 and 2017 were pre-approved by the Audit Committee[374](index=374&type=chunk)[375](index=375&type=chunk) PART IV [ITEM 15. Exhibits, Financial Statement Schedules](index=73&type=section&id=Item%2015%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements filed as part of the report, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Changes in Stockholders' Equity (Deficit), Statements of Cash Flows, and Notes to Consolidated Financial Statements - The report includes audited financial statements: Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Changes in Stockholders' Equity (Deficit), and Statements of Cash Flows[378](index=378&type=chunk) - All financial statement schedules are omitted as not applicable or redundant[378](index=378&type=chunk) - An Exhibit Index details various documents filed, such as merger agreements, organizational documents, warrants, and employment agreements[379](index=379&type=chunk)[382](index=382&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk) [ITEM 16. Form 10-K Summary](index=73&type=section&id=Item%2016%20Form%2010-K%20Summary) No Form 10-K Summary is provided - None[380](index=380&type=chunk) [Signatures](index=78&type=section&id=Signatures) The Form 10-K is signed by Edge Therapeutics' CEO, CFO, and Board members, dated **February 21, 2019** - The Form 10-K is signed by Brian A. Leuthner (President and CEO), Andrew Saik (CFO), and all Board members, dated **February 21, 2019**[388](index=388&type=chunk)[389](index=389&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=79&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on Edge Therapeutics' **2018** and **2017** financial statements, confirming **U.S. GAAP** fair presentation, exempt from internal control audit - KPMG LLP issued an unqualified opinion on Edge Therapeutics' financial statements for **2018** and **2017**, confirming fair presentation in accordance with **U.S. GAAP**[390](index=390&type=chunk) - The audit was conducted under **PCAOB** standards, but an audit of internal control over financial reporting was not performed, consistent with the company's status as an emerging growth company[392](index=392&type=chunk) [Balance Sheets](index=80&type=section&id=Balance%20Sheets) Edge's balance sheet as of **December 31, 2018**, shows decreased total assets and equity, with cash and cash equivalents declining from **$88.1 million** to **$34.6 million** Balance Sheet Summary (in thousands) | Metric | December 31, 2018 | December 31, 2017 | | :--------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $34,645 | $88,068 | | Total current assets | $35,651 | $89,054 | | Property and equipment, net | $427 | $3,424 | | Total assets | $36,221 | $92,621 | | Accounts payable | $399 | $4,369 | | Accrued expenses | $419 | $5,422 | | Restructuring reserve | $5,563 | $0 | | Short term debt | $0 | $3,075 | | Total current liabilities | $6,382 | $12,867 | | Long term debt | $0 | $17,383 | | Total stockholders' equity | $29,839 | $62,371 | | Accumulated deficit | $(192,816) | $(151,948) | - Cash and cash equivalents decreased by **$53.4 million (60.6%)** from **$88.1 million** in 2017 to **$34.6 million** in 2018[396](index=396&type=chunk) - Total assets decreased by **$56.4 million (60.9%)** from **$92.6 million** in 2017 to **$36.2 million** in 2018[396](index=396&type=chunk) - Total liabilities decreased significantly from **$30.2 million** in 2017 to **$6.4 million** in 2018, primarily due to the repayment of long-term debt[396](index=396&type=chunk) - Accumulated deficit increased by **$40.9 million (26.9%)** from **$151.9 million** in 2017 to **$192.8 million** in 2018[396](index=396&type=chunk) [Statements of Operations and Comprehensive Loss](index=81&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) Edge reported a net loss of **$40.9 million** (2018), an improvement from **$50.9 million** (2017), driven by reduced R&D and G&A expenses Statements of Operations and Comprehensive Loss (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :---------- | :--------- | | Research and development expenses | $16,069 | $34,312 | $(18,243) | (53)% | | General and administrative expenses | $14,291 | $17,655 | $(3,364) | (19)% | | Restructuring expenses | $9,914 | $0 | $9,914 | 100% | | Impairment charges | $2,823 | $0 | $2,823 | 100% | | Total operating expenses | $43,097 | $51,967 | $(8,870) | (17)% | | Loss from operations | $(43,097) | $(51,967) | $8,870 | (17)% | | Interest income | $872 | $701 | $171 | 24% | | Interest expense | $(1,425) | $(2,180) | $755 | (35)% | | Loss before income taxes | $(43,650) | $(53,446) | $9,796 | (18)% | | Benefit for income taxes | $2,782 | $2,586 | $196 | 8% | | Net loss and comprehensive loss | $(40,868) | $(50,860) | $9,992 | (20)% | | Loss per share (basic and diluted) | $(1.31) | $(1.67) | $0.36 | (21.6)% | | Weighted average common shares outstanding | 31,242,176 | 30,393,952 | 848,224 | 2.8% | - Net loss decreased by **$9.99 million (20%)** from **$50.86 million** in 2017 to **$40.87 million** in 2018[399](index=399&type=chunk) - Total operating expenses decreased by **$8.87 million (17%)** due to significant reductions in R&D and G&A expenses, despite new restructuring and impairment charges[399](index=399&type=chunk) [Statements of Changes in Stockholders' Equity (Deficit)](index=82&type=section&id=Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) Edge's total stockholders' equity decreased from **$62.4 million** (2017) to **$29.8 million** (2018), primarily due to a **$40.9 million** net loss Statements of Changes in Stockholders' Equity (Deficit) (in thousands) | Metric | December 31, 2018 | December 31, 2017 | | :--------------------------------------- | :---------------- | :---------------- | | Common Stock (Shares) | 31,449,989 | 30,869,205 | | Common Stock (Amount) | $10,591 | $10,400 | | Additional Paid-in Capital | $222,644,982 | $214,309,370 | | Accumulated Deficit | $(192,816,365) | $(151,948,359) | | Total Stockholders' Equity | $29,839,208 | $62,371,411 | | Stock based compensation expense | $7,469,441 | $6,182,841 | | Issuance of common stock from exercise of stock options | $721,195 | $118,188 | | Issuance of common stock from 401K match | $145,167 | $217,536 | | Net loss | $(40,868,006) | $(50,859,803) | - Total stockholders' equity decreased by **$32.5 million (52.2%)** from **$62.4 million** in 2017 to **$29.8 million** in 2018[402](index=402&type=chunk) - Additional paid-in capital increased by **$8.3 million** in 2018, primarily due to stock-based compensation expense and common stock issuances[402](index=402&type=chunk) [Statements of Cash Flows](index=83&type=section&id=Statements%20of%20Cash%20Flows) Edge experienced a net cash decrease of **$53.4 million** in 2018, primarily from **$33.2 million** in operating and **$20.3 million** in financing activities Statements of Cash Flows (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(33,153) | $(40,697) | | Net cash used in investing activities | $0 | $(188) | | Net cash (used in) provided by financing activities | $(20,269) | $22,554 | | Net decrease in cash | $(53,422) | $(18,331) | | Cash and cash equivalents at beginning of period | $88,068 | $106,399 | | Cash and cash equivalents at end of period | $34,646 | $88,068 | - Net cash used in operating activities decreased by **$7.5 million (18.4%)** from **$40.7 million** in 2017 to **$33.2 million** in 2018[405](index=405&type=chunk) - Net cash used in financing activities was **$20.3 million** in 2018, a significant change from **$22.6 million** provided in 2017, primarily due to debt repayment[405](index=405&type=chunk) - The company paid **$1.05 million** in interest in 2018, down from **$1.64 million** in 2017[405](index=405&type=chunk) [Notes to Consolidated Financial Statements](index=84&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail Edge's discontinuation of EG-1962, pending PDS merger, ongoing net losses, and financial position, including restructuring, tax, and legal matters - Edge Therapeutics discontinued the NEWTON 2 study for **EG-1962** and is exploring strategic alternatives, including a merger with **PDS Biotechnology**, which will become the company's primary business if completed[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk) - The company recorded a restructuring charge of **$6.3 million** in Q2 2018, including severance benefits and financial advisor fees, with a restructuring reserve of **$5.56 million** as of **December 31, 2018**[411](index=411&type=chunk)[412](index=412&type=chunk) - The company has ceased all further R&D activities for **EG-1962** and suspended research for other product candidates, implementing cost reductions and workforce restructuring[418](index=418&type=chunk)[423](index=423&type=chunk) - Patent costs are expensed as incurred and classified as general and administrative expenses; patent prosecution activities have been substantially scaled back[425](index=425&type=chunk) - Stock-based compensation expense was **$7.47 million** in 2018, up from **$6.18 million** in 2017, with a weighted average volatility of **86.33%** and risk-free interest rate of **2.23%** for options granted in 2018[448](index=448&type=chunk) Potentially Dilutive Securities Excluded from EPS Calculation (as of December 31) | Security Type | 2018 | 2017 | | :-------------------------------- | :-------- | :-------- | | Stock options to purchase Common Stock | 7,043,825 | 6,462,795 | | Unvested Restricted Stock Units | 509,962 | - | | Warrants to purchase Common Stock | 78,596 | 374,653 | | **Total** | **7,632,383** | **6,837,448** | - The company recorded a full equipment impairment charge of **$2.82 million** in 2018 for manufacturing equipment associated with **EG-1962**, deemed unlikely for future use[441](index=441&type=chunk) Accrued Expenses (in thousands) | Category | December 31, 2018 | December 31, 2017 | | :------------------------------ | :---------------- | :---------------- | | Accrued research and development costs | $76.6 | $2,857.0 | | Accrued professional fees | $69.1 | $267.6 | | Accrued compensation | $27.4 | $1,886.6 | | Accrued other | $213.1 | $385.9 | | Deferred rent | $33.0 | $25.0 | | **Total** | **$419.1** | **$5,422.2** | - As of **December 31, 2018**, **78,596** warrants were exercisable, down from **374,653** in 2017[443](index=443&type=chunk) - Federal NOL carryforwards were **$101.5 million** (expiring 2029-2037, with **$27.1 million** from 2018 having an indefinite carryforward period). Federal R&D credits were **$2.4 million** and orphan drug credit **$24.4 million**[456](index=456&type=chunk) - The company sold **$31.7 million** of New Jersey NOLs and **$131,214** of R&D credits for **$2.82 million** in 2018, and **$26.1 million** of NJ NOLs and **$424,466** of R&D credits for **$2.59 million** in 2017[457](index=457&type=chunk) - The **Tax Cuts and Jobs Act** reduced deferred tax assets by **$13.6 million**, offset by changes to the valuation allowance; no additional effect was determined in 2018[459](index=459&type=chunk) - Operating lease obligations total **$1.74 million**, with **$0.6 million** due in less than one year[482](index=482&type=chunk) - The company repaid its **$20.0 million** Hercules loan in **June 2018**, including **$0.9 million** in back-end fees and **$0.1 million** in accrued interest, resulting in no outstanding debt as of **December 31, 2018**[484](index=484&type=chunk)[485](index=485&type=chunk)