UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

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

For the transition period from ____________ to _____________

Commission file number 001-37568

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

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

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

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

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

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

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

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

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

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

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller Reporting Company ☒

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

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

The number of shares of the registrant’s Common Stock, par value $0.00033 per share, outstanding as of August 1, 2022 was 28,458,688.

PDS BIOTECHNOLOGY CORPORATION

FORM 10-Q FOR THE QUARTER ENDED June 30, 2022

INDEX

     
Page
Part I — Financial Information
  
       
 
Item 1.
Financial Statements (Unaudited):
  
       
   
3
       
   
4
       
   
5
       
   
6
       
   
7
       
 
Item 2.
 15
       
 
Item 3.
27
       
 
Item 4.
27
       
28
       
 
Item 1.
 28
       
 
Item 1A.
 28
       
 
Item 2.
28
       
 
Item 3.
28
       
 
Item 4.
28
       
 
Item 5.
28
       
 
Item 6.
28
       
29
30

2
PART 1.   
 FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

Condensed Consolidated Balance Sheets


  
June 30, 2022
    
December 31, 2021
  
ASSETS
  
(unaudited)
        
Current assets:
            
Cash and cash equivalents
  
$
52,984,672
    
$
65,242,622
  
Prepaid expenses and other
    
2,757,910
      
1,597,569
  
Total current assets
    
55,742,582
      
66,840,191
  
                 
Property and equipment, net
    
–
      
86
  
Operating lease right-to-use asset
    
258,188
      
357,611
  
                 
Total assets
  
$
56,000,770
    
$
67,197,888
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
  
$
1,877,991
    
$
1,309,403
  
Accrued expenses
    
2,302,921
      
2,187,704
  
Operating lease obligation-short term
    
335,012
      
258,924
  
Total current liabilities
    
4,515,924
      
3,756,031
  
                 
Noncurrent liability:
                
 Operating lease obligation-long term
    
59,650
      
231,430
  
Total Liabilities:
  
$
4,575,574
    
$
3,987,461
  
                 
STOCKHOLDERS’ EQUITY
                
Common stock, $0.00033 par value, 75,000,000 shares authorized at June 30, 2022 and December 31, 2021, 28,458,688 shares and 28,448,612 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
    
9,391
      
9,387
  
Additional paid-in capital
    
126,412,089
      
123,904,602
  
Accumulated deficit
    
(74,996,284
)
    
(60,703,562
)
Total stockholders’ equity
    
51,425,196
      
63,210,427
  
                 
Total liabilities and stockholders’ equity
  
$
56,000,770
    
$
67,197,888
  

See accompanying notes to the condensed consolidated financial statements.

3
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2022
    
2021
    
2022
    
2021
  
Operating expenses:
                        
Research and development expenses
  
$
3,761,646
    
$
2,764,195
    
$
8,922,961
    
$
4,177,252
  
General and administrative expenses
    
3,331,006
      
2,341,828
      
6,648,913
      
3,978,044
  
Total operating expenses
    
7,092,652
      
5,106,023
      
15,571,874
      
8,155,296
  
                                 
Loss from operations
    
(7,092,652
)
    
(5,106,023
)
    
(15,571,874
)
    
(8,155,296
)
                                 
Interest income
    
74,547
      
604
      
80,247
      
1,259
  
                                 
Loss before income taxes     (7,018,105 )    
(5,105,419
)
    
(15,491,627
)
    
(8,154,037
)
Benefit for income taxes     1,198,905       4,516,488       1,198,905       4,516,488  
Net loss and comprehensive loss
    
(5,819,200
)
    
(588,931
)
    
(14,292,722
)
    
(3,637,549
)
                                 
Per share information:
                                
Net loss per share, basic and diluted
  
$
(0.20
)
  
$
(0.03
)
  
$
(0.50
)
  
$
(0.16
)
                                 
Weighted average common shares outstanding, basic, and diluted
    
28,451,579
      
23,160,371
      
28,450,104
      
22,714,581
  

See accompanying notes to the condensed consolidated financial statements.

4
Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

   
Common Stock
     Additional     Accumulated        
   
Shares Issued
    
Amount
    
Paid-in Capital
    
Deficit
    
Total Equity
  
January 1, 2021
    
22,261,619
    
$
7,346
    
$
70,907,315
    
$
(43,785,085
)
  
$
27,129,576
  
Stock-based compensation expense
    
–
      
–
      
257,622
      
–
      
257,622
  
Issuance of common stock from 401K match
    
16,642
      
–
      
35,747
      
–
      
35,747
  
Net loss
    
–
      
–
      
–
      
(3,048,618
)
    
(3,048,618
)
Balance - March 31, 2021
    
22,278,261
      
7,346
      
71,200,684
      
(46,833,703
)
    
24,374,327
  
Stock-based compensation expense
    
–
      
–
      
441,598
      
–
      
441,598
  
Issuance of common stock from 401K match
    
–
      
5
      
(5
)
    
–
      
–
  
Issuance of common stock, from exercise of stock options
    
51,413
      
17
      
220,586
      
–
      
220,603
  
Issuances of common stock, net of issuance costs
    
6,088,235
      
2,009
      
48,542,989
      
–
      
48,544,998
  
Net loss
    
–
      
–
      
–
      
(588,931
)
    
(588,931
)
Balance - June 30, 2021
    
28,417,909
    
$
9,377
    
$
120,405,851
    
$
(47,422,634
)
  
$
72,992,594
  

   
Common Stock
     Additional     Accumulated
       
   
Shares Issued
    
Amount
    
  Paid-in Capital
    
  Deficit
    
Total Equity
  
January 1, 2022
    
28,448,612
    
$
9,387
    
$
123,904,602
    
$
(60,703,562
)
  
$
63,210,427
  
Stock-based compensation expense
    
–
      
–
      
1,128,973
      
–
      
1,128,973
  
Issuances of common stock, net of issuance costs
    
–
      
–
      
–
      
–
      
–
  
Issuances of common stock, from exercise of stock options
    
2,282
      
1
      
7,487
      
–
      
7,488
  
Net loss
    
–
      
–
      
–
      
(8,473,522
)
    
(8,473,522
)
Balance - March 31, 2022
    
28,450,894
      
9,388
      
125,041,062
      
(69,177,084
)
    
55,873,366
  
Stock-based compensation expense
    
–
      
–
      
1,348,601
      
–
      
1,348,601
  
Issuances of common stock, from exercise of stock options
    
7,794
      
3
      
22,426
      
–
      
22,429
  
Net loss
    
–
      
–
      
–
      
(5,819,200
)
    
(5,819,200
)
Balance - June 30, 2022
    
28,458,688
    
$
9,391
    
$
126,412,089
    
$
(74,996,284
)
  
$
51,425,196
  

See accompanying notes to the condensed consolidated financial statements.

5
Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   
Six Months Ended June 30,
  
   
2022
    
2021
  
Cash flows from operating activities:
            
Net loss
  
$
(14,292,722
)
  
$
(3,637,549
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Stock-based compensation expense
    
2,477,574
      
699,219
  
Stock-based 401K company common match
    
–
      
35,747
  
Depreciation expense
    
86
      
3,133
  
Operating lease expense
    
120,514
      
120,514
  
Changes in assets and liabilities:
                
Prepaid expenses and other assets
    
(1,160,341
)
    
(687,524
)
Accounts payable
    
568,588
      
960,139
  
Accrued expenses
    
115,217
      
(265,530
)
Operating lease liabilities
    
(116,783
)
    
(84,115
)
Net cash used in operating activities
    
(12,287,867
)
    
(2,855,966
)
                 
Cash flows from financing activities:
                
Proceeds from exercise of stock options
     29,917       220,603  
Proceeds from issuances of common stock, net of issuance costs
     –       48,544,998  
Net cash provided by financing activities
     29,917      
48,765,601
  
                 
Net (decrease) increase in cash and cash equivalents
    
(12,257,950
)
    
45,909,635
  
Cash and cash equivalents at beginning of period
    
65,242,622
      
28,839,565
  
                 
Cash and cash equivalents at end of period
  
$
52,984,672
    
$
74,749,200
  

See accompanying notes to the condensed consolidated financial statements.

6
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Nature of Operations


PDS Biotechnology Corporation, a Delaware corporation (the “Company” or “PDS”), is a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted cancer and infectious disease immunotherapies based on the Company’s proprietary Versamune® and Infectimune™ T cell activating technology platforms. The Company’s Versamune based products have demonstrated the potential to overcome the limitations of current immunotherapies by inducing, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells. The Company has developed multiple therapies, based on combinations of Versamune and disease-specific antigens, designed to train the immune system to recognize diseased cells and effectively attack and destroy them. The Company continues to advance its pipeline of candidates to address a wide range of cancers including HPV16-associated cancers (anal, cervical, head and neck, penile, vaginal, vulvar) and breast, colon, lung, prostate and ovarian cancers. The Company’s Infectimune -based vaccines have demonstrated the potential to induce, not only robust and durable neutralizing antibody response, but also powerful T cell responses including long-lasting memory T cell responses The Company’s infectious disease candidates are of potential interest for use in COVID-19 and universal influenza vaccines.



From the Company’s inception, it has devoted substantially all of its efforts to drug development, business planning, engaging regulatory, manufacturing and other technical consultants, acquiring operating assets, planning and executing clinical trials and raising capital.


In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The full impact of the COVID-19 pandemic continues to evolve. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and operations.  The FDA issued and since updated guidance to assist sponsors in assuring the safety of trial participants, maintaining compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity.  Clinical trial sites have implemented institution-specific measures securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. COVID-19 related travel and other restrictions may also impact the potential for on-site monitoring visiting and audits and inspections Company personnel, third parties, and regulators. There may be shortages of site personnel and equipment necessary for the timely completion of clinical trials. PDS is providing support to address these challenges, but these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical trials.



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

Note 2 – Summary of Significant Accounting Policies

(A)
Unaudited interim financial statements:


The interim balance sheet at June 30, 2022, the statements of operations and comprehensive loss and changes in stockholders’ equity and cash flows for the three and six months ended June 30, 2022 and 2021 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of its financial information. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021, filed by the Company with the SEC in its Annual Report on Form 10-K on March 31, 2022.

7
(B)
Use of estimates:


The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses at the date of the consolidated financial statements and during the reporting periods, and to disclose contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates. The most significant estimate relates to the fair value of securities underlying stock-based compensation.

(C)
Significant risks and uncertainties:


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


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

(D)
Cash equivalents and concentration of cash balance:


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

(E)
Research and development:


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


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

(F)
Patent costs:


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

(G)
Stock-based compensation:


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

8
(H)
Net loss per common share:


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


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


 
As of June 30,
  
   
2022
    
2021
  
Stock options to purchase Common Stock
    
4,289,943
      
3,209,248
  
Warrants to purchase Common Stock
    
124,604
      
197,518
  
Total
    
4,414,547
      
3,406,766
  

Note 3 – Liquidity


As of June 30, 2022, the Company had $53.0 million of cash and cash equivalents. The Company’s primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change to the Company’s outstanding accounts payable and accrued expenses.


On July 29, 2019, the Company entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital pursuant to which, the Company has the right, in its sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice, directing Aspire Capital (as principal) to purchase up to 100,000 shares of the Company’s common stock per business day, in an aggregate amount of up to $20.0 million of its common stock, or the Purchased Shares, over the term of the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022, and no capital was raised under the Aspire Purchase Agreement.



In July 2020, the Company filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which the Company refers to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020.



In May 2021, the Company received approximately $4.5 million from the net sale of tax benefits through 2019 to an unrelated, profitable New Jersey corporation pursuant the Company’s participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss (NOL) program for State Fiscal Year 2020.



In June 2021, the Company completed an underwritten public offering in which it sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. the Company received gross proceeds of approximately $51.7 million and net proceeds of approximately $48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.

9

In April 2022, the Company received approximately $1.2 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant the Company’s participation in the New Jersey Technology Business Tax Certificate Transfer NOL program for State Fiscal Year 2021.


The Company’s primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change in its outstanding accounts payable and accrued expenses.


The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the filing of this Quarterly Report on Form 10-Q.  The Company’s budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies.  Based on its available cash resources and cash flow projections as of the date the consolidated financial statements were available for issuance, management believes there are sufficient funds to continue operations and research and development programs for at least one year after the date of this Quarterly Report on Form 10-Q.


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

Note 4 – Fair Value of Financial Instruments


There were no transfers among Levels 1, 2, or 3 during 2022 or 2021.

   
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, 2022: (unaudited)
                        
Cash and cash equivalents
  
$
52,984,672
    
$
52,984,672
    
$
–
    
$
–
  
                                 
As of December 31, 2021:
                                
Cash and cash equivalents
  
$
65,242,622
    
$
65,242,622
    
$
–
    
$
–
  

Note 5 – Leases


Effective March 5, 2020, the Company entered into a sublease for approximately 11,200 square feet of office space located at 25B Vreeland Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and will continue for a term of forty (40) months with an option to renew through October 31, 2027. As of June 30, 2022 there are fourteen (14) months remaining in the lease term. Upon inception of the lease, the Company recognized approximately $0.7 million of a ROU asset and operating lease liabilities. The discount rate used to measure the operating lease liability as of May 1, 2020 was 9.15%. Throughout the period described above the Company has maintained, and continues to maintain, a month-to-month lease for its research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton NJ, 08540.

10
Supplemental cash flow information related to operating leases is as follows:

   
As of June 30,
  
   
2022
    
2021
  
             
Cash paid for operating lease liabilities
  
$
116,783
    
$
84,115
  

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

Year ended December 31,
      
2022 (remaining six months)
  
$
178,206
  
2023
    
239,470
  
2024
    
–
  
2025
    
–
  
2026 and after
    
–
  
Total future minimum lease payments
    
417,676
  
Less imputed interest
    
(23,014
)
   
$
394,662
  

Note 6 – Accrued Expenses

Accrued expenses and other liabilities consist of the following:

   
As of
June 30, 2022
    
As of
December 31, 2021
  
Accrued research and development
  
$
278,228
    
$
227,400
  
Accrued professional fees
    
765,657
      
485,400
  
Accrued compensation
    
1,259,036
      
1,458,310
  
Accrued rent     –       16,594  
Total
  
$
2,302,921
    
$
2,187,704
  

Note 7 – Stock-Based Compensation


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


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



As previously disclosed, on December 8, 2020, the Board of Directors of the Company adopted, subject to stockholder approval, the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Inventive Plan (the “Restated Plan”), which would amend and restate the Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Current Plan”). At the annual meeting of stockholders on June 17, 2021, stockholders voted to approve the Restated Plan at the Annual Meeting. The Restated Plan is identical to the Current Plan in all material respects, except as follows: (a) the number of shares of Common Stock authorized for issuance under the Restated Plan will increase from 826,292 shares to 3,339,243 shares, plus the total number of shares that remained available for issuance, that are not covered by outstanding awards issued under the Current Plan, immediately prior to December 8, 2020; and (b) the Restated Plan will terminate on December 7, 2030, unless earlier terminated. Please reference additional disclosure in Note 9. As of June 30, 2022, there were 1,303,000 shares available for grant under the Current Plan.

11

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


 Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four-year period. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding.


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


On May 17, 2022, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for issuance under the Inducement Plan from 500,000 shares to 1,100,000 shares. The 2019 Inducement Plan will be administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the 2019 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or following a bona fide period of non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. As of June 30, 2022, there were 367,064 shares available for grant under the 2019 Inducement Plan.


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


   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2022
    
2021
    
2022
    
2021
  
   
(unaudited)
    
(unaudited)
  
Stock-Based Compensation
                        
Research and development
  
$
487,532
    
$
167,432
    
$
856,582
    
$
227,817
  
General and administrative
    
861,069
      
274,166
   
1,620,992
      
471,401
  
Total
  
$
1,348,601
    
$
441,598
    
$
2,477,574
    
$
699,219
  



The fair value of options granted during the three and six months ended June 30, 2022 and 2021 was estimated using the Black-Scholes option valuation model utilizing the following assumptions. There was 494,000 and 1,439,005 of options granted during the three and six month period ended June 30, 2022, respectively.


   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2022
    
2021
    
2022
    
2021
  
   
Weighted
Average
    
Weighted
Average
    
Weighted
Average
    
Weighted
Average
  
   
(unaudited)
    
(unaudited)
  
Volatility
    
100.05
%
    
100.63
%
    
99.45
%
    
100.59
%
Risk-Free Interest Rate
    
2.60
%
    
0.79
%
    
1.62
%
    
0.72
%
Expected Term in Years
    
6.02
      
6.38
      
6.43
      
6.28
  
Dividend Rate
    
–
      
–
      
–
      
–
  
Fair Value of Option on Grant Date
  
$
4.01
    
$
7.28
    
$
4.59
    
$
6.39
  

12

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


   
Number
of Shares
    
Weighted
Average
Exercise Price
    
Weighted Average
Remaining
Contractual
Life in Years
    
Aggregate
Intrinsic Value
  
Options outstanding at December 31, 2021
    
3,163,835
    
$
5.57
      
7.90
    
$
10,839,589
  
Granted
    
1,439,005
      
5.73
      

   


 
Exercised
    
(10,076
)
    
2.51
      
   


 
Forfeited
    
(302,821
)
    
5.19
      

   


 
Expired
     –       –                  
Options outstanding at June 30, 2022
    
4,289,943
    
$
5.66
      
8.02
    
$
2,164,356
  
Vested and expected to vest at June 30, 2022
    
4,289,943
    
$
5.66
      
8.02
    
$
2,164,356
  
Exercisable at June 30, 2022
    
1,767,786
    
$
6.13
      
6.37
    
$
952,705
  


At June 30, 2022 there was approximately $14,551,120 of unamortized stock option compensation expense, which is expected to be recognized over a remaining average vesting period of 3 years.

Note 8 – Income Taxes

In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The Company expects to have a loss for 2022 and there will be no current income tax expense.  Additionally, there was a full valuation allowance against the net deferred tax assets as of June 30, 2022 and December 31, 2021. As such, the Company recorded no income tax benefit due to realization uncertainties.


The Company’s U.S. statutory rate is 21%. The primary factor impacting the effective tax rate for the three and six months ended June 30, 2022 is the anticipated full year operating loss which will require full valuation allowances against any associated net deferred tax assets.


Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of June 30, 2022, there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.  The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the three and six months ended June 30, 2022 and for the year ended December 31, 2021.



In accordance with the State of New Jersey’s Technology Business Tax Certificate Program, which allows certain high technology and biotechnology companies to sell unused NOL carryforwards to other New Jersey-based corporate taxpayers, the Company sold New Jersey NOL carryforwards, resulting in the recognition of $1.2 and $4.5 million of income tax benefit, net of transaction costs in the six months ended June 30, 2022 and 2021, respectively.

Note 9 – Commitments and Contingencies

Employment Matters


           The Company has entered into employment agreements with each of its executive officers. The employment agreements generally provide for, among other things, salary, bonus and severance payments. The employment agreements generally provide for between 12 months and 24 months of severance benefits to be paid to an executive (as well as certain potential bonus, COBRA and equity award benefits), subject to the effectiveness of a general release of claims, if the executive terminates his or her employment for good reason or if the Company terminates the executive’s employment without cause.  Such severance payments may be provided 90 days prior to and for as long as 24 months following the effective date of a change in control.  The continued provision of severance benefits is conditioned on each executive’s compliance with the terms of the Company’s confidentiality and invention and assignment agreement as well as his or her release of claims.

13
Index
Rent


For month-to-month arrangements not impacted by the adoption of ASC 842, rent for the three and six months ended June 30, 2022 was $55,500 and $111,000, respectively, compared to the three and six months ended June 2021 of $42,477 and $78,493.


Legal Proceedings


On or about December 27, 2021, Seth Van Voorhees, the former Chief Financial Officer of the Company, filed a Demand for Arbitration against the Company with the American Arbitration Association, asserting that he was wrongfully terminated. In his demand, Dr. Van Voorhees contends that his alleged damages are expected to be no less than $3,000,000, plus interest, arbitration costs, attorneys’ fees and punitive damages. In July 2022, the Company and Dr. Van Voorhees entered into a confidential settlement agreement which includes the customary dismissal of action, full release of claims with no admission of liability. There were no material changes to the Company’s accrued liabilities in connection with this matter.


While there can be no assurances as to the ultimate outcome of any legal proceeding or other loss contingency involving the Company, management does not believe any pending matter will be resolved in a manner that would have a material adverse effect on its financial position, results of operations or cash flows.  The Company may be involved, from time to time, in additional legal proceedings and claims arising in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance.

Note 10 – Retirement Plan


The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. The 401(k) employer contributions were $38,761 and $87,718 for the three and six months ended June 30, 2022, respectively, compared to the three and six months ended June 30, 2021 of $28,352 and $45,411 respectively.

Note 11– Subsequent Events


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

14
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2021 on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 31, 2022.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the Company and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the Company’s management, as well as assumptions made by, and information currently available to, management. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend,” “forecast,” “guidance”, “outlook” and other similar expressions among others. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation:


 ●
the Company’s ability to protect its intellectual property rights;


●
the Company’s anticipated capital requirements, including the Company’s anticipated cash runway and the Company’s current expectations regarding its plans for future equity financings;


●
the Company’s dependence on additional financing to fund its operations and complete the development and commercialization of its product candidates, and the risks that raising such additional capital may restrict the Company’s operations or require the Company to relinquish rights to the Company’s technologies or product candidates;


●
the Company’s limited operating history in the Company’s current line of business, which makes it difficult to evaluate the Company’s prospects, the Company’s business plan or the likelihood of the Company’s successful implementation of such business plan;


●
the timing for the Company or its partners to initiate the planned clinical trials for PDS0101, PDS0103, PDS0203 and other Versamune and Infectimune based products and the future success of such trials;


●
the successful implementation of the Company’s research and development programs and collaborations, including any collaboration studies concerning PDS0101, PDS0203 and other Versamune and Infectimune based products and the Company’s interpretation of the results and findings of such programs and collaborations and whether such results are sufficient to support the future success of the Company’s product candidates;


●
the success, timing and cost of the Company’s ongoing clinical trials and anticipated clinical trials for the Company’s current product candidates, including statements regarding the timing of initiation, pace of enrollment and completion of the trials (including our ability to fully fund our disclosed clinical trials, which assumes no material changes to our currently projected expenses), futility analyses, presentations at conferences and data reported in an abstract, and receipt of interim results (including, without limitation, any preclinical results or data), which are not necessarily indicative of the final results of the Company’s ongoing clinical trials;


●
expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our product candidates;


●
any Company statements about its understanding of product candidates mechanisms of action and interpretation of preclinical and early clinical results from its clinical development programs and any collaboration studies; the acceptance by the market of the Company’s product candidates, if approved; the timing of and the Company’s ability to obtain and maintain U.S. Food and Drug Administration or other regulatory authority approval of, or other action with respect to, the Company’s product candidates;


●
the timing of and the Company’s ability to obtain and maintain U.S. Food and Drug Administration or other regulatory authority approval of, or other action with respect to, the Company’s product candidates; and


●
other factors, including legislative, regulatory, political and economic developments not within the Company’s control, including unforeseen circumstances or other disruptions to normal business operations arising from or related to COVID-19 and those listed under Part II, Item 1A. Risk Factors.

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

In this Quarterly Report, unless otherwise stated or the context otherwise indicates, references to “PDS,” “the Company,” “we,” “us,” “our” and similar references refer to PDS Biotechnology Corporation, a Delaware corporation.

15
Index
Company Overview

We are a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted cancer and infectious disease immunotherapies based on our proprietary Versamune® and Infectimune™ T cell activating technology platforms. Our Versamune based products have demonstrated the potential to overcome the limitations of current immunotherapies by inducing, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells. We have developed multiple therapies, based on combinations of Versamune and disease-specific antigens, designed to train the immune system to recognize diseased cells and effectively attack and destroy them. We continue to advance its pipeline of candidates to address a wide range of cancers including HPV16-associated cancers (anal, cervical, head and neck, penile, vaginal, vulvar) and breast, colon, lung prostate and ovarian cancers. Our Infectimune -based vaccines have demonstrated the potential to induce, not only robust and durable neutralizing antibody response, but also powerful T cell responses including long-lasting memory T cell responses. Our infectious disease candidates are of potential interest for use in COVID-19 and universal influenza vaccines.

In May 2022, we announced that two abstracts had been presented at the 2022 American Society of Clinical Oncology Annual Meeting: Abstract number 6041, PDS0101 a novel type 1 interferon and CD8+ T-cell activating immunotherapy in combination with pembrolizumab in subjects with recurrent/metastatic HPV16-positive squamous cell carcinoma (HNSCC) and Abstract number 2518, Phase II evaluation of the combination of PDS0101, M9241, and bintrafusp alfa with HPV16+ malignancies. Also in May 2022, we announced expansion of our VERSATILE-002 clinical trial into Europe and in June 2022, we announced the U.S. Food and Drug Administration (the “FDA”) had granted Fast Track designation to our lead candidate PDS010 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (PEMBROLIZUMAB). The FDA’s Fast Track designation is designed to aid in the development and to expedite the review of drug candidate applications that would potentially treat serious or life-threatening conditions. In order to receive Fast Track designation, a product must also demonstrate the potential to address an unmet medical need. Treatments granted this designation are given the opportunity to have more frequent meetings with the FDA throughout the entire dug development and review process, with the goal of moving promising new drugs more rapidly through the process. It also provides the opportunity to submit sections of a New Drug Application (the “NDA”) on a rolling basis, where the FDA may review portions of the NDA as they are received instead of waiting for the entire NDA submission. In addition, Fast Track designated products are eligible for priority review at the time of NDA or Biologics License Application submission.

In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41st American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine.

Our current pipeline of Versamune based targeted immunotherapies and Infectimune based therapies focuses on the use of selected disease-associated antigens that have been demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases.

VERSATILE-002: PDS0101 + KEYTRUDA®

In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) which is the FDA-approved standard of care for first-line treatment of recurrent/ metastatic head and neck cancer commenced and is actively recruiting patients.The clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.

In this PDS Biotech-sponsored trial, patients whose cancer has returned or spread following initial treatment, will be able to avoid chemotherapy and take this combination of two immunotherapy drugs. Enrolling patients with more functional immune systems that have not been compromised by extensive chemotherapy may allow improved efficacy of the combination.Patients in the trial will receive a total of 5 cycles of combination therapy in the context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression.The primary endpoint of VERSATILE-002 is the objective response rate – or ORR – at six months following initiation of treatment.There are two cohorts in the trial. Cohort 1 is for patients that are yet to be treated with a checkpoint inhibitor (CPI naïve) and cohort 2 which consists of patients that have failed checkpoint inhibitor therapy (CPI refractory).

In February 2022, we announced we had achieved the preliminary efficacy milestone of at least four or more objective responses of the first 17 patients in the CPI naïve arm which now allows that arm to proceed to full enrollment. We also announced detailed preliminary safety data which showed that the combination is well tolerated without evidence of enhanced or significant toxicity in the first 18 patients in the CPI naïve arm. We continue to enroll patients in the first stage of the CPI refractory arm.

16
Index
In May 2022, we announced preliminary efficacy and safety data from this trial at the ASCO Annual Meeting. The abstract provided preliminary data on 19 patients (safety) with available imaging data for 17 of the 19 patients (efficacy). Highlights from the abstract were as follows:


 ●
Response rates thus far* (tumor shrinkage greater than 30%) seen in 7/17 (41.2%) patients in comparison to the published results of approximately 19% for approved checkpoint inhibitors, used as monotherapy for recurrent or metastatic head and neck cancer, with 2 of the 7 having complete responses (CR)

●
Stable disease (SD) was reported in 6/17 (35.3%) patients, with 4 of the 6 (67%) experiencing tumor shrinkage of less than 30%

●
Clinical efficacy (ORR* + SD) was seen in 13/17 (76.5%) patients

●
Progressive/ongoing disease was reported in 4/17 (23.5%) patients

●
Patients had received a median of 4/5 doses of PDS0101 (range 1-5) and 9/35 doses of KEYTRUDA® (range 1-18)

●
There were no treatment-related adverse events greater than or equal to Grade 3 (N=19)

●
No patients required dose interruption or reduction on the combination treatment

●
No patients discontinued the combination treatment

●
At 9 months of follow up (median not yet achieved):

●
Progression free survival (PFS) rate was 55.2%

●
Overall survival (OS) rate was 87.2%


*
no control or comparative studies have been conducted between checkpoint inhibitors and PDS0101

In May 2022, we announced the expansion of this trial into Europe and in June 2022, as described above, we received Fast Track designation for PDS0101 in combination with pembrolizumab.

National Cancer Institute: PDS0101+ M9241 +Bintrafusp Alfa

In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement (CRADA), in NCI, led Phase 2 clinical trial evaluating PDS0101 with NHS-IL12 (M9241), and M7824 (Bintrafusp Alfa), both of which are owned by EMD Serono (Merck KGaA) in patients with advanced/refractory HPV-associated cancers who have failed prior treatment. In February 2021, we announced that the NCI’s Phase 2 clinical trial of PDS0101 for the treatment of advanced/refractory HPV-associated cancers achieved its preliminary objective response target in patients naïve to checkpoint inhibitors which allowed for full enrollment of approximately 20 patients in this group.In addition, based on promising results in the CPI naïve arm, the trial was amended to allow enrollment of a separate cohort of checkpoint inhibitor-refractory patients for assessment of safety and activity of the triple combination. Preliminary efficacy assessment of the triple combination in this added group of 20 checkpoint inhibitor refractory patients is ongoing.The NCI recently achieved the intended enrollment objective of 30 patients in the CPI refractory arm of the trial.The trial has enrolled 45 patients and we plan to continue enrollment in the trial until the total enrollment of 56 patients is achieved.

Preclinical study results arising from this CRADA were recently published in the Journal for ImmunoTherapy of Cancer, Immunomodulation to enhance the efficacy of an HPV therapeutic vaccine (Journal for ImmunoTherapy of Cancer 2020;8:e000612. doi:10.1136/ jitc-2020-000612), indicating that PDS0101 generated both HPV-specific T-cells and an associated antitumor response when used as a monotherapy.When PDS0101 was combined with two other novel clinical-stage anti-cancer agents, Bintrafusp Alfa and M9241, the preclinical data suggested that all three therapeutic agents worked synergistically to provide superior tumor T-cell responses and subsequent tumor regression when compared to any of the agents alone or the 2-component combinations.If the published preclinical data demonstrating powerful activity of the triple combination is successfully confirmed in the ongoing Phase 2 trial, this triple combination could form the basis of a unique platform providing improved cancer treatments across multiple cancers.

In June 2021, at the American Society of Clinical Oncology (ASCO) conference the NCI announced interim data in this trial which included, data in both CPI naïve and refractory patients.In the CPI naïve group 83% (5/6) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease.100% of the CPI naïve patients were alive at a median duration of 8 months.In the CPI refractory group 42% (5/12) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease.10/12 (83%) of CPI refractory patients were alive at a median duration of 8 months.An update provided in January 2022 showed as of December 31, 2021, that >40 subjects had been recruited into the trial and 30 HPV16-positive patients had been evaluated.The median survival of all patients (3:1 CPI refractor to naïve) was 12 months and progressing.The historical survival of CPI naïve and CPI refractory advanced HPV-associated cancers when treated with CPI are 7-11 months and 3-4 months respectively.

17
Index
In June 2022, at the 2022 ASCO Annual Meeting, we provided an update to the preliminary data presented at the 2021 meeting, this included data from 30 patients and highlights were as follows:


 ●
Objective response (OR = >30% tumor reduction) was seen in 88% (7/8) of patients with checkpoint-naive disease; 4/7 (57%) patients’ responses are ongoing (median 17 months).

●
With checkpoint refractory patients: M9241 dosing appears to affect response rates, with 5/8 (63%) patients receiving M9241 at 16.8 mcg/kg achieving an OR compared to 1/14 (7%) patients who received M9241 at 8 mcg/kg achieving an OR; 4/6 (67%) patients’ responses are ongoing (median 12 months).

●
Tumor reduction was seen in 45% (10/22) of patients with checkpoint-refractory disease, including patients receiving high or low dose M9241.

●
In checkpoint refractory patients treated with high or low dose M9241, survival outcomes were similar (p=0.96 by Kaplan Meier analysis). At a median of 12 months of follow up 17/22 (77%) of patients were alive.

●
In checkpoint naïve patients 6/8 (75%) were alive at median 17 months of follow up.

●•
Similar OR and survival were seen across all types of HPV16-positive cancers.

●
Preliminary safety data: 13/30 (43%) of patients experienced Grade 3 treatment-related adverse events (AEs), and 2/30 patients (7%) experienced Grade 4 AEs. There were no grade 5 treatment-related AEs.

●
The study results to date strongly suggest, in agreement with the published preclinical studies, that all 3 drugs contribute to the clinical outcomes.

MD Anderson Cancer Center (IMMUNOCERV): PDS0101+ Chemoradiotherapy

In October 2020, a third PDS0101 Phase 2 clinical study was initiated with The University of Texas MD Anderson Cancer Center and is actively recruiting patients. This clinical trial is investigating the safety and anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. PDS believes that Versamune’s strong T-cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication. The enrollment rate in this trial has been negatively impacted by the COVID-19 pandemic and enrollment is on-going.

Mayo Clinic: PDS0101 Monotherapy and in combination with KEYTRUDA

In February 2022 we announced the initiation of an Investigator-Initiated Trial (ITT), MC200710, for PDS0101 alone or in combination with the checkpoint inhibitor, KEYTRUDA®, in patients with HPV-associated oropharyngeal cancer (HPV(+)OPSCC) at high risk of recurrence.The trial is being led by Drs. David Routman, Katharine Price, Kathryn Van Abel, and Ashish Chintakuntlawar of Mayo Clinic, a nationally and internationally recognized center of excellence for the treatment of head and neck cancers. We believe that this upcoming trial not only broadens our addressable patient population of those affected by the increasing incidence of HPV(+)OPSCC, but also allows us to better understand the activity of PDS0101 alone or in combination with KEYTRUDA® in earlier stages of disease.This trial is currently open for enrollment.

In this trial treatment will be administered before patients proceed to transoral robotic surgery (TORS) with curative intent. Treatment in this setting is referred to as neoadjuvant treatment. PDS0101 has been shown to induce killer T-cells that target and kill HPV-positive cancers, either alone or in combination with checkpoint inhibitors in preclinical studies, and in combination in clinical studies of patients with advanced recurrent/metastatic HPV-associated cancers.This trial will explore whether PDS0101 with or without checkpoint inhibition may increase HPV-specific anti-tumor responses, potentially resulting in tumor shrinkage, pathologic regression, and decreases in circulating tumor DNA (ctDNA).

Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept phase 2 trials.It is also designed to demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in multiple indications.After initial commercial approval, our strategy of combining PDS0101 with standard of care also positions us for rapid market penetration and expansion.

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Other Versamune® -Based Products in Development:

PDS0102

PDS0102 is an investigational immunotherapy utilizing tumor-associated and immunologically active T-cell receptor gamma alternate reading framed protein (TARP) from the NCI. PDS0102 is designed to treat TARP-associated cancers including, acute myeloid leukemia (AML), prostate and breast cancer. In our preclinical work, the administration of PDS0102, the Versamuine+TARP antigen combination led to the induction of large numbers of polyfunctional tumor targeted killer T-cells. In addition, the TARP tumor antigen alone has already been studied at the NCI in men with prostate cancer and been shown to be safe, immunogenic with slowing tumor growth rates (NCT00972309). We are evaluating the next steps in the clinical development of PDS0102 and are seeking nondilutive financings to progress to human trials.

PDS0103

In April 2020, the above mentioned, PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103.PDS0103 is an investigational immunotherapy owned by us and designed to treat cancers associated with the mucin-1, or MUC-1, oncogenic protein.These include cancers such as ovarian, breast, colorectal and lung cancers. PDS0103 combines Versamune with novel highly immunogenic agonist epitopes of MUC-1 developed by the NCI and licensed by PDS. PDS0103 is currently in late preclinical development.

MUC1 is highly expressed in several types of cancer and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed.Expression of MUC-1 is often associated with poor disease prognosis, due in part to drug resistance. In preclinical studies, and similarly to PDS0101, PDS0103 demonstrated the ability to generate powerful MUC1-specific CD8 killer T-cells.In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103 and have been planning to submit our IND package in the fourth quarter of 2022. However, the actual submission date may potentially be impacted by the outcome of our meetings with the FDA on the timing of a pivotal trial for PDS0101. Our primary goal is commercialization of PDS0101, and allocation of resources to implement an earlier than planned start may delay PDS0103 initiation by a few months.

Infectimune Development Strategy

We believe that the key differentiating attributes of the Infectimune platform technology are strong induction of CD8+ and CD4+ T-cells as well as antibodies which can be leveraged to improve treatment and preventive options in several infectious disease indications.In January 2022 we announced preclinical data on our universal flu program sponsored by the National Institute of Allergy and Infectious Disease (NIAID) demonstrating the potential of the Infectimune technology with computationally designed influenza proteins developed by the laboratory of Dr. Ted Ross at the University of Georgia to generate broadly protective anti-influenza immune responses across multiple strains of influenza.This data as well as our COVID-19 data has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more broadly effective and longer lasting protective vaccines.Current preventive and prophylactic vaccine approaches and technologies predominantly focus on creating strong induction of antibody responses.However, the induction of T-cell responses, in addition to antibody responses, provides more durable and broad protection against infectious diseases.

Earlier announced preclinical studies performed at the University of Kentucky on a potential COVID-19 vaccine indicate that the vaccine elicits the induction of highly active and potent virus-specific CD8 killer and CD4 helper T-cells within 14 days of treatment.The study also showed induction of the long-lasting virus-specific memory T-cells necessary for longer term protection.A 30-45-fold increase in COVID-19 specific T-cells was observed by day 14 when compared to the vaccine without Versamune.These preclinical studies also indicated induction of strong anti-SARS-CoV-2 neutralizing antibodies within 14 days, with a 20-25-fold increase when compared to the vaccine without Versamune.

The peer-reviewed scientific publication “A Newcastle Disease Virus (NDV) Expressing a Membrane-Anchored Spike as a Cost-Effective Inactivated SARS-CoV-2 Vaccine” by Sun et al. Vaccines (2020, volume 8, issue 4, page 771) also provides strong rationale for clinical development of an Infectimune based COVID-19 vaccine to maximize the full breadth of immune responses induced against SARS-CoV-2. This research conducted at the Mount Sinai Icahn School of Medicine, NY, indicated that there is powerful antibody induction by Versamune against SARS-CoV-2 at low antigen doses suggesting potential for an effective antigen dose sparing COVID-19 vaccine.These data are based on preclinical studies combining our Infectimune technology with an inactivated Newcastle disease virus (NDV)/SARS-CoV-2 vaccine (NDV vaccine) developed at Mount Sinai.

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Based on the highly promising data recently announced with the universal seasonal flu vaccine and the current focus of the NIAID in developing more effective flu vaccines, we have decided to opportunistically focus our near-term infectious disease activities to align with the interests of the NIAID Collaborative Influenza Vaccine Innovation Centers (CIVICs) program. This will involve development of a universal seasonal flu vaccine and also potential development of a universal pandemic influenza vaccine based on similar computationally designed antigens as have shown promise with Infectimune.

We had out-licensed the Covid-19 vaccine (PDS0203) to the Brazilian company Farmacore for development in Latin America.Initial financial support for the program had been provided by the Brazilian government for preclinical development. On February 22, 2021, we and Farmacore announced that Blanver Farmoquímica e Farmacêutica S.A joined their efforts (collectively the “Consortium”) to develop and commercialize a novel COVID-19 vaccine in Latin America. The progression of the Farmacore development program was delayed in the fourth quarter of 2021.After a review of the program by PDS and Farmacore, the agreement with Farmacore was extended for six months to May 31, 2022 to provide additional time for Farmacore to commence manufacturing and scale up of drug product for use in clinical trials and any necessary process development work. We have evaluated the progress of the program and as described above have determined to strategically focus our near-term efforts on the development of universal flu vaccines. The licensing agreement with Farmacore expired on May 31, 2022.

In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41st American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine. We are evaluating the next steps in the clinical development and funding for PDS0202.

Our current pipeline of Versamune and Infectimune based therapies is as follows:

graphic


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We have never been profitable and have incurred net losses in each year since inception. Our net losses were $14.3 million, and $3.6 million for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $75.0 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with these operations.

As of June 30, 2022, we had $53.0 million in cash and cash equivalents.

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


 ●
the timing and costs of our planned clinical trials;


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


●
the outcome, timing and costs of seeking regulatory approvals;


●
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 license or acquire other products and technologies.

SELECTED FINANCIAL OPERATIONS OVERVIEW

Revenue

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

Research and Development Expenses

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

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

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

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Results of Operations

The following table summarizes the results of our operations for the three months ended June 30, 2022 and 2021:

   
Three Months Ended
June 30,
    
Increase
  
   
2022
    
2021
    
$ Amount
    
%
  
   
(in thousands)
              
Operating expenses:
                        
Research and development expenses
  
$
3,762
    
$
2,764
    
$
998
      
36
%
General and administrative expenses
    
3,331
      
2,342
      
989
      
42
%
Total operating expenses
    
7,093
      
5,106
      
1,987
      
39
%
Loss from operations
    
(7,093
)
    
(5,106
)
    
(1,987
)
    
39
%
Interest income, net
    
75
      
1
      
74
      
7,400
%
Benefit from income taxes
    
1,199
      
4,516
      
(3,317
)
    
(73
)%
Net loss and comprehensive loss
  
$
(5,819
)
  
$
(589
)
  
$
(5,230
)
    
888
%

Research and Development Expenses

Research and development (R&D) expenses increased to $3.8 million for the three months ended June 30, 2022 from $2.8 million for the three months ended June 30, 2021. The increase of $1.0 million in 2022 was primarily attributable to an increase of $0.4 million in clinical study and research costs, $0.7 million in personnel costs and $0.1 million in facilities partially offset by a decrease of $0.2 million in manufacturing services.

General and Administrative Expenses

General and administrative expenses increased to $3.3 million for the three months ended June 30, 2022 from $2.3 million for the three months ended June 30, 2021. The increase of $1.0 million is primarily attributable to an increase of $0.8 million in personnel costs and $0.2 million in legal fees.

Benefit from Income Taxes

Income tax benefit was $1.2 million for the three months ended June 30, 2022 and $4.5 million for the three months ended June 30, 2021. A decrease of $3.3 million was due to a smaller portion of the accumulated Net Operating Losses (NOL) through 2020 available for sale.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes the results of our operations for the six months ended June 30, 2022 and 2021:

   
Six Months Ended
June 30,
    
Increase (Decrease)
  
   
2022
    
2021
    
$ Amount
    
%
  
   
(in thousands)
              
Operating expenses:
                        
Research and development expenses
  
$
8,923
    
$
4,177
    
$
4,746
      
114
%
General and administrative expenses
    
6,649
      
3,978
      
2,671
      
67
%
Total operating expenses
    
15,572
      
8,155
      
7,417
      
91
%
Loss from operations
    
(15,572
)
    
(8,155
)
    
(7,417
)
    
91
%
Interest income, net
    
80
      
1
      
79
      
7900
%
Benefit from income taxes
    
1,199
      
4,516
      
(3,317
)
    
(73
)%
%Net loss and comprehensive loss
  
$
(14,293
)
  
$
(3,638
)
  
$
(10,655
)
    
293
%

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Research and Development Expenses

Research and development (R&D) expenses increased to $8.9 million for the six months ended June 30, 2022 from $4.2 million for the same period in 2021. The increase of $4.7 million was primarily attributable to an increase in personnel costs of $1.5 million, clinical studies of $1.3 million, manufacturing and quality of $1.5 million, research and regulatory studies $0.3 million and facilities $0.1 million.

General and Administrative Expenses

General and administrative expenses increased to $6.6 million for the six months ended June 30, 2022 from $4.0 million for the same period in 2021. The $2.6 million increase was primarily attributable to an increase in personnel costs of $1.7 million, legal costs of $0.8 million and marketing costs of $0.1 million.

Benefit from Income Taxes

Income tax benefit was $1.2 million for the six months ended June 30, 2022 and $4.5 million for the six months ended June 30, 2021. A decrease of $3.3 million was due to a smaller portion of the accumulated Net Operating Losses (NOL) through 2020 available for sale.

Liquidity and Capital Resources

In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital pursuant to which, we have the right, in our sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice, directing Aspire Capital (as principal) to purchase up to 100,000 shares of our common stock per business day, in an aggregate amount of up to $20.0 million of our common stock, or the Purchased Shares, over the term of the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022, and no capital was raised under the Aspire Purchase Agreement.

In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020.

In May 2021, we received approximately $4.5 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant our participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss (NOL) program for State Fiscal Year 2020.

In June 2021, we sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of approximately $48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.

In April 2022, we received approximately $1.2 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant the Company’s participation in the New Jersey Technology Business Tax Certificate Transfer NOL program for State Fiscal Year 2020.

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As of June 30, 2022, we had $53.0 million in cash and cash equivalents. Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the filing of this Quarterly Report on Form 10-Q.Based on such evaluation and our current plans, which are subject to change, management believes that our existing cash and cash equivalents as of June 30, 2022 will be sufficient to satisfy our operating cash needs for at least one year after the filing of this Quarterly Report on Form 10-Q.

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

Cash Flows

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

   
Six Months Ended June 30,
  
   
2022
    
2021
  
Net cash used in operating activities
  
$
(12,288
)
  
$
(2,856
)
Net cash provided by financing activities
    
30
      
48,766
  
Net decrease in cash and cash equivalents
  
$
(12,258
)
  
$
45,910
  

Net Cash Used in Operating Activities

Net cash used in operating activities was $12.3 million and $2.9 million for the six months ended June 30, 2022 and 2021, respectively. The increase in net cash used in operating activities of $9.4 million was primarily due to an increase in net loss of $10.7 million, an increase in prepaid expenses of $0.5 million, an increase in stock compensation of $1.8 million, a decrease in accounts payable of $0.4 million, partially offset by an increase in accrued expenses of $0.4 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2022 of $0.03 million was due to the receipt of net proceeds from the exercise of stock options.

Net cash provided by financing activities for the six months ended June 30, 2021 was primarily due to the receipt of net proceeds of $48.5 million due to the issuance of common stock.

Operating Capital Requirements

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

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We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the filing of this Quarterly Report. Our budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies.We believe that our existing cash and cash equivalents as of June 30, 2022 are sufficient to continue operations and research and development programs for at least one year after the date of this Quarterly Report. Until we can generate significant cash from our operations, we expect to continue to fund our operations with available financial resources. These financial resources may not be adequate to sustain our operations.

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


 ●
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 products on our own; and


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

Please see the section titled “Risk Factors” elsewhere in the Quarterly Report and Annual Report for additional risks associated with our operations.

Purchase Commitments

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

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q.As described in Note 2, the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ from these estimates under different assumptions or conditions. We believe that the discussion in our management’s discussion and analysis addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

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Operations and Liquidity

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

Outlook and Impact of COVID-19 on our Business

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

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

As previously stated, we licensed Versamune to Farmacore in Brazil to develop PDS0203; a vaccine for the prevention of COVID-19.The Secretary for Research and Scientific Training of The Ministry of Science, Technology and Innovation of Brazil provided a commitment to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune based COVID-19 vaccine in Brazil. We have not received confirmation of the availability of financial resources within the MCTI to support the clinical development and commercialization of a Versamune based COVID-19 vaccine in Brazil. Clinical development and commercialization of a Versamune based COVID-19 vaccine in Brazil has not been initiated. Due to delays in the program, in the fourth quarter of 2021, we met with Farmacore and performed a detailed program review.As the result of that review, we extended the contract with Farmacore for six months through May 31, 2022.We have evaluated the progress of the program and have determined to strategically focus on PDS0202 universal flu vaccine. The licensing agreement with Farmacore expired on May 31, 2022.

Off-Balance Sheet Arrangements

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

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Smaller Reporting Company

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

ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The primary objectives of our investment activities are to ensure liquidity and to preserve principal, while at the same time maximizing the income we receive from our cash and marketable securities without significantly increasing risk. As of June 30, 2022, we had cash equivalents of $53.0 million that were held in a non-interest-bearing money operating account and an institutional U.S. Treasury money market fund. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, we do not believe that an immediate 100 basis point change in interest rates would have a material effect on the fair market value of our cash equivalents. To minimize the risk in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in institutional market funds that are comprised of U.S. Treasury and Treasury backed repurchase agreements.

ITEM 4:
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.
OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

The information in Note 9 to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference. There are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this item by reference from Note 9 to our Condensed Consolidated Financial Statements for the quarter ended June 30, 2022 contained in this Quarterly Report on Form 10-Q.

ITEM 1A.
RISK FACTORS

With the exception of the risk factors noted below, there have been no material changes from our risk factors as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021. However, any investment in our business involves a high degree of risk. Before making an investment decision, you should carefully consider the information we include in this Quarterly Report on Form 10-Q, including our unaudited interim condensed consolidated financial statements and accompanying notes, our Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 31, 2022, including our financial statements and related notes contained therein, and the additional information in the other reports we file with the Securities and Exchange Commission. These risks may result in material harm to our business and our financial condition and results of operations. In this event, the market price of our common stock may decline and you could lose part or all of your investment. Additional risks that we currently believe are immaterial may also impair our business operations. Our business, financial conditions and future prospects and the trading price of our common stock could be harmed as a result of any of these risks.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, an ongoing military conflict between Russia and Ukraine, and record inflation. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, geopolitical tensions, or record inflation.

We are exposed to the risk of changes in social, geopolitical, legal, and economic conditions. The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine. As a result of Russia’s invasion of Ukraine, the United States, the European Union, the United Kingdom, and other G7 countries, among other countries, have imposed substantial financial and economic sanctions on certain industry sectors and parties in Russia. Broad restrictions on exports to Russia have also been imposed. These measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions limiting Russia’s ability to import various goods.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit markets, as well as supply chain interruptions, which has contributed to record inflation globally. In addition, the ongoing Russian military actions and the resulting sanctions could continue to adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. We are continuing to monitor inflation, the situation in Ukraine and global capital markets and assessing its potential impact on our business.

Although, to date, our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such matters may impact our business. The extent and duration of the conflict in Ukraine, geopolitical tensions, record inflation and resulting market disruptions are impossible to predict but could be substantial. Any such disruptions may also magnify the impact of other risks described in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our results of operations and liquidity needs could be materially affected by market fluctuations and general economic conditions.

Our results of operations could be materially affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues, and the availability and cost of credit have in the past and may continue to contribute to increase volatility and diminished expectations of the economy and markets going forward. Market upheavals may have an adverse effect on us. In the event of a market downturn, our results of operations could be adversely affected. Our future cost of equity or debt capital and access to the capital markets could be adversely affected, and our stock price could decline. There may be disruption or delay in the performance of our third-party contractors and suppliers. If our contractors, suppliers and partners are unable to satisfy their contractual obligations, our business could suffer.

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 June 30, 2022.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.
OTHER INFORMATION

None.

ITEM 6.
EXHIBITS

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Index
EXHIBIT INDEX

Exhibit
Number
  
Exhibit Description
10.1*+**
  
Executive Employment Agreement by and between Spencer Brown and PDS Biotechnology Corporation, effective as of June 1, 2022.
     
10.2* **
  
Amended and Restated Preclinical/Clinical Collaboration and License Agreement dated as of November 30, 2020 by and between PDS Biotechnology Corporation and Farmacore Biotechnology.
     
 
First Amendment to Preclinical/Clinical Collaboration and License Agreement dated as of November 22, 2021 by and between PDS Biotechnology Corporation and Farmacore Biotechnology.
     
 
PDS Biotechnology Corporation 2019 Inducement Plan, as amended (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2022 and incorporated herein by reference).
     
 
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
 
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
 
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
     
 
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
     
101.INS*
  
XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
     
104
  
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*
Filed herewith (unless otherwise noted as being furnished herewith)
+
Indicates management contract or compensatory plan.
**
Certain portions of the Exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

29
Index
SIGNATURES

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

 
PDS Biotechnology Corporation
  
       
August 8, 2022
By:
/s/ Frank Bedu-Addo
  
   
Frank Bedu-Addo
  
   
President and Chief Executive Officer
(Principal Executive Officer)
  
       
August 8, 2022
By:
/s/ Matthew Hill
  
   
Matthew Hill
  
   
Chief Financial Officer
  
   
(Principal Financial and Accounting Officer)
  


30