PDS Biotechnology(PDSB) - 2021 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements for PDS Biotechnology Corporation, including the balance sheets, statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's operations, accounting policies, liquidity, and other financial disclosures for the quarter ended March 31, 2021 Condensed Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of the specified dates Condensed Consolidated Balance Sheet Highlights (in USD) | Metric | March 31, 2021 | December 31, 2020 | Change (Absolute) | | :-------------------------------- | :------------- | :---------------- | :---------------- | | Cash and cash equivalents | $25,037,374 | $28,839,565 | $(3,802,191) | | Total current assets | $27,256,888 | $30,337,230 | $(3,080,342) | | Total assets | $27,761,665 | $30,890,379 | $(3,128,714) | | Total current liabilities | $2,929,047 | $3,270,450 | $(341,403) | | Total Liabilities | $3,387,338 | $3,760,803 | $(373,465) | | Total stockholders' equity | $24,374,327 | $27,129,576 | $(2,755,249) | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including revenues, expenses, and net loss, for the specified periods Condensed Consolidated Statements of Operations and Comprehensive Loss (Three Months Ended March 31, in USD) | Metric | 2021 | 2020 | Change (Absolute) | Change (%) | | :------------------------------------ | :----------- | :----------- | :---------------- | :--------- | | Research and development expenses | $1,413,057 | $1,971,679 | $(558,622) | -28.3% | | General and administrative expenses | $1,636,216 | $2,060,148 | $(423,932) | -20.6% | | Total operating expenses | $3,049,273 | $4,031,827 | $(982,554) | -24.4% | | Loss from operations | $(3,049,273) | $(4,031,827) | $982,554 | -24.4% | | Interest income | $655 | $46,419 | $(45,764) | -98.6% | | Net loss and comprehensive loss | $(3,048,618) | $(3,985,408) | $936,790 | -23.5% | | Net loss per share, basic | $(0.14) | $(0.39) | $0.25 | -64.1% | | Weighted average common shares outstanding, basic | 22,263,838 | 10,314,761 | 11,949,077 | 115.8% | Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity accounts, such as stock-based compensation and net loss, over the reporting period Changes in Stockholders' Equity (Three Months Ended March 31, in USD) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Balance - December 31, 2020 | N/A | $27,129,576 | | Stock-based compensation expense | $257,622 | N/A | | Issuance of common stock from 401K match | $35,747 | N/A | | Net loss | $(3,048,618) | N/A | | Balance - March 31, 2021 | $24,374,327 | N/A | Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities for the specified periods Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, in USD) | Metric | 2021 | 2020 | | :------------------------------------ | :----------- | :----------- | | Net loss | $(3,048,618) | $(3,985,408) | | Stock-based compensation expense | $257,622 | $124,992 | | Net cash used in operating activities | $(3,802,191) | $(3,164,394) | | Net cash provided by financing activities | $0 | $12,040,461 | | Net increase (decrease) in cash and cash equivalents | $(3,802,191) | $8,876,067 | | Cash and cash equivalents at end of period | $25,037,374 | $21,037,806 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1 – Nature of Operations PDS Biotechnology Corporation is a clinical-stage immunotherapy company developing cancer immunotherapies and infectious disease vaccines using its proprietary Versamune® platform. The COVID-19 pandemic has caused clinical trial delays but also led to an expanded infectious disease pipeline, including a COVID-19 vaccine candidate (PDS0203) with a significant funding commitment from Brazil * PDS Biotechnology is a clinical-stage immunotherapy company focused on developing cancer immunotherapies and infectious disease vaccines, leveraging its proprietary Versamune® T-cell activating platform[20] * The COVID-19 pandemic caused delays in two of the three PDS0101 clinical trials for cancer indications, impacting clinical trial operations and patient enrollment[24] * The company has expanded its infectious disease pipeline to include PDS0203, a Versamune®-based COVID-19 vaccine, with a consortium in Brazil receiving a commitment of up to US$60 million for its clinical development and commercialization[27] Note 2 – Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including the preparation of unaudited interim financial statements under U.S. GAAP, the use of estimates, and the expensing of research and development costs and stock-based compensation. It also highlights key operational risks and uncertainties * Unaudited interim financial statements are prepared in accordance with U.S. GAAP and SEC requirements for interim reporting, with certain footnotes condensed or omitted[28] * The company's operations are subject to significant risks and uncertainties, including clinical and regulatory development, cash resource preservation, intellectual property, competition, and the impact of health epidemics like COVID-19[30] * Research and development costs are expensed as incurred, and stock-based compensation is recognized as an expense based on grant date fair values using the Black-Scholes option-pricing model[33][36] Note 3 – Liquidity As of March 31, 2021, the company held $25.0 million in cash and cash equivalents. It has historically funded operations through equity offerings, raising approximately $11.9 million and $17.1 million net in 2020, and has $81.0 million available under a shelf registration. Management believes current funds are sufficient for at least 12 months, but plans to seek additional financing through equity/debt or partnerships * Cash and cash equivalents as of March 31, 2021, totaled $25.0 million[40] * The company completed an underwritten public offering in February 2020, receiving net proceeds of approximately $11.9 million[42] * In August 2020, the company sold common stock under a shelf registration, receiving net proceeds of approximately $17.1 million, with approximately $81.0 million of Shelf Securities remaining available[43] * Management believes current cash resources are sufficient to continue operations and research and development programs for at least 12 months from the report date[45] * Future funding plans include equity and/or debt financings, government funding programs, and potential partnerships, with the understanding that additional financing may not be available on favorable terms[46] Note 4 – Fair Value of Financial Instruments This note confirms that there were no transfers among fair value hierarchy levels during 2021 or 2020, and all cash and cash equivalents are classified as Level 1 assets, indicating readily observable market prices * No transfers among Levels 1, 2, or 3 of the fair value hierarchy occurred during 2021 or 2020[47] Fair Value Measurements of Cash and Cash Equivalents (in USD) | Date | Total | Level 1 (Quoted Prices in Active Markets) | | :---------------- | :----------- | :---------------------------------------- | | March 31, 2021 | $25,037,374 | $25,037,374 | | December 31, 2020 | $28,839,565 | $28,839,565 | Note 5 – Leases The company entered into a sublease for office space in Florham Park, NJ, effective May 1, 2020, with a 40-month term, recognizing approximately $0.7 million in ROU assets and operating lease liabilities. It also maintains a month-to-month lease for research facilities. The note provides a maturity schedule for operating lease liabilities * The company entered into a sublease for approximately 11,200 square feet of office space in Florham Park, NJ, commencing May 1, 2020, for a term of forty months[50] * Upon inception of the lease, approximately $0.7 million of a Right-of-Use (ROU) asset and operating lease liabilities were recognized[50] Maturity of Operating Lease Liability (Year Ended December 31, in USD) | Year | Amount | | :---------------------- | :------- | | 2021 (remaining 9 months) | $128,779 | | 2022 | $295,346 | | 2023 | $239,469 | | Total future minimum lease payments | $663,594 | | Less imputed interest | $(81,649) | | Total operating lease liability | $581,945 | Note 6 – Accrued Expenses Accrued expenses and other liabilities increased from $1,735,322 at December 31, 2020, to $1,854,795 at March 31, 2021, primarily driven by an increase in accrued compensation Accrued Expenses and Other Liabilities (in USD) | Category | March 31, 2021 | 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 recognized $257,622 in stock-based compensation expense for the three months ended March 31, 2021, an increase from $124,992 in the prior year. It details its equity compensation plans, including the 2018 Stock Incentive Plan and the 2019 Inducement Plan, and provides a summary of stock options outstanding and their valuation using the Black-Scholes model Stock-Based Compensation Expense (Three Months Ended March 31, in USD) | Category | 2021 | 2020 | | :-------------------------- | :------- | :------- | | Research and development | $60,385 | $52,684 | | General and administrative | $72,308 | $197,236 | | Total | $124,992 | $257,622 | * As of March 31, 2021, there were 1,899,197 stock options outstanding with a weighted average exercise price of $10.40 and an aggregate intrinsic value of $1,654,588[60] * Approximately $1,483,195 of unamortized stock option compensation expense is expected to be recognized over a remaining average vesting period of 3 years[60] Note 8 – Income Taxes The company expects an operating loss for 2021 and has a full valuation allowance against its net deferred tax assets, resulting in no income tax benefit. It has no uncertain tax positions and its U.S. federal and state net operating losses are subject to examination from inception * A full valuation allowance was recorded against net deferred tax assets as of March 31, 2021, and December 31, 2020, due to realization uncertainties[61] * No income tax benefit was recorded for the three months ended March 31, 2021, and no uncertain income tax positions were identified[61][63] Note 9 – Commitments and Contingencies This note details rent expenses for month-to-month arrangements not affected by ASC 842, showing a decrease in rent expense for the three months ended March 31, 2021, compared to the prior year Rent Expense for Month-to-Month Arrangements (Three Months Ended March 31, in USD) | Year | Amount | | :--- | :------- | | 2021 | $36,017 | | 2020 | $58,641 | Note 10 – Retirement Plan The company's 401(k) defined contribution plan received employer contributions of $35,747 for the three months ended March 31, 2021, an increase from $9,800 in the prior year 401(k) Employer Contributions (Three Months Ended March 31, in USD) | Year | Amount | | :--- | :------- | | 2021 | $35,747 | | 2020 | $9,800 | Note 11 – Subsequent Events Subsequent events have been evaluated through the date the financial statements were issued, with no material events requiring disclosure * Subsequent events were evaluated through the date the financial statements were issued[66] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, compared to 2020. It covers the business overview, financial performance, liquidity, and the impact of COVID-19, emphasizing the company's focus on clinical-stage immunotherapy development and its funding strategies Company Overview PDS Biotechnology is a clinical-stage immunotherapy company developing cancer immunotherapies and infectious disease vaccine candidates using its proprietary Versamune® T-cell activating platform * PDS Biotechnology is a clinical-stage immunotherapy company developing cancer immunotherapies and infectious disease vaccine candidates using its proprietary Versamune® T-cell activating platform[72] * PDS0101 is in Phase 2 clinical trials for recurrent/metastatic head and neck cancer (in combination with KEYTRUDA®), advanced HPV-associated malignancies (with M7824 and NHS-IL12), and locally advanced cervical cancer (with chemo-radiotherapy)[75][77][80] * The company is developing PDS0203, a Versamune®-based COVID-19 vaccine, with a consortium in Brazil that has secured a commitment of up to US$60 million for clinical development and commercialization[85][86] * Other Versamune®-based therapies in the pipeline include PDS0102 (TARP antigens), PDS0103 (MUC-1 antigens), PDS0104 (TRP-2 and melanoma antigens), PDS0202 (universal influenza vaccine), and PDS0201 (tuberculosis immunotherapy)[81][82][83][84][89] Key Components of Our Statement of Operations This section outlines the key components of the company's statement of operations, including revenue generation, research and development expenses, and the inherent uncertainties in pharmaceutical product development * The company has not generated any revenues from commercial product sales and expects future revenue from research and development payments, license fees, and milestone payments[93] * Research and development expenses are expensed as incurred and are expected to increase significantly as the company advances its Versamune®-based immuno-oncology candidates through clinical trials and prepares for potential commercial launch[94][95] * Due to the numerous risks and uncertainties in pharmaceutical product development, the company is unable to estimate the exact duration and completion costs of its R&D projects or when it will generate revenue from product commercialization[96] Results of Operations This section presents a comparative analysis of the company's financial performance for the three months ended March 31, 2021, versus 2020, highlighting changes in operating expenses and net loss Results of Operations (Three Months Ended March 31, in thousands USD) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | 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% | * The decrease in research and development expenses by $0.6 million was primarily due to a $0.3 million decrease in professional services and a $0.3 million decrease in clinical studies[98] * General and administrative expenses decreased by $0.5 million, mainly due to a $0.7 million decrease in professional services (including legal fees), partially offset by a $0.2 million increase in personnel costs[99] Liquidity and Capital Resources This section details the company's cash position, historical fundraising activities, and future funding strategies, emphasizing management's belief in sufficient current resources for at least 12 months * As of March 31, 2021, the company had $25.0 million in cash and cash equivalents[104] * In February 2020, the company completed a public offering, raising approximately $11.9 million in net proceeds[102] * In August 2020, the company sold common stock under a shelf registration, raising approximately $17.1 million in net proceeds, with approximately $81.0 million of Shelf Securities remaining available for future sale[103] * Management believes that existing cash resources are sufficient to continue operations and research and development programs for at least 12 months from the date of the report[105] * The company plans to fund future operations through equity and/or debt financings, government funding programs, and potential partnerships, acknowledging the risk of dilution or restrictive covenants[106] Cash Flows This section summarizes the company's cash flow activities for the three months ended March 31, comparing 2021 to 2020, and highlighting changes in operating and financing cash flows Summary of Cash Flows (Three Months Ended March 31, in thousands USD) | Category | 2021 | 2020 | | :------------------------------------ | :----- | :----- | | Net cash used in operating activities | $(3,802) | $(3,164) | | Net cash provided by financing activities | $0 | $12,040 | | Net increase (decrease) in cash and cash equivalents | $(3,802) | $8,876 | * The increase in net cash used in operating activities by $0.6 million in Q1 2021 was primarily due to an increase in prepaid expenses related to the Syneos CRO contract[108] * Net cash provided by financing activities in Q1 2020 was $12.0 million, primarily from the issuance of common stock, with no such activities in Q1 2021[109] Operating Capital Requirements This section discusses the company's ongoing need for substantial additional funding to support its operations and product development, acknowledging the uncertainties in securing such financing * The company has not generated product revenue and anticipates continued and increasing losses as it develops and seeks regulatory approvals for its product candidates[110] * Substantial additional funding will be required for continuing operations, and the ability to secure such funding on acceptable terms is uncertain[110][106] * Future funding requirements depend on factors such as the timing and costs of clinical trials, regulatory approvals, intellectual property costs, and commercialization efforts[112] Contractual Obligations and Commitments This section outlines the company's contractual obligations, primarily operating lease liabilities, and confirms the absence of material non-cancelable purchase commitments Contractual Obligations as of March 31, 2021 (in USD) | Obligation | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :------------------------ | :-------- | :--------------- | :-------- | :-------- | :---------------- | | Operating lease obligations | $581,945 | $123,654 | $458,291 | $0 | $0 | | Total contractual obligations | $581,945 | $123,654 | $458,291 | $0 | $0 | * The company has no material non-cancelable purchase commitments with service providers[115] Critical Accounting Policies and Estimates This section affirms that the financial statements are prepared under U.S. GAAP, requiring management estimates, and notes no material changes to critical accounting policies since the prior annual report * The financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that affect reported amounts[116] * There have been no material changes to the company's critical accounting policies and estimates during the three months ended March 31, 2021, from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020[117] Impact of the CARES Act This section states that the company evaluated the CARES Act and does not anticipate any material financial impact or significant changes to its internal controls * The company evaluated the CARES Act and does not expect any material cash benefit or significant impact on its financial statements or internal controls over financial reporting[118] Operations and Liquidity (COVID-19 Impact) This section addresses the significant disruptions and uncertainties caused by the COVID-19 pandemic, including clinical trial delays, while highlighting the company's resilient cash position and expanded infectious disease pipeline * The COVID-19 pandemic has caused significant disruption and uncertainty, potentially affecting the company's liquidity and operations, including delays in clinical trial enrollment[119][121] * Despite the uncertainty, the company believes its current cash reserves position it well to manage through the crisis[122] * The company has expanded its infectious disease pipeline to include a COVID-19 vaccine candidate (PDS0203) due to renewed interest in related technologies[123] Off-Balance Sheet Arrangements This section confirms that the company had no off-balance sheet arrangements during the reported periods and currently has none * The company did not have any off-balance sheet arrangements during the periods presented and does not currently have any[124] Smaller Reporting Company This section clarifies the company's reporting status, noting it is no longer an "emerging growth company" but remains a "smaller reporting company" and will utilize available disclosure exemptions * As of January 1, 2021, the company is no longer an "emerging growth company" but remains a "smaller reporting company" and intends to rely on available disclosure exemptions[125] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company's primary market risk exposure is interest rate sensitivity. However, due to the short-term maturities and low-risk profile of its cash equivalents, a significant change in interest rates is not expected to materially affect their fair market value * The company's primary exposure to market risk is interest rate sensitivity[126] * As of March 31, 2021, cash equivalents of $25.0 million were held in a non-interest-bearing money operating account and an institutional U.S. Treasury money market fund[126] * Due to the short-term maturities and low-risk profile of investments, an immediate 100 basis point change in interest rates is not expected to have a material effect on the fair market value of cash equivalents[126] ITEM 4. CONTROLS AND PROCEDURES Management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2021, concluding they were effective. No material changes in internal control over financial reporting were identified during the quarter * Disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective as of March 31, 2021[127] * No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting occurred during the quarter ended March 31, 2021[128] PART II — OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity sales, and other miscellaneous information ITEM 1. LEGAL PROCEEDINGS The company is not currently involved in any legal proceedings that, in management's opinion, would have a material adverse effect on its results of operations or financial position * The company is not currently a party to any legal proceedings that would have a material adverse effect on its results of operations or financial position[130] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously reported in the Annual Report on Form 10-K for December 31, 2020. The company reiterates that an investment involves a high degree of risk, and investors should carefully consider all information * There have been no material changes from the risk factors previously reported in the Annual Report on Form 10-K for the year ended December 31, 2020[131] * Any investment in the company's business involves a high degree of risk, and investors should carefully consider all information[131] 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 * No unregistered sales of the company's equity securities occurred during the three months ended March 31, 2021[132] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the period * The company reported no defaults upon senior securities[133] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company's operations * This item is not applicable to the company[134] ITEM 5. OTHER INFORMATION The company reported no other information for this period * No other information was reported[135] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and other required filings * The section lists exhibits filed with the Form 10-Q, including certifications of the Principal Executive Officer and Principal Financial Officer, and XBRL documents[138] EXHIBIT INDEX This section provides a comprehensive list of all documents filed as exhibits to the current report * The Exhibit Index provides a detailed list of all documents filed as exhibits to the Form 10-Q, including various certifications and XBRL-related files[138] SIGNATURES This section formally attests to the accuracy and completeness of the report by authorized corporate officers * The report was signed on May 13, 2021, by Frank Bedu-Addo, President and Chief Executive Officer, and Seth Van Voorhees, Chief Financial Officer, as duly authorized representatives of PDS Biotechnology Corporation[142]