PDS Biotechnology(US:PDSB)2020-05-13 10:31markdown [Part I — Financial Information](index=3&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2020 report a net loss of **$4.0 million** and increased cash to **$21.0 million** from a public offering [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,037,806 | $12,161,739 | | Total current assets | $23,917,184 | $14,470,201 | | **Total assets** | **$23,934,333** | **$14,491,252** | | **Liabilities & Equity** | | | | Total current liabilities | $4,046,781 | $2,793,545 | | **Total liabilities** | **$4,046,781** | **$2,793,545** | | **Total stockholders' equity** | **$19,887,552** | **$11,697,707** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Research and development expenses | $1,971,679 | $1,030,003 | | General and administrative expenses | $2,060,148 | $3,905,877 | | Loss from operations | $(4,031,827) | $(4,935,880) | | Gain on bargain purchase | – | $11,729,882 | | **Net (loss) income** | **$(3,985,408)** | **$6,816,698** | | Net (loss) income per share, basic | $(0.39) | $1.82 | | Net (loss) income per share, diluted | $(0.39) | $1.47 | - The significant net income in Q1 2019 was primarily due to an **$11.7 million** gain on a bargain purchase related to the reverse merger[12](index=12&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20(Deficit)) - Total stockholders' equity increased from **$11.7 million** at year-end 2019 to **$19.9 million** at March 31, 2020[15](index=15&type=chunk) - The increase in equity was primarily driven by the issuance of **10,000,000 shares** of common stock, which provided net proceeds of **$11.97 million**, offset by a net loss of **$4.0 million** for the quarter[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summary of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,164,394) | $(3,367,362) | | Net cash provided by investing activities | – | $29,106,512 | | Net cash provided by financing activities | $12,040,461 | $750,000 | | **Net increase in cash** | **$8,876,067** | **$26,489,150** | | **Cash at end of period** | **$21,037,806** | **$26,592,845** | - Cash provided by financing activities in Q1 2020 was primarily from **$12.0 million** in net proceeds from the issuance of common stock[18](index=18&type=chunk) - Cash provided by investing activities in Q1 2019 was due to **$29.1 million** in cash received from the reverse merger transaction[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's clinical-stage immunotherapy operations, COVID-19 impact, and liquidity, confirming sufficient cash for at least 12 months - The company is a clinical-stage immunotherapy company focused on its **Versamune® T-cell activating technology platform** for cancer and infectious diseases, including COVID-19[20](index=20&type=chunk) - In February 2020, the company completed a public offering, selling **10,000,000 shares** for gross proceeds of approximately **$13 million** (**$11.9 million** net)[50](index=50&type=chunk) - The company believes its cash of **$21.0 million** as of March 31, 2020, is sufficient to fund operations for at least **12 months** from the report date[52](index=52&type=chunk) - The March 2019 reverse merger with Edge Therapeutics was treated as a reverse acquisition, with Private PDS as the accounting acquirer. An intangible IPR&D asset of **$2.97 million** acquired in the merger was fully impaired in December 2019[23](index=23&type=chunk)[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting the Versamune® platform, collaborations, COVID-19 vaccine, and liquidity, with increased R&D and decreased G&A - The company is developing **PDS0101** for HPV-related cancers and is in collaboration with Merck to combine it with **KEYTRUDA®** in a **Phase II trial**[92](index=92&type=chunk) - A Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) was expanded in April 2020 to include clinical and pre-clinical development of **PDS0103** for MUC1-associated cancers[93](index=93&type=chunk) - The company is advancing a COVID-19 vaccine candidate, **PDS0203**, and has initiated pre-clinical testing[96](index=96&type=chunk) Operating Expense Comparison (in thousands) | Expense Category | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,972 | $1,030 | $942 | 91% | | General and administrative | $2,060 | $3,906 | $(1,846) | (47)% | - The company raised **$11.9 million** in net proceeds from a public offering in February 2020 and had **$21.0 million** in cash and cash equivalents as of March 31, 2020[113](index=113&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its **$21.0 million** cash and cash equivalents, with no material effect expected from a 100 basis point interest rate change - The company's primary market risk exposure is interest rate sensitivity on its **$21.0 million** of cash and cash equivalents[133](index=133&type=chunk) - Investments are held in low-risk instruments, and management believes a **1% (100 basis point)** change in interest rates would not have a material effect on the fair market value of its cash equivalents[133](index=133&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were not effective as of March 31, 2020, due to unremediated material weaknesses, mainly a lack of U.S. GAAP expertise - Management concluded that disclosure controls and procedures (DCPs) were **not effective** as of March 31, 2020[135](index=135&type=chunk) - Material weaknesses were identified in **four components of internal control**: Control Environment, Risk Assessment, Control Activities, and Information & Communication[135](index=135&type=chunk) - The core issue was a **lack of adequate finance and accounting personnel** with the **U.S. GAAP technical expertise** to handle complex transactions, such as the reverse merger[136](index=136&type=chunk)[138](index=138&type=chunk) - Remediation efforts are underway but were **not complete** as of the quarter-end, and the material weaknesses remained **unremediated**[140](index=140&type=chunk)[141](index=141&type=chunk) [Part II — Other Information](index=28&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company and its subsidiaries are not currently party to any material pending legal proceedings - The company is **not currently a party** to any **material pending legal proceedings**[145](index=145&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, including a history of losses, need for capital, growth challenges, material internal control weaknesses, and COVID-19 pandemic impacts - The company has a history of **significant losses**, with an accumulated deficit of **$32.9 million** as of March 31, 2020, and may **never achieve profitability**[148](index=148&type=chunk)[149](index=149&type=chunk) - The business will require **additional capital** to fund operations, and failure to obtain it could force **delays or discontinuation** of development programs[150](index=150&type=chunk) - The COVID-19 pandemic has **adversely affected** business operations and clinical trial timelines, including the **postponement of the Phase 2 VERSATILE-002 trial**, and is expected to continue to do so[163](index=163&type=chunk)[164](index=164&type=chunk) - **Material weaknesses** in internal control over financial reporting have been identified and are **under remediation**; failure to remediate could lead to **misstatements and loss of investor confidence**[154](index=154&type=chunk)[156](index=156&type=chunk) - Executive officers and directors beneficially own approximately **17.8%** of the company's common stock, representing a **significant concentration of ownership**[161](index=161&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of its equity securities during the three months ended March 31, 2020 - There were **no unregistered sales** of the Company's equity securities during the three months ended March 31, 2020[169](index=169&type=chunk) [Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[170](index=170&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[171](index=171&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company reports no other information to disclose for this period - None[172](index=172&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including a sublease agreement and principal officer certifications - A list of exhibits filed with the report is provided, including **certifications by principal officers** and **XBRL data files**[173](index=173&type=chunk)[176](index=176&type=chunk)