PDS Biotechnology Corp 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report. We are a clinical-stage immunotherapy company developing a growing pipeline of cancer immunotherapies and infectious disease vaccines designed to overcome the limitations of current immunotherapy technologies. We own Versamune ® , a proprietary T-cell activating platform designed to train the immune system to better attack and destroy disease. When paired with an antigen, which is a disease-related protein that is recognizable by the immune system, Versamune ® has been shown to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD8+ killer T-cells, a specific sub-type of CD8+ killer T-cell that is more effective at killing infected or target cells. Our immuno-oncology product candidates are of potential interest for use as a component of combination product candidates (for example, in combination as a component of combination products with other leading technologies) to provide effective treatments across a range of cancer types. We believe our product candidates are of interest for potential in relation to Human Papillomavirus, or HPV-associated cancers, melanoma, colorectal, lung, breast and prostate cancers or as monotherapies in early-stage disease. We are working to expand our infectious disease pandemic development program, which includes preclinical stage novel vaccines for COVID-19 and universal influenza, in addition to our tuberculosis development collaboration with Farmacore Biotechnology. It is well documented that the most critical attribute of an effective cancer immunotherapy is the induction of high levels of active antigen-specific CD8+ (killer) T-cells. Priming adequate levels of active CD8+ T-cells in-vivo continues to be a major obstacle facing immunotherapy. PDS0101 in its first human clinical trial provided data supporting the earlier promising preclinical study results and demonstrated the unique in-vivo induction of high levels of active HPV-specific CD8+ T-cells in humans. We believe that the Versamune® platform has the potential to become an industry-leading immuno-oncology technology and is currently being applied to the development of a robust pipeline of valuable “new-generation, multi-functional” immunotherapies, both as single agents and as part of combination therapies with other leading immuno-oncology technologies. 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) for first-line treatment of recurrent/ metastatic head and neck cancer opened 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 June 2019, the FDA approved using KEYTRUDA ® in combination with platinum and fluorouracil (FU) for all patients for first line treatment of patients with metastatic or unresectable recurrent head and neck squamous cell carcinoma, or HNSCC, and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test. In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement, which we refer to as the CRADA, in a National Cancer Institute, or NCI ,led Phase 2 clinical study evaluating PDS0101, NHS-IL12, and M7824, owned by EMD Serono (Merck KGaA). Recently, this investigator-led study achieved its initial safety benchmark – meaning that not more than 1 dose-limiting toxicity was observed in the first 6 patients who received the combination. In February 2021, the Company announced that the NCI’s Phase 2 clinical study of PDS0101 for the treatment of advanced HPV-associated cancers achieved its preliminary objective response target in patients naïve to checkpoint inhibitors. The trial will now progress to full enrollment of approximately 20 patients in this group. In addition, the trial has been 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. If this preclinical data 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. 65 Index This previously announced CRADA a with the NCI for development of PDS0101 HPV cancer immunotherapy in combination with other immune-modulating agents as a potential treatment for advanced HPV-related cancers. Preclinical study results arising from this CRADA were recently published in the Journal for ImmunoTherapy of Cancer, Immunomodulation to enhance the efficacy of and 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 (M7824) and NHS-IL12 preclinical data suggested that all three therapeutic agents worked synergistically to provide enhanced tumor T-cell response and subsequent tumor regression and when compared to any of the agents alone or 2-component combinations. In April 2020, the 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, orMUC-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. The PDS0103 immunotherapy combines the utility of the Versamune® platform with novel and proprietary, highly immunogenic peptides derived from the cancer-associated protein known as mucin-1 - or MUC1. 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 MUC-1-specific CD8 killer T-cells. 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 study 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. Our expanded infectious diseases pipeline now covers three infectious pathogens and vaccines. Based on the key characteristics of Versamune ® we are progressing preclinical development of PDS0202, a universal influenza vaccine candidate, which combines Versamune ® with novel influenza vaccine antigens. PDS0202 pre-clinical development is being supported by an agreement with the National Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation Centers, or CIVICs, program, with a goal of progressing into a human clinical trial. PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential mutations, based on the understood potential of Versamune ® ’s to prime the immune system to generate both antibodies for near term protection and T-cell responses for long term protection against pathogens. We are jointly developing PDS0203 under a collaboration agreement with Farmacore. In December 2019, we entered into an Amended and Restated Material Transfer Agreement (MTA) with the Brazilian pharmaceutical company Farmacore Biotechnology to develop a novel tuberculosis, or TB, immunotherapy based on a combination of Farmacore’s proprietary TB antigens with Versamune ® however testing to be performed in Brazil has been significantly hampered by the COVID-19 pandemic. 66 Index We have never been profitable and have incurred net losses in each year since inception. Our net losses were $14.8 million, and $7.0 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $43.8 million. Substantially all of our net losses have resulted from costs incurred in connection with its research and development programs and from general and administrative costs associated with these operations. As of December 31, 2020, we had $28.8 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. Corporate Information We currently operate the existing business of Private PDS (as defined below) as a publicly traded company under the name PDS Biotechnology Corporation. We were incorporated as Edge Therapeutics, Inc., or Edge, on January 22, 2009. Upon closing of the Merger (as defined below), we suspended Edge’s prior business and prioritized the business of PDS Biotechnology Corporation, a privately held Delaware corporation, which we refer to as Private PDS, which is a clinical-stage biopharmaceutical company developing multi-dimensional cancer immunotherapies that are designed to overcome the limitations of the current approaches. On March 15, 2019, we completed our previously disclosed reverse merger with Private PDS, which we refer to as the Merger, pursuant to and in accordance with the terms of the Agreement and Plan of Merger, dated as of November 23, 2018, as amended on January 24, 2019, by and among Edge, Echos Merger Sub, a wholly-owned subsidiary of Edge, which we refer to as Merger Sub, and Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as our wholly-owned subsidiary. In connection with and immediately following completion of the Merger, we effected a 1-for-20 reverse stock split, or the Reverse Stock Split, and changed our corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation. All of the outstanding stock of Private PDS was converted into shares of our common stock or canceled upon closing of the Merger. See “Note 1 – Nature of Operations” and “Note 4 – Reverse Merger” in our financial statements in Part I for more information on the Merger. 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. 67 Index As a result of the Merger, we acquired an in-process research and development asset (IPR&D) for $2,974 relating to Edge’s NEWTON 2 trials that we initially sought to find partners interested in continuing the development of these product candidates. Following the discontinuation of the NEWTON 2 trial for EG-1962, Edge had ceased all research and development efforts related to EG-1962 and suspended efforts on other legacy Edge product candidates. As of December 31, 2019, based on the limited prospects for partners we were no longer actively seeking partners to continue the development of these product candidates and pursue them to commercialization. Accordingly, we recorded an impairment charge IPR&D of $2,974 in our consolidated statements of operations and comprehensive loss. 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 I-O, candidates into and through clinical trials, pursues regulatory approval of our injectable Versamune® 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 for our injectable I-O candidates. The probability of successful commercialization of our I-O 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. The following table summarizes our research and development expenses incurred for the periods indicated (in thousands): Year Ended December 31, 2020 2019 PDS projects $ 4,601 $ 3,194 Clinical consulting 942 399 Regulatory consulting - 287 Salaries and other costs 2,381 2,220 Total $ 7,924 $ 6,100 General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development and support functions. Other general and administrative expenses include travel expenses, professional fees for auditing, tax and legal services and facility-related costs. Lease Termination and Disposal Costs There were no lease termination or disposal costs in 2020. The lease termination costs relate to moving our corporate offices in 2019, consists of $0.7 million for lease termination fees and $0.3 million for disposal of leasehold improvements and office furniture. Other Income Other income consists of interest income consists of interest income earned on our cash and cash equivalents and interest expense. Critical Accounting Policies 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. 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. While our significant accounting policies are described in the notes to our financial statements appearing in this Annual Report, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results in 2020 and 2019. 68 Index Acquisition Our consolidated financial statements include the operations of an acquired business after the completion of the acquisition in 2019. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired, and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of IPR&D be recorded on the balance sheet. Transaction costs are expensed as incurred. Amounts recorded in connection with an acquisition can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. We are required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, we use fair value in the initial recognition of net assets acquired in a business combination and when measuring impairment losses. We estimate fair value using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of non-financial assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer. When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following techniques: ● Income approach, which is based on the present value of a future stream of net cash flows. ● Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities. ● Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence. Our fair value methodologies depend on the following types of inputs: ● Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). ● Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs). ● Unobservable inputs that reflect estimates and assumptions (Level 3 inputs). A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. On March 15, 2019, as a result of the Merger with Edge Therapeutics, Inc., we recognized an IPR&D asset estimated to be $2,974 using the discounted cash flow method based on probability-adjusted cash flow success scenarios to develop EG-1962 into a commercial product, estimating the revenue and costs. We started with a forecast of all the expected net cash flows associated with the asset, which includes the application of a terminal value for indefinite-lived assets, and then we applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach included: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with IPR&D assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate. Asset Impairment We review all of our long-lived assets for impairment indicators throughout the year. In 2019 we performed impairment testing for indefinite-lived intangible assets annually or whenever impairment indicators are present. When necessary, we record charges for impairments of intangibles for the amount by which the fair value is less than the carrying value of these assets. For the year ended December 31, 2019, the Company recorded an impairment charge - IPR&D of $2,974 for the estimated value of the IPR&D asset in its consolidated statement of operations and comprehensive loss. 69 Index Income Taxes We file U.S. federal income tax returns and New Jersey state tax returns. Our deferred tax assets are primarily comprised of federal and state tax net operating losses and tax credit carryforwards and are recorded using enacted tax rates expected to be in effect in the years in which these temporary differences are expected to be utilized. At December 31, 2020, we had federal net operating losses, or NOLs, carryforwards of approximately $94.1 million, $30.0 million of which expire at various dates between 2028 and 2037, losses generated in 2018 or later of $64.1 million will carry forward indefinitely. At December 31, 2020, we had federal research and development credits carryforwards of approximately $1.1 million. We may be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon our value immediately before the ownership change, changes to our capital during a specified period prior to the change, and the federal published interest rate. Although we have not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited. Accrued Clinical Expenses When preparing our financial statements, we are required to estimate our accrued clinical expenses. This process involves reviewing open contracts and communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. If we underestimate or overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued clinical expenses have approximated actual expense incurred. Stock-based Compensation We estimate the fair value of our stock-based option awards to employees, directors and non-employees using the Black-Scholes option-pricing model, which requires the following assumptions: (1) the expected volatility of our stock is based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available, (2) the expected term of the award is based on the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, as we have a limited history of being a public company from March 15, 2019 (the date of the Merger) to develop reasonable expectations about future exercise patterns and employment duration for our options, (3) the risk-free interest rate based on U.S. Treasury notes with a term approximating the expected life of the option and (4) expected dividend yield of 0, since we have never paid cash dividends and have no present intention to pay cash dividends. Results of Operations Comparison of the Years Ended December 31, 2020 and 2019 Year Ended December 31, Increase (Decrease) 2020 2019 $ % (in thousands) Operating expenses: Research and development expenses $ 7,924 $ 6,100 $ 1,824 30 % General and administrative expenses 6,962 10,982 (4,020 ) (37 )% Impairment expenses IPRD – 2,974 (2,974 ) (100 )% Lease termination and disposal costs – 979 (979 ) (100 )% Depreciation 16 – 16 100 % Total operating expenses 14,902 21,035 (6,133 ) (29 )% Loss from operations (14,902 ) (21,035 ) 6,133 (29 )% Bargain purchase gain – 13,335 (13,335 ) (100 )% Interest income, net 55 320 (265 ) (83 )% Loss before incomes taxes (14,847 ) (7,380 ) (7,467 ) 101 % Income taxes (benefit) – (382 ) 382 – Net loss and comprehensive loss $ (14,847 ) $ (6,998 ) $ (7,849 ) 112 % 70 Index Research and Development Expenses Research and development (R&D) expenses increased to $7.9 million for the year ended December 31, 2020 from $6.1 million for the same period in 2019. The increase of $1.8 million was primarily attributable to an increase in clinical manufacturing of $0.6 million, clinical and pre-clinical studies of $0.9 million, and internal R&D personnel costs of $0.6 million. Offset by a decrease in non-cash stock-based compensation of $0.3 million. General and Administrative Expenses General and administrative expenses decreased to $7.0 million for the year ended December 31, 2020 from $11.0 million for the same period in 2019. The $4.0 million decrease was due to decreases in personnel costs of $0.4 million, non-cash stock-based compensation of $2.4 million, D&O insurance costs of $0.5 million, legal fees of $0.5 million, and professional fees of $0.2 million. Impairment Charge - IPRD Impairment charge-IPRD is attributable to the write-off of the intangible asset acquired as part of the merger. Lease Termination and Disposal Costs The lease termination costs relates to moving the Company’s corporate offices in 2019 and consists of $0.7 million for lease termination fees and $0.3 million for disposal of office furniture. Bargain Purchase Gain The bargain purchase gain of $13.3 million for the year ended December 31, 2019, is as a result of the Merger, representing the excess of the fair value of net assets acquired over the fair value of the common stock issued to acquire Private PDS in the Merger. Interest income, net Interest income, net was $0.1 million during the year ended December 31, 2020, a decrease of $0.3 million compared to the year ended December 31, 2019, due primarily to interest received on invested cash and cash equivalents. Liquidity and Capital Resources On July 29, 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. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of our outstanding shares of common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. The minimum price at which we can sell shares under the Aspire Purchase Agreement is $0.50. On July 29, 2019, we issued 100,654 shares of our common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. We recorded the fair value of the shares at July 29, 2019 of $603,924 as an expense in the third quarter of 2019. Concurrently with the Aspire Purchase Agreement, we entered into a registration rights agreement with Aspire Capital, or the Registration Rights Agreement. In accordance with the Registration Rights Agreement, on August 20, 2019 we filed a Registration Statement on Form S-1 (File No. 333-232988) to cover the resale of the Commitment Shares and any Purchased Shares issuable to Aspire Capital under the Aspire Purchase Agreement. There is market uncertainty regarding the utilization of financing associated from the Aspire Purchase Agreement. As of December 31, 2020, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a public offering price of $1.30 per share. The shares sold included 769,230 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 $13 million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions. 71 Index 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. On August 13, 2020, we sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 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 $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses. Approximately $81,000,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement. Our operations have also been financed from cash of $29.1 million from the consummation of the Merger in March 2019. As of December 31, 2020, we had $28.8 million of 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 its ability to continue as a going concern within one year beyond the filing of this Annual Report on Form 10-K. Our budgeted cash requirements in 2021 and beyond include expenses related to continuing development and clinical studies. Based on our available cash resources and cash flow projections as of the date the consolidated financial statements were available for issuance, we believe there are sufficient funds to continue operations and research and development programs for at least 12 months from the date of this report. 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. Failure to obtain adequate financing also may adversely affect its ability to operate as a going concern. Cash flows The following table shows a summary of our cash flows for each of the years indicated (in thousands): Year Ended December 31, 2020 2019 Net cash used in operating activities $ (13,149 ) $ (18,073 ) Net cash provided by investing activities – 29,382 Net cash provided by financing activities 29,827 750 Net increase in cash $ 16,678 $ 12,059 Net Cash Used in Operating Activities Net cash used in operating activities was $13.1 million and $18.1 million for the years ended December 31, 2020 and 2019, respectively. The decrease in cash used in operating activities of $5.0 million was primarily due to a decrease in Merger related costs in 2020. Net Cash Provided by Investing Activities Net cash provided by investing activities in 2019 relates primarily to cash acquired in the Merger. Net Cash Provided by Financing Activities Net cash provided by financing activities of $29.8 million for the year ended December 31, 2020 was due to the receipt of net proceeds from the issuance of common stock. 72 Index 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. 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 beyond the filing of this Annual Report. Our budgeted cash requirements in 2021 and beyond include expenses related to continuing development and clinical studies. We believe that our existing cash and cash equivalents as of December 31, 2020 are sufficient to continue operations and research and development programs for at least the next 12 months from the date of this Annual 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 tablet vaccines on our own; and ● the initiation, progress, timing and results of our commercialization of our tablet vaccine candidates, if approved, for commercial sale. Please see the section titled “Risk Factors” elsewhere in this Annual Report on Form 10-K for additional risks associated with our operations. Contractual Obligations and Commitments The following is a summary of our contractual obligations as of the date indicated: As of December 31, 2020 Total Less than One Year 1-3 Years 3-5 Years More than 5 Years Operating lease obligations $ 705,651 $ 170,836 $ 534,815 $ – $ – Total contractual obligations $ 705,651 $ 170,836 $ 534,815 $ – $ – 73 Index Purchase Commitments We have no material non-cancelable purchase commitments with service providers as we have generally contracted on a cancelable, purchase order basis. 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. W e 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. 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. Two of the three 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. Even though all three studies have since been initiated despite the pandemic challenges, the evolving COVID-19 pandemic has also impacted the pace of enrollment in clinical trials and we may be affected by similar delays as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to a health emergency and clinical trial staff can no longer get to the clinic. 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. Despite the economic uncertainty resulting from the COVID-19 pandemic, we intend to continue to focus on the development of our product candidates and we have expanded our infectious disease pipeline since the pandemic brought renewed resources and interest on technologies such as the Versamune ® platform in the context of research and development in prevention of COVID-19. We are working with a consortium of partners in Brazil to develop PDS0203; a vaccine for the prevention of COVID-19. This consortium received a commitment from the Secretary for Research and Scientific Training of The Ministry of Science, Technology and Innovation of Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine in Brazil. 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. 74 Index 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. Even though we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company. 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. These exemptions include: • being permitted to provide only two years of audited consolidated financial statements in this Annual Report on Form 10-K, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; • reduced disclosure obligations regarding executive compensation; • not being required to furnish a contractual obligations table in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and • not being required to furnish a stock performance graph in our annual report. We expect to continue to take advantage of some or all of the available exemptions. ITEM 8. Financial Statements and Supplementary Data The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.