PDS Biotechnology Annual Report 2020

Plain-text annual report

10-K 1 brhc10021904_10k.htm 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ☐ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to ________ Commission file number 001-37568 PDS Biotechnology Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 26-4231384 (IRS Employer Identification No.) 25B Vreeland Road, Florham Park, NJ 07932 (Address of principal executive offices) (800) 208-3343 (Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, par value $0.00033 per share Trading symbol(s) PDSB Name of each exchange on which registered Nasdaq Capital Market Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 ☐ ☒ Emerging growth company Accelerated filer ☐ Non-accelerated filer ☒ Smaller Reporting 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. Yes ☐ No ☐ Indicate by check mark whether the registrant has ﬁled a report on and attestation to its management’s assessment of the eﬀectiveness of its internal control over ﬁnancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting ﬁrm that prepared or issued its audit report. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity held by non-aﬃliates (without admitting that any person whose shares are not included in such calculation is an aﬃliate) of the registrant on the last day of the registrant’s second ﬁscal quarter, was $23.0 million (based on the closing price for shares of the registrant’s common stock as reported on the Nasdaq Capital Market on that date). The number of shares of the registrant’s common stock, par value $0.00033 per share, outstanding as of March 11, 2021 was 22,261,619. Documents Incorporated By Reference Portions of registrant’s deﬁnitive proxy statement relating to registrant’s 2021 Annual Meeting of Stockholders (the “Proxy Statement”) to be ﬁled with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the registrant’s ﬁscal year ended December 31, 2020, are incorporated by reference in Part III of this Annual Report on Form 10-K. Except with respect to information speciﬁcally incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K. PDS BIOTECHNOLOGY CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2020 INDEX PART I Item 1 Item 1A Item 1B Item 2 Item 3 Item 4 Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures PART II Item 5 Item 7 Item 8 Item 9 Item 9A Item 9B Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Item 10 Item 11 Item 12 Item 13 Item 14 Directors, Executive Officers and Corporate Governance Executive Compensation Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accountant Fees and Services PART IV Item 15 Item 16 Exhibits and Financial Statement Schedules Form 10-K Summary Signatures 2 PAGE 4 34 63 63 63 63 64 65 75 75 75 76 77 77 77 77 77 77 77 81 Index Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations and ﬁnancial position, strategy and plans, and our expectations for future operations, are forward-looking statements. In some cases, you can identify forward- looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading “Risk Factors” contained in Item 1A of this Annual Report. In light of these risks, uncertainties and assumptions, actual results could diﬀer materially and adversely from those anticipated or implied in the forward-looking statements in this Annual Report and you should not place undue reliance on these forward-looking statements. These forward-looking statements include, but are not limited to, statements about: ● ● ● ● ● ● ● ● ● the accuracy of estimates of our expenses, future revenue, capital requirements and our needs for additional financing; our ability to obtain funding for our operations in the event we determine to raise additional capital; estimates of the suﬃciency of our existing capital resources combined with future anticipated cash ﬂows to ﬁnance our operating requirements; our ability to retain key management personnel; the accuracy of our estimates regarding expenses, future revenues and capital requirements; our ability to maintain our listing on the Nasdaq Stock Market; regulatory developments in the United States and foreign countries; unforeseen circumstances or other disruptions to normal business operations arising from or related to COVID-19; expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our product candidates; and ● other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors. Any forward-looking statements in this Annual 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, even if new information becomes available in the future. In this Annual 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. 3 Index PART I Unless the context requires otherwise, references in this report to “PDS,” “Company,” “we,” “us,” and “our” and similar designations refer to PDS Biotechnology Corporation and our subsidiaries. ITEM 1. Business Company Overview We are a clinical-stage immunotherapy company developing a growing pipeline of cancer immunotherapy candidates and infectious disease vaccine candidates 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. On March 11, 2021, we announced that our COVID-19 vaccine consortium consisting of PDS, Farmacore Biotechnology and Blanver Farmoquímica, received a commitment from the Secretary for Research and Scientiﬁc Training of The Ministry of Science, Technology and Innovation of Brazil (“MCTI”) to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine in Brazil. MCTI intends to make the funding available to prepare to perform a combined Phase 1/2 clinical trial, upon authorization by the Brazilian regulatory agency, Agência Nacional de Vigilância Sanitária (Anvisa) to initiate the proposed clinical program in Brazil. The pre-IMPD package for the Phase 1/2 trial is currently under review by Anvisa and the trial is anticipated to begin by Q3 2021. The majority of the capital provided by MCTI will fund the manufacturing process scale up, production and the Phase 3 trial, pending the results of the Phase 1/2 trial. The consortium members will work under a mutually agreed work plan to guide the vaccine eﬃciently through development in compliance with regulatory standards. The consortium anticipates working to initiate manufacturing scale up activities in the second quarter. The Phase 1 and 2 trials, which will be run together, are anticipated to enroll approximately 360 patients and will assess the safety and eﬃcacy of the vaccine as well as both the antibody and killer T-cell responses induced by the vaccine to the novel coronavirus. The clinical trials are planned to be conducted in Brazil. As the license holder of PDS0203 in Latin America, Farmacore Biotechnology will continue to lead the regulatory and clinical trial eﬀorts in Brazil and has selected a top clinical research organization, to conduct clinical trials in Brazil. We will continue to contribute scientiﬁc expertise and operational support and oversee scale up of the manufacturing process. Blanver Farmoquímica will manufacture, promote, distribute, and commercialize the Versamune®-based COVID-19 vaccine in Latin America. All funding is contingent on the availability of ﬁnancial resources within the MCTI, and The Secretary for Research and Scientiﬁc Training of the MCTI has committed to making every effort to finance all clinical and development stages of the program. 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. 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. 4 Index Our current pipeline of Versamune ®-based therapies focuses on four key antigens associated with a broad variety of solid tumors that remain challenging to treat, as follows: On March 15, 2019, we, then operating as Edge, completed our reverse merger with Private PDS, pursuant to and in accordance with the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 23, 2018, as amended on January 24, 2019, by and among us, Echos Merger Sub, a wholly-owned subsidiary of Edge, or Merger Sub, and Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as our wholly-owned subsidiary, which refer to as the Merger. 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. For accounting purposes, the Merger was treated as a “reverse acquisition” under generally accepted accounting principles in the United States, or U.S. GAAP, and Private PDS is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical ﬁnancial statements of Private PDS became the Company’s historical ﬁnancial statements, and the historical ﬁnancial statements of Private PDS are included in the comparative prior periods. See “[Note 4] – Reverse Merger” for more information on the Merger. As part of the Merger, we acquired all of Edge’s assets relating to current and future research and development. Immunotherapies Generally Cancer remains a leading cause of morbidity and mortality despite improvements in treatments. The Versamune platform is part of a category of promising new treatments that have emerged from the convergence of oncology and immunology ﬁelds. These novel therapies, that harness the power of the immune system to ﬁght cancer, are called immunotherapies. Cancer immunotherapies have signiﬁcant potential to treat a broad range of cancers, and several have been approved by the United States Food and Drug Administration (“FDA”). While progress has been made in developing new anti-cancer immunotherapeutic technologies and products, signiﬁcant challenges limiting their broad clinical eﬀectiveness remain. We are developing the Versamune based treatments with the goal of overcoming the limitations and safety concerns of other anti-cancer treatments and with the goal of bringing eﬀective treatments to cancer patients. On a basic immunological level, considerable hurdles impeding the ability of immunotherapy to harness the body’s immune system most eﬀectively persist. For example, approved checkpoint inhibitors have been demonstrated to be eﬀective and for those patients who respond, the durability of their responses can be signiﬁcant. Unfortunately, the rates of response reported are only in the range of 15-20%. Importantly, immune therapies, including checkpoint inhibitors, CAR-Ts and live-vector vaccines, remain burdened with signiﬁcant systemic toxicities limiting their use either in the early- stage cancer setting or in combination with other approved anti-cancer treatments. In contrast to these immune therapies, Versamune has a promising safety profile and generates potency without systemic side effects. 5 Index Cancer Immunotherapy Cancer immunotherapy is a form of cancer treatment that utilizes the power of the body’s own immune system to recognize, attack and eliminate cancer. The ultimate goal of cancer immunotherapy is tumor eradication or, at least, regression. The body’s immune system is a complex, biological network designed to defend against germs, other microscopic invaders, and cancer cells. Once the immune system recognizes an organism or cell as foreign or dangerous, it begins a series of complex reactions to identify, target and eliminate them. This is called mounting an immune response. Cancer immunotherapy takes advantage of the discovery that most cancer cells express unique proteins, also called tumor antigens, not normally expressed by healthy cells and thus can be recognized as abnormal and dangerous. Because the immune system is precise, it can target these dangerous cancer cells exclusively while sparing healthy cells. However, the challenge remains that cancer cells are often not perceived as dangerous or foreign, so the immune system becomes tolerant to them. An ideal cancer immunotherapy should have the following attributes to maximize the opportunity for clinical effectiveness in patients. It should: Stimulate both tumor specific killer and helper T-cells within the body Activate, arm and expand large numbers of T-cells that recognize the tumor Alter or de-camouflage the tumor microenvironment (TME) to make the cancer more visible or susceptible to attack by the immune system • • • • Generate immune memory, so that if the cancer cells return, the immune system is able to recognize and eliminate them • Optimize safety and tolerability by limiting systemic inflammation and toxicity As stated in the June 2019 issue of The Journal of Immunology , a leading peer-reviewed journal in the ﬁeld of immunology, our Versamune® platform incorporates each of these attributes, inducing potent anti-tumor responses in pre-clinical studies. (Gandhapudi, et al., J. Immunology, June 2019; Rumﬁeld et al, J. Journal for ImmunoTherapy of Cancer, May 2020 ). We believe our Versamune ® technology platform is unique in its ability to successfully encompass the mechanistic attributes required to induce a safe and effective anti-cancer immune response. How does cancer immunotherapy work? An important function of the body’s immune system is to scan for proteins not normally expressed in healthy tissue (antigens). Once an antigen has been identiﬁed as foreign, abnormal or dangerous, the antigen is presented to T-cells, a type of white blood cell eﬀective at eliminating cancer cells and infectious agents (e.g. bacteria and viruses). The presentation of an antigen to T-cells is implemented primarily in the lymph nodes by specialized antigen presenting cells known as dendritic cells which are programmed specially to identify foreign antigens and to present them to T-cells. Unique proteins on the surface of dendritic cells, known as major histocompatibility complex (MHC) molecules, bind to the foreign antigen and display them on the cell surface for recognition by the appropriate T-cells. Then, once presented, a sub-population of T-cells known as the CD8+ or killer T-cells, are primed and respond to the speciﬁc foreign antigen by attacking and killing the cells containing the abnormal protein. Other T-cell sub-populations, such as CD4+ or helper T-cells, are also critical in regulating immune responses. Cells communicate via chemical signaling. For an immune response to be triggered and to be eﬀective, important immune signaling pathways must be activated to enable the body to induce messenger proteins known as cytokines and chemokines. Some of these cytokines and chemokines serve both to activate and expand T-cells and to arm the T-cells with the appropriate cancer-killing function. An eﬀective cancer immunotherapy must modulate these complex processes, enhancing activation and producing robust expansion of the critically important high-quality, tumor-speciﬁc T-cell populations, most notably CD8+ killer cells. As will be reviewed in more detail in the section below, the ability to promote the induction of therapeutic quantities of high-quality tumor-targeting CD8+ killer T-cells within a patient’s own body has been a major limitation of cancer immunotherapy. Production of adequate numbers of high-quality CD8+ killer T-cells alone, however, is insuﬃcient to eradicate all cancer cells. One of the diﬃculties in treating cancer stems from the fact that cancer cells have the unique ability to suppress the immune system; they camouﬂage themselves or evade T-cell attack by activating immune mechanisms that suppress the ability of T-cells to detect or attack them. They accomplish this in part by increasing the population of immune suppressive cells, including cells known as regulatory T-cells (Treg) as well as other cell types, within the tumor microenvironment. An eﬀective immunotherapy must overcome the tumor’s immune suppressive mechanisms in order to successfully locate and attack the cancer cells. 6 Index Finally, cancers can be diﬃcult to cure because they may recur even after successful initial treatment due to micro-metastatic (hidden) tumors disease that is not completely eradicated after treatment and that eventually expands. It is yet another task of the immune system to remain ever vigilant for recurrence, a vigilance mediated by memory T-cells which serve as the immune system’s long-term memory. To be durable and eﬀective over an extended period after treatment, and to minimize the likelihood of cancer recurrence, an immunotherapy should enhance this immune function as well. The challenges to effective immunotherapy The inability to generate adequate quantities of unique, high-quality killer T-cells, to minimize systemic toxicities, to overcome the immune system’s tolerance of the cancer, and to generate immunological memory, all limit the clinical eﬀectiveness of immunotherapies. On a fundamental biological or immunological level, one of the most daunting challenges confronting the development of eﬀective immunotherapy is the development of a simple and easy to administer therapy that can promote the induction of highly potent, targeted, tumor-speciﬁc T-cells that can eﬀectively treat cancer with minimal side eﬀects. Suboptimal T-cell activation remains a key limitation of immunotherapies. Potential hurdles exist at all stages of the immunological process, including poor uptake of the antigen by the dendritic cells as well as inadequate processing and presentation of the tumor antigen. Versamune® Products Versamune- has shown the potential for overcoming the challenges of immunotherapy Versamune® is a proprietary T-cell activating platform designed to overcome the challenges of current immunotherapy in order to improve the treatment outcomes of patients with cancer. Versamune ®-derived products are based on positively charged (cationic) and immune activating lipids that form spherical nanoparticles in aqueous media. These lipids include the R-enantiomer of 1,2-dioleoyl-e-trimethyl-ammonium-propane (R-DOTAP). Cationic lipids are positively charged molecules that have a water-soluble portion (head group) attached to a water insoluble tail. The water-soluble portion of the molecule has a positive charge and the water-insoluble portion is made up of hydrocarbon (also called fatty acid) chains. The nanoparticles, which are coated with a positive charge, are deliberately sized to mimic viruses, facilitating detection by the body’s immune system and uptake by dendritic cells. To treat a speciﬁc cancer, the unique or overexpressed antigen found on the surface of the cancer cells is manufactured, then mixed with the Versamune® nanoparticles to create a pharmaceutical product for simple subcutaneous injection. Versamune® has the potential to promote dendritic cell update of antigens One of the biggest challenges in developing a potent immunotherapy has been dendritic cell uptake. Versamune® is designed speciﬁcally to be taken up by dendritic cells in the skin. As noted, Versamune® nanoparticles are sized comparably to viruses normally taken up as part of the natural function of the dendritic cells, facilitating eﬃcient uptake of the Versamune®-based immunotherapy. Studies evaluating the uptake of Versamune® nanoparticles by dendritic cells and epithelial cells, found almost exclusive uptake by the dendritic cells. Four hours following a single subcutaneous injection, about 80% of the dendritic cells in the draining lymph node were found to have taken up the Versamune®-based immunotherapy. 7 Index INJECTION SITE Versamune® has the potential to promote efficient antigen processing and T-cell presentation When dendritic cells take up Versamune ® nanoparticles they become activated, mature and begin recruiting additional dendritic cells. Once inside the dendritic cell, the tumor-associated antigen is released and processed into the requisite small peptides (pieces of protein) in the cell compartment known as the cytoplasm. An important potential advantage of Versamune® from what has been observed to date is its ability to fuse with and destabilize endosomes in the cytoplasm, promoting eﬃcient entry of the antigen into the cell compartment where processing can take place. Processed antigen is turned into peptides that then utilize both the MHC class I and class II pathways. The MHC class I pathway is critical to programing CD8+ killer T-cells and the MHC class II pathway to programming CD4+ helper T-cells to recognize tumor antigens. When Versamune ®-induced maturation occurs, the dendritic cells express costimulatory molecules on their surface, which facilitate the highly eﬃcient uptake and presentation of antigens to the T-cells. We believe this activity overcomes one of the most signiﬁcant limitations of current immunotherapy development – the eﬃcient priming of critical CD8+ killer T-cells against tumor antigens. Interestingly, Versamune ® has been demonstrated to promote presentation of antigens to CD4+ helper cells as well. 8 Index Versamune® has the potential to promote eﬃcient activation and robust expansion of high quality polyfunctional CD8+ killer T-cells in Lymph Nodes Ultimately mature dendritic cells migrate into lymph nodes, small glands located throughout the body containing white blood cells including T- cells, where much of the key immunological activity pertaining to the priming and expansion of T-cells takes place. In the lymph nodes the dendritic cells present the tumor antigens to T-cells resulting in activation or priming of the T-cells to recognize the particular antigen expressed by the cancer. Importantly, Versamune® also understood to upregulate type I interferon genes (type I IFN), which are responsible for critical immunological processes. Upregulation of type I IFN induces an important immunological protein called CD69 that facilitates interactions between the dendritic cell and T-cells in the lymph nodes. Upregulation of type I IFN signaling also induces multiple immune messengers called cytokines and chemokines that further signal T-cells to inﬁltrate into the lymph nodes. Powerful activators of CD8+ killer T-cells, such as CCL2 and CXCL10 are documented to be induced by Versamune ® as well. As the Versamune®-induced production of chemokines appears to be restricted to the lymph nodes, the site of T-cell activation, it provides for both superior activation and expansion of CD8+ killer T-cells. Localization of these immune messengers within the lymph nodes and their limited presence in the blood circulation enhances the safety of the Versamune®-based immunotherapies. Thus, through the versality of its mechanisms of action, as understood to date, we believe that Versamune® may safely promote the eﬃcient and robust expansion in-vivo of large numbers of highly potent (polyfunctional) CD8+ killer T-cells, both critical factors in developing a successful immunotherapy. 9 Index Versamune® has the potential to overcome immune suppression Regulatory T-cells (Treg) are a sub-population of white blood cells normally responsible for recognizing normal healthy cells and for preventing autoimmune disease. In cancer however, they are utilized by the cancer cells to evade immune detection. Versamune® may contribute to signiﬁcant alteration of the tumor microenvironment to reduce dramatically the Treg to killer CD8+ T-cell ratio making the tumors more susceptible to destruction by killer T-cells. Preclinical studies have demonstrated that lowering the Treg to CD8+ killer T-cell ratio with polyfunctional CD8+ killer and CD4+ helper T- cells promotes eﬀective tumor lysis and regression. Overcoming a tumor’s immune tolerance and minimizing its ability to evade detection is a signiﬁcant goal of a successful cancer immunotherapy that together with potent T-cell induction may translate to enhanced tumor elimination. In preclinical studies, Versamune® (R-DOTAP) nanoparticles demonstrated a reduction in the Treg/CD8+ T-cell ratio 10 Index Results of Comparative Preclinical Testing of Versamune ® and Other Immunotherapies for the eradication of a Tumor Preclinical testing of Versamune® therapy using the HPV 16 antigen is compared against similar testing performed using other immunotherapeutic approaches with the HPV16 antigen. Published studies as well as our own testing with other agents have demonstrated a slowing down of the rate of tumor growth, however without eﬀective eradication of the cancer. Using the tumor model, the Versamune ® based therapy was unique in its ability to reduce the tumor size and eventually completely regress the tumors. The results from the Versamune® based treatment are attributed to its ability to induce: (i) powerful activation of the critical immunological signaling pathways, (ii) robust production of both CD8+ killer and CD4+ helper T-cells, and (iii) the degradation of the tumor’s protective immune suppression mechanism. Versamune® has the potential to induce Immune Memory Memory T-cells allow the body to maintain tumor-recognizing and attacking T-cells for an extended period after treatment, with the ideal outcome of reducing cancer recurrence. Preliminary studies demonstrated that Versamune® protected mice who had experienced tumor regression against tumor reestablishment even when the mice were reinjected with the same tumor cells. This sustained protection was evidence of immune memory: persistence of antigen-speciﬁc T-cells to recognize tumor proteins associated with a particular cancer, as the animals were not protected against establishment of diﬀerent tumors. Evidence of the potential for Versamune®-based immunotherapies to induce immune memory has also been demonstrated in a phase 1 clinical trial in humans. 11 Index Enhancing tumor-speciﬁc memory responses to monitor for and eradicate cancer cells well after initial treatment we believe provides potential for significant clinical benefit by possibly reducing the incidence of tumor recurrence. Today, many cancer immunotherapies produce serious systemic autoimmune eﬀects as well as inﬂammatory toxicities due to the increased presence and spikes of cytokines in the blood circulation. We believe the mechanism of action of Versamune ® as well as its design have the potential to contribute to the localization of cytokines in the lymph nodes and speciﬁc targeting of CD8+ killer T-cells to antigens in tumor tissue. Therefore the hypothesis is that Versamune®-based therapies may exhibit an improved and favorable safety profile compared to currently available treatments. As noted, Versamune ® is injected subcutaneously (under the skin) and its mechanisms of action are localized primarily in the lymph nodes. Further supporting these observations are data demonstrating that negligible levels of Versamune®-induced cytokines were detected in the blood of mice. Very low quantities of Versamune® were detected in the blood or in any organ outside of the lymph nodes. Additionally, Versamune® is broken down (hydrolyzed) in the body into fatty acids and excreted, showing in these preliminary studies that it could mitigate the potential for short- or long-term accumulation of the nanoparticles. These pre-clinical observations have been conﬁrmed by early clinical data documenting that this localized and highly speciﬁc cascade of immune activity was associated with an absence of signiﬁcant systemic toxicity at all doses tested. In a phase 1 clinical study designed to evaluate safety, all patients had transient swelling and redness at the injection site due to initiation of the immunological cascade at the injection site which cleared completely within 3-7 days. No dose-limiting toxicities or long-term safety concerns were observed. In choosing and designing a Versamune ®-based therapy for development, careful attention is paid to selecting speciﬁc, appropriate antigens because, as described above, Versamune® induces a strong T-cell response to the antigen. All of the antigens currently being evaluated in combination with Versamune® are present primarily in cancer cells which should therefore result in tumor-speciﬁc T-cell attack, thereby minimizing oﬀ-target toxicity and potential destruction of healthy cells and tissue. Versamune’ s potential as a cancer immunotherapy platform The unique ability of Versamune ® to modulate and enhance numerous critical steps required for an eﬀective immune response and to be combined with targeted speciﬁc antigens found on tumor cells, oﬀers several exciting opportunities to treat a variety of cancers. Further, its diverse mechanisms of action together with its favorable safety proﬁle suggest therapeutic promise when used in combination with other treatment modalities or immunotherapies such as checkpoint inhibitors as well as in the single-agent monotherapy setting. 12 Index Human Papillomavirus (HPV)-Related Cancers Despite the successful introduction of HPV preventive vaccines, HPV-related cancers remain a signiﬁcant component of the global cancer burden. HPV infection occurs in both men and women and is associated with head and neck (oropharyngeal), cervical, anal, vaginal, vulvar and penile cancers. PDS0101 is our lead Versamune®-based immunotherapy. PDS0101 combines Versamune® with a mixture of short proteins (peptides) derived from the cancer-causing HPV16 viral protein. HPV16 is the most pervasive and diﬃcult to treat HPV amongst the 13 diﬀerent high-risk, cancer-causing HPV types. In a preclinical study in the most widely utilized animal HPV-cancer tumor model, PDS0101 uniquely induced complete regression of the tumors after a single sub-cutaneous injection. These data prompted a phase 1 open-label, dose-escalation, proof of concept study of PDS0101 in women with cervical intraepithelial neoplasia (CIN) infected with high-risk HPV types. The data demonstrated that PDS0101 was immunologically active at all three doses studied, conﬁrmed induction of high levels of active HPV-speciﬁc CD8+ killer T-cells, and was associated with clinical regression of the cervical lesions that often occurred rapidly. These results suggest that PDS0101 activated the critical mechanisms in humans resulting in potent T-cells which target and eﬀectively kill human HPV-positive cancer cells. All patients who experienced regression remained disease-free over the 2-year retrospective evaluation period, suggesting potential durability or memory of the immune response. The clinical data were presented at the 34th Annual Society for the Immunotherapy of Cancer Conference in November 2019 (Wood, et al., 2019). Based on these encouraging preclinical and human data, PDS0101 is being studied in multiple phase 2 clinical studies in various HPV-related cancers. PDS0102: T-cell receptor gamma Alternate Reading frame Protein (TARP)-Related Cancers The TARP antigen is strongly associated with prostate and breast cancers. In the U.S. 450,000 patients are projected to be diagnosed with prostate or breast cancer this year. Approximately 90% of prostate cancers and 50% of breast cancers overexpress the TARP tumor antigen. In a human clinical study, the National Cancer Institute demonstrated that its proprietary TARP antigens were effectively recognized by the immune system in prostate cancer patients with PSA biochemical recurrence leading to a notable reduction in tumor growth rate. In preclinical studies, a dramatically enhanced TARP-speciﬁc killer T-cell response was observed when our designed TARP antigens were combined with Versamune®. Preclinical development is ongoing. PDS0103: Mucin-1 (MUC1)-Related Cancers MUC1 is highly expressed in multiple solid tumor types and has been shown to be associated with drug resistance and poor disease prognosis. We are developing PDS0103, a Versamune®-based therapy in combination with novel, highly immunogenic, agonist epitopes of the MUC1 oncogenic C- terminal region to treat ovarian, breast, colorectal and lung cancers. In preclinical studies, similarly to PDS0102, a dramatically enhanced MUC1-speciﬁc killer T-cell response was observed when the novel antigens were combined with Versamune®. Preclinical development is ongoing. PDS0104: Melanoma-Specific Antigens The rates of melanoma have been rising rapidly over the past few decades and approximately 96,480 new melanomas will be diagnosed this year alone. More than 7,000 of these will prove fatal. PDS0104 combines Versamune ® with various melanoma antigens including the Tyrosinase-related protein 2 (TRP2) which is highly expressed in melanoma. PDS0104 has been demonstrated in pre-clinical animal models of aggressive melanoma to have unique and signiﬁcant anti-tumor activity as a monotherapy and has also demonstrated strong anti-tumor synergy in combination with checkpoint inhibitors. Preclinical development is ongoing. Versamune® has demonstrated immunological compatibility with a wide array of tumor and pathogenic antigens. While our current pipeline pairs Versamune® with four diﬀerent tumor antigens, to address over 10 cancer types, more than 75 tumor antigens have been identiﬁed and reported. The versatility of the platform suggests that Versamune® could work well with a wide range of identified tumor antigens and neoantigens. We are exploring the expansion of its Versamune®-based pipeline by pairing the technology with multiple tumor antigens to develop additional product candidates. 13 Index Development Strategy The unique combination of high potency and excellent safety of the Versamune ® platform observed in preclinical studies was corroborated in the successfully-completed 12-patient PDS0101 Phase 1/2a clinical trial. On September 19, 2019, we reported retrospective clinical outcome data from this study. Despite most of the patients being infected with multiple HPV strains other than HPV 16, regression was seen in 8 out of 10 patients, with complete regression of pre-cancerous lesions documented in 6 out of 10 patients at their ﬁrst post-treatment evaluation, which occurred within 1-3 months of completing treatment. In addition, the fact that no disease recurrence occurred over the two-year evaluation period strongly suggested a robust and durable therapeutic immune response due to the induction of T-cells by PDS0101 administration that were clinically active. As a result of this information strongly suggesting the unique ability of PDS0101 to generate potent and biologically active CD8+ T-cells in-vivo, we focused our clinical strategy on areas of more severe unmet medical need in which PDS0101 is combined with other immune-modulating agents, including checkpoint inhibitors and standard of care e.g. chemoradiotherapy, to provide improved clinical benefit to patients. We believe that rational design of combination immunotherapies using agents that promote synergy with each other and reduce the potential for compounded toxicity will substantially enhance the potential for combination therapies to deliver improved clinical beneﬁt for cancer patients. Versamune® appears to activate an appropriate combination of immunological pathways to promote strong CD8+ T-cell induction while also altering the tumor microenvironment to make tumors more susceptible to T-cell attack, which we believe makes it an ideal complement to checkpoint inhibitors and other immune-modulating agents by enhancing their potency as part of combination therapies. In addition, the diﬀerences in mechanism of action between Versamune® and checkpoint inhibitors, as well as the initial demonstrated safety proﬁle of Versamune ®, suggests that these combinations may be potentially much better tolerated by patients than other combination therapies involving checkpoint inhibitors and other cancer treatments such as immune-cytokines and chemotherapy. 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 this sponsored trial, patients whose cancer has returned or spread following initial treatment, will be able to avoid chemotherapy and take this combination of two immuno-therapy 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 study 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 nine months following initiation of treatment. There will be a lead-in cohort of 12 patients to assess the safety of the combination, and a formal planned interim analysis evaluating response to treatment in the ﬁrst 38 patients. Sites have implemented institution-speciﬁc measures securing the safety of patients and staﬀ to ensure the integrity of the study in the face of the ongoing pandemic. The study’s Lead Principal Investigator is Dr. Jared Weiss, who serves as the section chief of Thoracic and Head and Neck/Neck Oncology at the University of North Carolina School of Medicine Lineberger Comprehensive Cancer Care Center. This trial is progressing pursuant to an amendment in October 2019 to an existing clinical trial collaboration agreement with a subsidiary of Merck (known as MSD outside the United States and Canada). This amendment, primarily related to a modiﬁcation to the original clinical trial design to evaluate PDS0101 in combination with KEYTRUDA® as ﬁrst-line treatment. This Phase 2 trial, previously anticipated to begin in June 2020, was put on hold in April 2020, primarily due to the effect of COVID-19 on clinical trial operations in the United States. 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. 14 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, 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. 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 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. After initial commercial approval, our strategy of combining PDS0101 with standard of care also positions us for rapid market penetration and expansion. Infectious Disease We believe that the key diﬀerentiating attributes of the Versamune ® platform technology, strong induction of CD8+ and CD4+ T-cells as well as antibodies, can also be leveraged to improve treatment and preventive options in several infectious disease indications. Speciﬁcally, the COVID-19 pandemic has provided a unique opportunity to highlight Versamune ®’s potentially transformative immunostimulatory activities. Our expanded infectious diseases pipeline now covers three infectious pathogens and 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. We are jointly developing PDS0203 under a collaboration agreement with Farmacore. PDS0203 is a second-generation Versamune ®-based COVID-19 vaccine candidate: a simple subunit vaccine that utilizes a recombinant protein derived from the Spike protein of SARS-CoV-2, as opposed to an inactivated virus-based vaccine. Preclinical studies of PDS0203 have shown the induction of strong neutralizing antibodies, virus-speciﬁc polyfunctional CD8+ (killer) and CD4+ (helper) T-cells, and long-term memory T-cell responses. Initial ﬁnancial support for the program has been provided by the Brazilian government for preclinical development. On February 22, 2021, PDS Biotechnology 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. Under the terms of the agreement, São Paulo- based Blanver will manufacture, promote, distribute, and commercialize the Versamune®-based COVID-19 vaccine in Latin America. On March 11, 2021 we announced that the Consortium received a commitment from the Secretary for Research and Scientiﬁc Training of the MCTI, Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®-based COVID-19 vaccine (See Note 16 in the Notes to Consolidated Financial Statements for additional details regarding this announcement). 15 Index 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® to prime the immune system to generate both antibodies for near term protection and T-cell responses for long term protection against pathogens. Preclinical data of studies performed at the University of Kentucky indicates that PDS0203 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 a Versamune®-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 Versamune® technology with an inactivated Newcastle disease virus (NDV)/SARS-CoV-2 vaccine (NDV vaccine) developed at Mount Sinai. The preclinical study compared various treatment regimens in their ability to induce antibodies against SARS-CoV-2: • • • the NDV vaccine alone at doses of 5µg, 10µg and 20µg, the NDV vaccine in combination with Versamune® at 0.2µg, 1µg and 5µg, and the NDV vaccine in combination with Addavax, an adjuvant well-known for its ability to induce powerful antibody responses, at 0.2µg, 1µg and 5µg. As seen in Figure 3B of the publication, shown below, the NDV vaccine with R-DOTAP nanoparticles (Versamune ®) yielded the strongest antibody responses. Figure 3C, also shown below, highlighted Versamune ®’ s ability to induce the highest levels of neutralizing antibodies even at the lowest studied antigen dose of 0.2µg. Challenge studies also indicated that the Versamune ®-containing vaccine conferred protection against SARS-CoV-2 infection. We understand this broader projected range of eﬀective immunity to be a result of Versamune ®’s activation of Type I interferons (IFNs) critical to developing effective anti-viral immune responses, and also to promote presentation of the unique disease-associated protein or peptide to the appropriate compartment of the dendritic cells of the immune system. As a result of this capability, Versamuneâ has indicated there is potential for enhanced immunogenicity in the context of dose sparing of both flu and COVID-19 antigens through strong induction of neutralizing antibodies. Finally, in light of the chemical composition of PDS0203 as a subunit vaccine, we believe manufacturing scale-up for global deployment may encounter fewer challenges than is generally observed with more complex product candidates. 16 Index 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 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. Preclinical development studies will be performed at three sites: our Princeton, NJ laboratories, The University of Kentucky School of Medicine, and the CIVICs Center for Influenza Vaccine Research for High-Risk Populations. In December 2019, we entered into an Amended and Restated Material Transfer Agreement (MTA) with Farmacore to develop a novel tuberculosis, or TB, immunotherapy based on a combination of Farmacore’s proprietary TB antigens with Versamune ®. In preliminary evaluations, our Versamune®-based TB product, PDS0201, demonstrated highly promising TB-speciﬁc T-cell induction in-vivo. Under the Farmacore MTA, we will undertake product development and Farmacore will conduct in-vivo preclinical studies to evaluate product eﬃcacy. Testing to be performed in Brazil has been significantly hampered by the COVID-19 pandemic. The term of the agreement extends until the end of the initial product testing period. Since our inception in 2005, we have devoted substantially all our resources to developing our Versamune ® platform and our Versamune ®-based products, advancing preclinical programs, conducting clinical trials, manufacturing PDS0101 for clinical trials, and providing general and administrative support. We have funded our operations primarily from the issuance of common stock. We have not generated any product revenue to date. We have never been profitable and have incurred net losses in each year since our inception. 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®-based products; the outcome, timing and costs of seeking regulatory approvals; the impact of COVID-19 on company operations; 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. Leadership We are led by a team of executives and directors with signiﬁcant experience in drug discovery, development and commercialization. Our founder and CEO Frank Bedu-Addo, has been responsible for developing and launching products for Schering-Plough/ Merck and Liposome Company/ Elan. Our other co-founder and Chief Scientiﬁc Oﬃcer, Dr. Gregory Conn, has more than 35 years of drug-development experience, including development of antiviral and anticancer drugs through to commercialization. Other members of our senior management team have held senior positions at the National Cancer Institute Center for Cancer Research, and National Institute of Allergy and Infectious Diseases. Our Chief Financial Oﬃcer, Seth Van Voorhees, has experience leading the ﬁnancial operations at several public high-tech companies and has prior experience as an investment banker where he completed various capital raising and M&A transactions. The chairman of our board of directors, Stephen Glover was President of Insmed Therapeutic Proteins and is the current CEO of ZyVersa Therapeutics. Our director, Sir Richard Sykes was the CEO and Chairman of GSK. Our director, Dr. Otis Brawley, is the Bloomberg Distinguished Professor of Oncology and Epidemiology at John’s Hopkins School of Medicine and former Chief Medical and Scientific Officer at the American Cancer Society. 17 Index We are supported by scientiﬁc leaders in the ﬁeld of vaccine development and oncology. Among the distinguished experts on our Scientiﬁc Advisory Board are Dr. Mark Einstein and Professor Leaf Huang. Dr. Einstein, Professor and Chair in the Department of OB/ GYN & Women’s Heath at Rutgers University Medical School is an expert in HPV-related pathogenesis, therapy and prevention of lower anogenital tract and gynecologic cancers. He is an active leader for management guidelines and translating clinical study and translational data for the World Health Organization, American Cancer Society, Society of Gynecologic Oncology and the American College of Obstetrics and Gynecology. Professor Leaf Huang, one of our founders, is a Distinguished Professor of Pharmacoengineering and Molecular Pharmaceutics at the Eshelman School of Pharmacy, University of North Carolina at Chapel Hill pioneered the liposome design and manufacture of cationic lipid vector nanoparticles as a delivery system for cDNA, mRNA, siRNA, proteins and peptides for tumor growth inhibition and for vaccines in treating cancer and infectious diseases. Our Principal Investigator for the PDS0101 Head and Neck Study with KEYTRUDA for ﬁrst-line treatment of recurrent/ metastatic Head and Neck Cancer is Dr. Jared Weiss, Associate Professor of Medicine, University of North Carolina Lineberger Comprehensive Cancer Center, who is an expert in head and neck thoracic oncology with a focus on immunotherapeutic approaches for these diseases. Facilities & Manufacturing and Commercial scale up Product candidates using our Versamune® development platform are manufactured using a readily-scalable, ﬁll-ﬁnish process with well-deﬁned and reproducible operations. We do not own or operate cGMP compliant manufacturing facilities for the production of any of our product candidates and we do not have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturing organizations (“CMOs”) to produce the amounts of our product candidates necessary for our preclinical research and clinical studies. As part of the manufacture and design process for our product candidates, we rely on internal, scientiﬁc and manufacturing know-how and trade secrets and the know- how and trade secrets of third-party manufacturers. We currently employ internal resources to manage our manufacturing contractors. Our research and development activities are located at the Princeton Innovation Center BioLabs, 303A College Road East, Princeton, NJ 08540, which provides ﬁrst-rate development facilities for biotech companies. All animal toxicology and eﬃcacy testing are done via third party contracts and collaborations in order to provide maximum ﬂexibility and to minimize operational costs and overhead. This approach allows for independent validation of our data, and we believe it has historically been a cost-efficient way to progress our development programs. We do not intend to incur the costs of building, staﬃng and maintaining manufacturing facilities in the near term. The supply chain integrity was not negatively impacted by COVID-19 thus far. Our management team has formulation, manufacturing and operations expertise, including past senior executive management roles in contract drug development and manufacturing. Our management team plans to utilize its expertise and knowledge to identify suitable contract manufacturers who will be capable of efficiently manufacturing our products. Regulatory Pathway For our lead product candidate, PDS0101, the next step in the product development process are our ongoing Phase 2 clinical trials. This process is described further under “U.S. Product Development Process.” The ﬁnal protocols for all phase 2 clinical trials were submitted to the FDA prior to trial initiation and information for all three trials are on www.clinicaltrials.gov. To conform to the FDA electronic Common Technical Document format requirement and submission of the CGMP material that will be used in the Phase 2 trials for PDS0101, we submitted a Chemistry, Manufacturing, and Controls amendment to our Investigational New Drug application, related to PDS’s Phase 2 studies with PDS0101 to the FDA in 2020. If Phase 2 clinical trials support further development, under standard FDA processes we would then need to complete Phase 3 clinical trials and gather other necessary application data and information for PDS0101 to seek marketing authorization. We anticipate that we would seek marketing authorization from the FDA for our product candidates through the Biologics License Application pathway, under Section 351(a) of the Public Health Service Act. This process and the requirements are described further under “U.S. Product Development Process.” For our earlier stage, preclinical product candidates, we plan to work to develop data with the goal of progressing to an IND submission and clinical development. 18 Index Intellectual Property PATENTS We seek to maintain high barriers to entry around our product candidates and the markets in which they are utilized by using a multiple layered approach to our patents, patent applications, and substantial know-how and trade secrets related to the Versamune® platform. PDS strives to protect and enhance the proprietary technology, inventions and improvements that are commercially important to its business, including seeking, maintaining, and defending patent rights. PDS also relies on trade secrets relating to its platform and on know-how, continuing technological innovation to develop, strengthen and maintain its proprietary position in the vaccine ﬁeld. In addition, PDS relies on regulatory protection aﬀorded through data exclusivity, market exclusivity and patent term extensions where available. PDS also utilizes trademark protection for its company name, and expects to do so for products and/or services as they are marketed. PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune ® platform. As of December 31, 2020, PDS holds six (6) U.S. patents with granted claims directed to its platform technology and eight (8) pending patent applications. These issued patents will expire in 2028, 2029, 2031 and 2033. Should the more recently submitted patent applications currently in prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of March 8, 2021, PDS holds thirty (30) issued foreign patents and thirty four (34) pending or published foreign patent applications. Most of our international issued patents are issued in multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform technology. These issued patents will expire in 2031-2034, or later if patent term extension applies. Licensed Patents Licensed Patent Families 1 and 2 cover the Versamune ®-based product candidates, as they are directed to the currently utilized Versamune ® ingredient, (R)-DOTAP and its crystal forms, manufacturing methods, and pharmaceutical compositions using the compounds. PDS Biotechnology has an exclusive worldwide license from Merck & Cie to Licensed Patent Families 1 and 2, which are owned by Merck Patent GmbH, for use in the Company’s immunotherapy compositions and immunotherapies. Merck & Cie has informed the Company that it has rights to license these patent families through an intra-company agreement with Merck Patent GmbH. Licensed Patent Families 1-2 (which cover (R)-DOTAP compositions and crystal forms and methods of use) are also of signiﬁcance to the Company’s future commercial endeavors in using (R)-DOTAP to develop additional immunotherapies and immune modulators. Licensed Patent Families 3 and 4 are licensed from the US government and are directed to mucin-1 (“MUC-1”) antigens to be used by the Company in future cationic lipid immunotherapy or vaccine products. Such immunotherapies can be used for treating a range of cancers, including colon, breast, ovarian and lung cancers. Trade Secrets and Other Proprietary Information In contrast to patent protection or regulatory exclusivities, trade secret protection is a form of intellectual property that does not require disclosure of the subject information as part of the process, but instead depends on maintaining the subject information as strictly conﬁdential. Companies may in some circumstances rely on trade secrets to protect certain aspects of their proprietary know-how and technological advances, especially where they do not believe patent protection is appropriate or obtainable. Trade secret protection depends in part on conﬁdentiality agreements with employees, consultants, outside scientiﬁc collaborators, sponsored researchers and other advisors that prohibit disclosure of designated proprietary information. Trade secrets can be diﬃcult to protect. Conﬁdentiality agreements may not succeed in preventing a person or parties from actually disclosing conﬁdential information, and in that event the rights of the trade secret holder are subject to the viability of an adequate remedy at law, typically under state law modeled on the Uniform Trade Secrets Protection Act, to stop, mitigate or compensate for the unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the proprietary rights. Finally, there is always at least some risk that others may independently discover the trade secrets and proprietary information. 19 Index Material License Agreements and Research and Development Agreements Patent License Agreement with National Institutes of Health. Eﬀective January 5, 2015, PDS entered into a Patent License Agreement (the “Patent License Agreement”) as Amended by First Amendment to Patent License Agreement (“First Amendment”) of August 5, 2015, with the National Institutes of Health (“NIH”) an agency within the Department of Health and Human Services (“HHS”), pursuant to which NIH granted PDS a nonexclusive license to certain patent rights for the development of a therapeutic cancer vaccine speciﬁcally in combination with PDS’s proprietary Versamune ® technology for ovarian, breast, colon and lung cancers. The Patent License Agreement expires when the last licensed patent expires if the Patent License Agreement is not terminated prior to that date. NIH may terminate the Patent License Agreement if PDS is in default in the performance of any material obligation under the Patent License Agreement. PDS may unilaterally terminate the Patent License Agreement in any country or territory upon sixty (60) days written notice. Under the Patent License Agreement and First Amendment PDS agreed to pay NIH: (a) a noncreditable, nonrefundable royalty in the amount of $30,000 upon execution of the Patent License Agreement; (b) a noncreditable, nonrefundable royalty in the amount of $60,000 upon execution of the First Amendment to Patent License Agreement (c) a nonrefundable minimum annual royalty of $5,000; (d) earned royalties of two percent (2%) on net sales, reducible by a half percent (0.5%) for any earned royalties PDS must pay to third parties; (e) benchmark royalties as follows: (i) $25,000 upon successful completion of each Phase 2 Clinical Studies of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (ii) $50,000 upon initiation of the ﬁrst Phase 3 Clinical Study of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (iii) $750,000 upon the ﬁrst commercial sale in the licensed territory utilizing and/or directed to licensed product(s) and/or licensed process(es) within the licensed patent rights for breast, colon, lung or ovarian cancer; and (f) additional sublicensing royalties for each sublicense required to be approved by NIH of four percent (4%) on the fair market value of any consideration received for granting such sublicense. DOTAP Chloride Enantiomer License Agreement with Merck Eprova AG. Eﬀective November 1, 2008, PDS entered into a DOTAP Chloride Enantiomer License (the “DOTAP License Agreement”) with Merck Eprova AG (“EPRO”), pursuant to which PDS obtained an exclusive license from EPRO technology to undertake development of products relating to the R-enantiomer and S-enantiomer of DOTAP Chloride for worldwide commercialization in a composition and method of inducing an immune response in a subject by administering at least one cationic lipid with or without an antigen. The DOTAP License Agreement expires on a licensed product-by-licensed product and country-by-country basis until the expiration of the obligation to pay royalties applicable to such licensed product in such country. PDS has the right to unilaterally terminate the DOTAP License Agreement (in its entirety or on a licensed product-by-licensed product or country-by-country basis) at any time for any reason upon prior written notice. Upon the reverse merger and according the agreement under the “Compensation due to Assignability” provisions PDS paid a one-time royalty of CHF 100,00 as a result of the reverse merger between PDS and Edge Therapeutics. Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services. Eﬀective February 2, 2016, PDS entered into a Cooperative Research and Development Agreement (the “ CRADA”) with the U.S. Department of Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as deﬁned by the exhibited Research Plan. The principal goal of the CRADA is to determine whether PDS’s Versamune ® immunotherapeutic technology will be eﬀective for enhancing delivery of cancer vaccines or viral vaccines or other immunotherapies developed by the Vaccine Branch, Center for Cancer Research, NCI, in mouse models and in human clinical studies. The CRADA provides for development, testing and studies to be conducted in conjunction with the Vaccine Branch involving Versamune ® and Multi-epitope (ME) T cell receptor gamma alternate reading frame protein peptide (TARP) to develop a treatment for prostate cancer using autologous dendritic cells and co- administered locally with ME TARP peptides co-formulated with Versamune® immunotherapeutic technology in a non-cellular vaccine platform. 20 Index The term of the CRADA is ﬁve (5) years, starting February 2, 2016. Pursuant to Appendix A, PDS agreed to provide up to $1,000,000 but no less than $500,000 during the ﬁrst year of the CRADA and up to $1,000,000 but no less than $750,000 per year for the remaining years of the CRADA for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as well as to pay for supplies and travel expenses and, upon consent of the parties, to acquire support for a postdoctoral research fellow to conduct additional preclinical studies. The CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If PDS terminates prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, PDS must supply enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, PDS must pay non-cancellable obligations for personnel for a period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is sooner. If PDS suspends development on the test article without the transfer of its active development eﬀorts, assets, and obligations to a third party within ninety (90) days of discontinuation, NCI may continue development. In such event, PDS must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license regarding same. Cost Reimbursement Agreement with University of Kentucky Research Foundation - I. Eﬀective November 1, 2015, PDS entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as speciﬁed more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was renewed on July 1, 2020 for an anticipated cost of $444,477. The agreement terminates on June 30, 2021 unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days written notice. Cost Reimbursement and Sponsored Agreement with University of Kentucky Research Foundation - II. Eﬀective November 1, 2015, PDS entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as speciﬁed more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was renewed on July 1, 2020 for an anticipated cost of $13,987. The agreement terminates on June 30, 2021 unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days written notice. Clinical Trial Collaboration and Supply Agreement with MSD International GmbH. Eﬀective May 19, 2017, PDS entered into a Clinical Trial Collaboration and Supply Agreement (the “CTCSA”) with MSD International GmbH (“Merck”) pursuant to which PDS and Merck agreed to collaborate in a Phase 2 clinical study to evaluate the safety, and preliminary eﬃcacy of the concomitant and/or sequenced administration of the combination of a Merck compound (i.e., pembrolizumab, a humanized anti-human PD-1 monoclonal antibody) and a PDS compound (i.e., PDS0101, a cationic lipid-based therapeutic vaccine combining HPV peptides) in treatment of patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV 16) infection. The term of the CTCSA commenced on May 19, 2017 and shall continue until the earlier of (i) delivery of the ﬁnal study report and (ii) Study Completion (i.e., upon database lock of the Study results), or until terminated by either party. In the event the CTCSA is terminated by Merck upon a material breach by PDS, PDS must reimburse Merck for its direct manufacturing costs, such as manufacturing fees, raw materials, direct labor, freight and duty, factory overhead costs and its indirect manufacturing costs, such as allocations of indirect factory overhead and site support costs. This agreement was amended on October 28, 2019 to reﬂect the study will be for first in line treatment of disease. On October 28, 2019, PDS entered into an amendment to the clinical trial collaboration agreement with Merck to evaluate the combination of PDS’s lead Versamune®-based immunotherapy, PDS0101, with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in a Phase II clinical study. The modiﬁcation to the clinical study design to evaluate PDS0101 in combination with KEYTRUDA® as ﬁrst-line treatment comes as a result of Merck’s approval by the FDA on June 10, 2019 for ﬁrst line treatment of patients with metastatic or unresectable recurrent HNSCC using KEYTRUDA® in combination with platinum and ﬂuorouracil (FU) for all patients and as a single agent for patients whose tumors express PD-L1 as determined by an FDA- approved test. The study was initiated in November of 2020 to evaluate the eﬃcacy and safety of the combination as a ﬁrst-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection. 21 Index Other Research and Development Agreements Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services. Eﬀective April 22, 2019, PDS entered into a Cooperative Research and Development Agreement (the “ CRADA”) with the U.S. Department of Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as deﬁned by the exhibited Research Plan. Under the agreement, PDS will collaborate with the NCI’s Genitourinary Malignancies Branch (GMB) and Laboratory of Tumor Immunology and Biology (LTIB) with plans to conduct a Phase 2 clinical study evaluating PDS0101 with novel immune-modulating agents M7824 and NHS-IL12 being studied at NCI as part of a CRADA with EMD Serono (Merck KGaA). The phase 2 clinical study was initiated in June of 2020. The CRADA also involves preclinical evaluation of PDS0101 in combination with other therapeutic modalities upon the mutual agreement of both parties. In April 2020, this agreement was amended to include PDS0103, in preclinical and clinical development for treatment of ovarian, breast, colorectal and lung cancers. The term of the CRADA is ﬁve (5) years, starting April 22, 2019. Pursuant to Appendix A, PDS agreed to provide $110,000 annually, the ﬁrst payment of which is to be made on the ﬁrst anniversary the of the CRADA Eﬀective date or upon the initiation of a Phase II clinical study as the NIH Clinical Center, whichever comes ﬁrst for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as well as to pay for supplies and travel expenses and infrastructure costs. The CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If PDS terminates prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, PDS must supply enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, PDS must pay non- cancellable obligations for personnel for a period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is sooner. If PDS suspends development on the test article without the transfer of its active development eﬀorts, assets, and obligations to a third party within ninety (90) days of discontinuation, NCI may continue development. In such event, PDS must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license regarding same. Amended and Restated Material Transfer Agreement with Farmacore Biotechnology On December 4, 2019 PDS entered into an Amended and Restated Material Transfer Agreement with Farmacore Biotechnology to develop a novel tuberculosis (TB) immunotherapy based on Farmacore’s proprietary TB antigens and Versamune®. A prior material transfer agreement under which preliminary work commenced was Amended and Restated due to promising early pre- clinical results and to progress to the next development phase. PDS will undertake product development and Farmacore will conduct pre-clinical studies to evaluate the eﬃcacy of the product. The term of the agreement extends until the end of the product testing period and may be terminated at any time by either party with 30 days’ notice. License and Collaboration Agreement with Farmacore Biotechnology In June 2020, we announced a second collaboration with Farmacore to develop PDS0204, a vaccine to prevent COVID-19, combining Versamune® with Farmacore’s recombinant SARS-CoV-2 antigen. Based on the highly promising antibody and T-cell data generated with PDS0203, PDS and Farmacore amended the agreement to prioritize the advancement of PDS0203 to human clinical trials. Farmacore will retain commercialization rights in Latin America and revenues from Latin American sales will be shared between PDS and Farmacore. Under the Agreement, Farmacore leads the regulatory and clinical trial effort and PDS contributes scientific expertise and operational support. The Agreement term extends until the next phase of development and may be terminated with 30 days’ notice. 22 Index COVID-19 Impact on Business and Operations 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. Competition The biotechnology and pharmaceutical industries are characterized by intense competition to develop new technologies and proprietary products. While PDS believes that the Versamune® platform provides it with competitive advantages, PDS faces competition from many diﬀerent sources, including biotechnology and pharmaceutical companies, academic institutions, government agencies, as well as public and private research institutions. Any products that PDS may commercialize will have to compete with existing products and therapies as well as new products and immunotherapies that may become available in the future. PDS anticipates that it will face intense and increasing competition as new immunotherapies enter the market and advanced technologies become available. PDS expects any products that it develops and commercializes to compete on the basis of, among other things, eﬃcacy, safety, convenience of administration and delivery, price, availability of therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors. PDS’s competitors may obtain FDA or other regulatory approval for their products more rapidly than it may obtain approval for its products, which could result in PDS’s competitors establishing a strong market position before it is able to enter the market. In addition, the ability of PDS to compete may be aﬀected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. There is currently no approved HPV therapeutic product available for sale globally. PDS has performed an evaluation of HPV therapeutic products in development and considers the products utilizing eﬀective antigen delivery systems to the dendritic cells to be its closest competitors. PDS believes its top clinical-stage competitors include Etubics, Vaccibody, Admedus, Cel-Sci, Neo-ImmuneTech, Kite Pharma, Immune Design, Dynavax, Bavarian Nordic, Seattle Genetics, Selecta Biosciences Hookipa Pharm, ZIOPHARM Oncology, Heat Biologics, Genocea Biosciences, OncoSec Medical, Harpoon Therapeutics, and Gritstone Oncology. Government Regulation and Product Approval Federal, state and local government authorities in the United States and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post- approval monitoring and reporting, marketing and export and import of biological and pharmaceutical products such as those PDS is developing. PDS’s product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, its activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States. The process for obtaining regulatory marketing approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. 23 Index U.S. Product Development Process In the United States, the FDA regulates biological drug products under the Federal Food, Drug and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and implementing regulations. Products are also subject to certain other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-approval, may subject an applicant to administrative or judicial action. FDA decisions or enforcement actions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, ﬁnes, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on PDS. The process required by the FDA before a biological drug product may be marketed in the United States generally involves the following: • • • • • • • completion of nonclinical laboratory tests and animal studies according to good laboratory practice regulations, or GLP, and applicable requirements for the humane use of laboratory animals or other applicable regulations; submission to the FDA of an investigational new drug application, or an IND, which must become eﬀective before human clinical studies may begin; performance of adequate and well-controlled human clinical studies according to the FDA’s regulations commonly referred to as good clinical practice, or GCP, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use; submission to the FDA of a Biologics License Application, or BLA, for marketing approval that meets applicable requirements to ensure the continued safety, purity, and potency/eﬃcacy of the product that is the subject of the BLA based on results of nonclinical testing and clinical studies (including among other things clinical data, chemistry, and manufacturing and controls (CMC) data); satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity; pre-approval inspection by the FDA of the sponsor (or any third party service providers) relative to oversight of clinical studies, clinical trial sites that generated the data in support of the BLA, and any manufacturing facilities; and FDA review and approval, or licensure, of the BLA. Before testing any product candidate in humans, the product enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The results of preclinical studies and early clinical studies of product candidates with small patient populations may not be predictive of the results of later-stage clinical studies or the results once the applicable clinical studies are completed. The IND automatically becomes eﬀective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical studies and places the study on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, PDS cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies. 24 Index Clinical trials involve the administration of the biological product candidate to volunteers or patients under the supervision of qualiﬁed investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection (for example, inclusion and exclusion criteria), and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND and also require IRB approval. Clinical trials must be conducted and monitored in accordance with the FDA law including GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated beneﬁts. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • • • Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in seriously ill subjects. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and pharmacologic actions of the investigational product in humans, the side eﬀects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse eﬀects and safety risks, to preliminarily evaluate the eﬃcacy of the product for speciﬁc targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. Multiple Phase 2 clinical studies may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical studies. Phase 3. Clinical studies, which must be adequate and well-controlled, are undertaken to further evaluate dosage, clinical eﬃcacy, potency, and safety in an expanded patient population generally at geographically dispersed clinical trial sites. These clinical studies are intended to establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling. Although these are the typical phases of progression, and characteristics of the phases of a clinical development program, certain expedited programs allow for variations that could support a marketing application based on surrogate endpoints, intermediate clinical endpoints, or single-arm as opposed to comparative or placebo-controlled studies (for example, FDA could rely on well-controlled Phase 2 studies for evidence of eﬀectiveness under certain circumstances). Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow- up, or to gain other information about the product. During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators of potential safety risks, from clinical trials or any other source, including for serious and unexpected adverse events and serious and unexpected suspected adverse reactions, any ﬁndings from other studies suggesting a signiﬁcant risk in humans exposed to the drug, tests in laboratory animals or in vitro testing that suggest a signiﬁcant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualiﬁes for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but no later than within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any speciﬁed period, if at all. The FDA, the sponsor or its data safety monitoring board, or DSMB, may suspend or terminate a clinical trial at any time on various grounds, including a ﬁnding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to subjects. 25 Index Information about certain clinical trials must be submitted within speciﬁc timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website, and other jurisdictions have similar laws that may apply. Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical characteristics of the biological product as well as ﬁnalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely deﬁned. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the ﬁnal biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life. U.S. Review and Approval Processes After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes require substantial time and eﬀort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a signiﬁcant application fee. For approved drugs, including BLA-licensed biological products, PDUFA also imposes an annual PDUFA program fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the ﬁrst application ﬁled by a small business. No user fees are assessed on BLAs for products designated as orphan drugs unless the application for the product also includes a non-orphan indication. Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for ﬁling. The FDA may refuse to ﬁle any BLA that it deems incomplete or not properly reviewable at the time of submission, and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for ﬁling. Once the submission is accepted for ﬁling, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or eﬀective for its intended use, and has an acceptable purity proﬁle, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer an application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, and applications for new molecular entities and original BLAs are generally discussed at advisory committee meetings unless the FDA determines that this type of consultation is not needed under the circumstances. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. Before approving a BLA, the FDA will typically inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it is satisﬁed that the manufacturing establishments and processes supporting the BLA meet the appropriate requirements and comply with the applicable regulations (including cGMP requirements and adequate assurance for consistent commercial production of the product within required speciﬁcations). Additionally, before approving a BLA, the FDA will typically conduct a pre-approval inspection of regulated participants in clinical trials (for example, the sponsor, investigators responsible for speciﬁc sites, and CROs) to assure that the clinical trials were conducted in compliance with the IND and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur signiﬁcant expenditure of time, money and eﬀort in the areas of training, record keeping, production, and quality control. Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data diﬀerently than PDS interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all of the speciﬁc deﬁciencies in the BLA identiﬁed by the FDA. The deﬁciencies identiﬁed may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. 26 Index If a product receives regulatory approval, the approval may be signiﬁcantly limited to speciﬁc diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase 4 clinical studies, designed to further assess a biological product’s safety and eﬀectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized. In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA for a new indication, dosage form, dosage regimen, or route of administration must contain data that are adequate to assess the safety and eﬀectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and eﬀective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Post-Approval Requirements Any products for which PDS receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record- keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and eﬃcacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses or consistent with the approved labeling, known as ‘oﬀ-label’ use, limitations on industry-sponsored scientiﬁc and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, if the physicians deem to be appropriate in their professional medical judgment, manufacturers may not market or promote such oﬀ-label uses. Recent court decisions have impacted the FDA’s enforcement activity regarding oﬀ-label promotion in light of First Amendment considerations; however, there are still signiﬁcant risks in this area in part due to the potential False Claims Act exposure. Further, the FDA has not materially changed its position on oﬀ-label promotion following legal setbacks on First Amendment grounds and the DOJ has consistently asserted in FCA brieﬁngs that “speech that serves as a conduit for violations of the law is not constitutionally protected.” In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability of the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and eﬀort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the signiﬁcance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and claims, are also subject to further FDA review and approval. The Drug Supply Chain Security Act, or DSCSA imposes obligations on manufacturers of prescription biopharmaceutical products for commercial distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of entities in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers, and dispensers). The DSCSA preempts certain previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing Act, or PDMA. Trading partners within the drug supply chain must now ensure certain product tracing requirements are met that they are doing business with other authorized trading partners; and they are required to exchange transaction information, transaction history, and transaction statements. Product identiﬁer information (an aspect of the product tracing scheme) is also now required. The DSCSA requirements, development of standards, and the system for product tracing have been and will continue to be phased in over a period of years, with the FDA indicating enforcement discretion on certain aspects due to the COVID-19 pandemic. The distribution of product samples continues to be regulated under the PDMA, and some states also impose regulations on drug sample distribution. 27 Index The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the eﬀects of an approved product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or eﬀectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of its product candidates under development. Regulatory Exclusivities Applicable to Biologics and Related Matters Abbreviated Licensure Pathway for Biosimilars: The Biologics Price Competition and Innovation Act of 2009 (BPCIA) amended the PHSA to create an abbreviated approval pathway for “biosimilar” biologics, that is, those shown to be highly similar to an already-FDA-licensed reference biologic. The abbreviated approval process for biosimilars under the BPCIA is similar in concept to the Abbreviated New Drug Application (“ANDA”) for generic small molecule drugs established by the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch-Waxman”) amendments to the FDCA. As with Hatch-Waxman, the goal of the BPCIA was to increase access to lower-priced versions of drugs, while balancing the need to continue incentivizing innovation in drug development. Biosimilarity is deﬁned to mean that the proposed biologic is highly similar to the reference product notwithstanding minor diﬀerences in clinically inactive components and that there are no clinically meaningful diﬀerences between the biological product and the reference product in terms of the safety, purity and potency of the product. Further, a biosimilar may be determined to be “interchangeable” with the reference product, in which case the biosimilar may be substituted for the reference product under state substitution laws, similar to the way generic small molecule drugs are substituted. The higher standard of interchangeability requires a showing that the biosimilar is expected to produce the same clinical result as the reference biologic in any given patient, and further that the risk to the patient in terms of safety, purity, and/or potency pf switching between the biosimilar and the reference product is no more than using the reference product without switching. Regulatory Exclusivities Applicable to Biologics Under the BPCIA: The BPCIA established certain regulatory exclusivities that provide reference biologics with prescribed periods of time during which competing biosimilars or interchangeable biosimilars may not be approved or may not be marketed. Once its BLA is approved (“date of ﬁrst licensure) the reference biologic is entitled to a period of four years after its date of ﬁrst licensure during which time FDA is prohibited from accepting a marketing application that would seek approval of any products that are biosimilar to the branded product. In addition, the reference biologic is entitled to a period of 12 years after its date of ﬁrst licensure during which time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. In addition, the ﬁrst interchangeable biosimilar may be entitled to a period of one year after its date of ﬁrst licensure, or other periods keyed to the outcome of patent litigation if instituted, during which FDA is prohibited from ﬁnding that any other biosimilars are interchangeable to the same reference biologic. The reference biologic may also be entitled to regulatory exclusivity under other statutory provisions that apply to biologics and small molecule drugs. Orphan Drug Exclusivity: Under the Orphan Drug Act, the FDA may grant orphan drug designation to biological products indicated for a rare disease or condition, generally a disease or condition that aﬀects fewer than 200,000 individuals in the United States, or in the alternative there is no reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the biological product and its potential orphan use are disclosed publicly by the FDA. The ﬁrst BLA sponsor to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a period of 12 years after its date of ﬁrst licensure during which time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. There is an exception in certain limited circumstances, such as for a showing of clinical superiority to the product with orphan drug exclusivity. A product is clinically superior if it is safer, more eﬀective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a diﬀerent drug or biological product for the same disease or condition, or the same biological product for a diﬀerent disease or condition. Other beneﬁts of orphan drug designation include tax credits for certain research and a waiver of the BLA user fee. Pediatric Study Requirements and Pediatric Exclusivity: Under the Best Pharmaceuticals for Children Act (BPCA), a sponsor qualiﬁes for “pediatric exclusivity” if it complies with a Written Request (WR) issued by FDA for pediatric studies. The sponsor may apply to FDA to issue a WR. Pediatric exclusivity operates by adding six months of exclusivity on to the end of the latest-expiring form of exclusivity, and may apply to patent rights or to FDA regulatory exclusivities. To qualify for pediatric exclusivity, at least one of those rights must still be currently in force at the time FDA approves the pediatric studies. 28 Index Patent Term Extensions: Patents have a limited lifespan. In most countries, including the U.S., the standard expiration of a patent is 20 years from the eﬀective ﬁling date. Various extensions of patent terms may be available in certain circumstances, for example where there are delays in obtaining FDA regulatory approvals that result in a reduction of the period of time during which we could market a product under patent protection. In the U.S., such possible extensions include those permitted under Hatch-Waxman, which permits a patent term extension of up to ﬁve years to cover an FDA- approved product. The actual length of the extension will depend on the amount of patent term lost while the product was in clinical trials, and FDA must agree with our calculation of the time lost in regulatory review. Other U.S. Healthcare Laws and Compliance Requirements In the United States, PDS’s activities are potentially subject to regulation, either directly or indirectly, by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, for instance the Office of Inspector General (OIG), the U.S. Department of Justice (DOJ), and individual U.S. Attorney oﬃces within the DOJ, and state and local governments. For example, sales, marketing and scientiﬁc/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the criminal provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the federal Anti-Kickback Statute, the federal false claims laws, the physician payment transparency laws, and similar state laws, each as amended. The compliance and enforcement landscape, and related risk, is informed by government enforcement precedent and settlement history, Advisory Opinions, and Special Fraud Alerts. Our approach to compliance may evolve over time in light of these types of developments. The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully oﬀering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor, however, does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. PDS’s practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. The lack of uniform court interpretation of the Anti-Kickback Statute combined with emerging, novel enforcement theories, makes compliance with the law diﬃcult. The potential safe harbors available are subject to change through legislative and regulatory action, and we may decide to adjust our business practices or be subject to heightened scrutiny as a result. Violations of the federal Anti-Kickback Statute can result in signiﬁcant criminal ﬁnes, exclusion from participation in Medicare and Medicaid and follow-on civil litigation, among other things, for both entities and individuals. Additionally, the intent standard under the Anti-Kickback Statute was amended by the Aﬀordable Care Act to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or speciﬁc intent to violate it in order to have committed a violation. In addition, the Aﬀordable Care Act codiﬁed case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a per se false or fraudulent claim for purposes of the federal False Claims Act, as discussed below. The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare beneﬁt program, including private third-party payers. Federal criminal law at 18 U.S.C. § 1001, among other sections, prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, ﬁctitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. 29 Index The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The qui tam provisions of the False Claims Act and similar state laws allow a private individual to bring civil actions on behalf of the federal or state government and to share in any monetary recovery. As a result of a modiﬁcation made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government, whether directly or indirectly. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses. HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare beneﬁt program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, ﬁctitious or fraudulent statement in connection with the delivery of or payment for healthcare beneﬁts, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Also, many states have enacted similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor, even extending to self-pay items and services. PDS may be subject to data privacy and security regulations by both the federal government and the states in which it conducts its business. We are not a covered entity under HIPAA and have not functioned as a business associate under HIPAA that would cause the HIPAA Security Rule and provisions of the Privacy Rule to apply directly to us as a business associate. To the extent that we ever function in a business associate capacity, HIPAA, as amended by the HITECH Act, and its respective implementing regulations, including the ﬁnal omnibus rule published on January 25, 2013, imposes requirements relating to the privacy, security and transmission of individually identiﬁable health information. Following enactment of the HITECH Act, HIPAA’s privacy and security standards now directly apply to business associates of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, gave state attorneys general new authority to ﬁle civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in speciﬁed circumstances, many of which diﬀer from each other in signiﬁcant ways, and may apply more broadly thus complicating compliance eﬀorts (for example, California recently enacted legislation — the California Consumer Privacy Act, or CCPA — which went into eﬀect on January 1, 2020 and among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information, and creates a private right of action with statutory damages for certain data breaches. The CCPA was recently amended by the California Privacy Rights Act, or CPRA, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modiﬁcations will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential eﬀects of the CCPA and CPRA and implementing regulations are significant and may cause us to incur substantial costs and expenses to comply. Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or aﬀecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. The FTC’s authority under Section 5 is concurrent with HIPAA’s jurisdiction and with any action taken under state law. 30 Index Additionally, the Federal Physician Payments Sunshine Act under the Aﬀordable Care Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures”. In 2022 the Sunshine Act reporting will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into eﬀect in 2022 for payments made in 2021). Certain states also mandate implementation of compliance programs, impose restrictions on pharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to healthcare providers and entities. In order to distribute products commercially, PDS must also comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, ﬁle periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical studies and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of PDS’s activities are potentially subject to federal and state consumer protection and unfair competition laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between pharmaceutical companies and providers and patients, which has led to a number of investigations, prosecutions, convictions and settlements in the industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert management’s attention from the business, even if investigators ultimately find that no violation has occurred. If PDS operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to it, PDS may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties; damages; ﬁnes; disgorgement; exclusion from participation in government programs, such as Medicare and Medicaid; injunctions; private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow it to enter into government contracts; contractual damages; reputational harm; administrative burdens; diminished proﬁts and future earnings; and the curtailment or restructuring of its operations; any of which could adversely aﬀect PDS’s ability to operate its business and its results of operations. Coverage, Pricing and Reimbursement Signiﬁcant uncertainty exists as to the coverage and reimbursement status of any product candidates for which PDS obtains regulatory approval. In the United States and markets in other countries, sales of any products for which PDS receives regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to speciﬁc products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-eﬀectiveness of medical products, therapies and services, in addition to questioning their safety and eﬃcacy. PDS may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-eﬀectiveness of its tablet product candidates, in addition to the costs required to obtain the FDA approvals. PDS’s product candidates may not be considered medically necessary or cost-eﬀective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable PDS to maintain price levels suﬃcient to realize an appropriate return on its investment in product development. 31 Index Diﬀerent pricing and reimbursement schemes exist in other countries. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical studies that compare the cost-eﬀectiveness of a particular product candidate to currently available therapies. Other countries allow companies to ﬁx their own prices for medicines, but monitor and control company proﬁts. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross- border imports from low-priced markets exert a commercial pressure on pricing within a country. The marketability of any product candidates for which it receives regulatory approval for commercial sale may suﬀer if the government and third- party payors fail to provide adequate coverage and reimbursement, or require onerous prior approvals or other restricted access. In addition, emphasis on managed care in the United States has increased and PDS expects the pressure on healthcare pricing will continue to increase. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which PDS receives regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. U.S. Healthcare Reform In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive reforms aﬀecting the payment for, the availability of and reimbursement for healthcare services. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. PDS anticipates that current and future U.S. legislative healthcare reforms may result in additional downward pressure on the price that PDS receives for any approved product, if covered, and could seriously harm its business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent PDS from being able to generate revenue, attain proﬁtability or commercialize its product candidates. In addition, it is possible that there will be further legislation or regulation that could harm its business, financial condition and results of operations. For example, the Patient Protection and Aﬀordable Care Act (ACA) which was signed into law in the United States in March 2010, contained several provisions affecting the pharmaceutical industry. On December 15, 2019, a federal district court in Texas struck down the ACA in its entirety, ﬁnding that the Tax Cuts and Jobs Act of 2017, renders the individual mandate unconstitutional. The judge further concluded that since the individual mandate is “essential” to the ACA, it could not be severed from the rest of the ACA and therefore, the entire ACA was unconstitutional. Despite its decision, however, the court did not issue an injunction and therefore, immediate compliance is not required. The U.S. Supreme Court agreed to hear this case. Oral argument took place on November 10, 2020, and a ruling by the Court is expected sometime this year. Although litigation and legislation over the Aﬀordable Care Act are likely to continue, with unpredictable and uncertain results, we expect that the Biden administration may seek to expand and strengthen the Aﬀordable Care Act. Furthermore, it is unclear how the eventual decisions from the Supreme Court and the various other courts across the country to repeal and replace the ACA will impact the ACA and our business. It is also unclear how regulations and sub-regulatory policy, which ﬂuctuate continually, may aﬀect interpretation and implementation of the ACA and its practical effects on our business. There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, U.S. federal prosecutors have issued subpoenas to pharmaceutical companies seeking information about pricing practices in connection with an investigation into pricing practices being conducted by the U.S. Department of Justice. Several state attorneys general also have commenced drug pricing investigations and ﬁled lawsuits against pharmaceutical companies, and the U.S. Senate has publicly investigated a number of pharmaceutical companies relating to price increases and pricing practices. Proposed legislation has been designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. Drug pricing is and will remain a key legislative issue in the coming year, although we do not know the steps the Biden Administration will take with respect to drug pricing. 32 Index At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products or put pressure on our product pricing. We expect that additional state healthcare reform measures will be adopted in the future, which could limit the amounts that state governments will pay for healthcare products and services and result in additional pricing pressures. The boom in state laws targeting drug pricing is unprecedented and the requirements are not uniform from state to state, creating additional compliance and commercialization challenges for manufacturers. If PDS is able to obtain marketing approval for one or more of our products, our revenue and future proﬁtability could be negatively aﬀected if these or other inquiries were to result in legislative or regulatory proposals that limit our ability to increase the prices of any products for which we obtain marketing approval. Foreign Regulation In order to market any product outside of the United States, PDS would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and eﬃcacy and governing, among other things, clinical studies, marketing authorization, commercial sales and distribution of its products. Whether or not PDS obtains FDA approval for a product, it would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical studies or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might diﬀer from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose signiﬁcant compliance obligations. Moreover, the collection and use of personal health data in the European Union, which was formerly governed by the provisions of the European Union Data Protection Directive, was replaced with the European Union General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and conﬁdentiality of the personal data, data breach notiﬁcation and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for ﬁnes of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business. Employees PDS’s management team possesses considerable experience in drug development research, manufacturing, clinical development and regulatory matters. PDS’ virtual operating strategy of collaborating with scientiﬁc and clinical experts in cancer immunology, tumor immunology and gynecological oncology provides additional considerable experience in immunotherapy development, clinical design and execution. PDS has no collective bargaining agreements with its employees and it has not experienced any work stop pages. Legal Proceedings From time to time, PDS may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Litigation, regardless of the outcome, could have an adverse impact on PDS because of defense and settlement costs, diversion of management resources and other factors. PDS is not currently a party to any legal proceedings, the adverse outcome of which, in PDS’s management’s opinion, individually or in the aggregate, would have a material adverse effect on PDS’s results of operations or financial position. Employees and Human Capital Management As of December 31, 2020, we had 15 employees. None of our employees are subject to a collective bargaining agreement. Our employees are highly skilled, and many hold advanced degrees. We consider our relationship with our employees to be good. Our future performance depends signiﬁcantly upon the continued service of our key scientiﬁc, technical and senior management personnel and our continued ability to attract and retain highly skilled employees. We provide our employees with market salaries and bonuses, opportunities for equity ownership, development programs that enable continued learning and growth and a robust employment package that promotes well-being across all aspects of their lives. In addition to salaries, these programs include potential annual discretionary bonuses, stock awards, a 401(k) plan, healthcare and insurance beneﬁts, health savings and ﬂexible spending accounts, paid time oﬀ, family leave, and ﬂexible work schedules, among other beneﬁts. We have taken proactive, aggressive action throughout the COVID-19 pandemic to protect the health and safety of our employees. We 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, in compliance with all appropriate government regulations, that we determine to be in the best interest of our employees. 33 Index ITEM 1A. Risk Factors The risks described below may not be the only ones relating to our company. 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. Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K, including our financial statements and related notes, and our other filings from time to time with the Securities and Exchange Commission or SEC. Risk Factors Summary Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following principal risk factors that make an investment in our company speculative or risky. You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below: • We have incurred signiﬁcant losses since our inception and expect to continue to incur signiﬁcant losses for the foreseeable future and may never achieve or maintain profitability. • We are dependent on the success of PDS0101, which is still in early-stage clinical development, and if PDS0101 does not receive regulatory approval or is not successfully commercialized, our business may be harmed. • We have a limited operating history and have never generated any product revenue. • We will require additional capital to fund our operations, and if we fail to obtain necessary ﬁnancing, we may not be able to complete the development and commercialization of our Versamune® Products. • Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights. • We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations. • Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations. • If we fail to maintain an eﬀective system of internal control over ﬁnancial reporting in the future, we may not be able to accurately report our ﬁnancial condition, results of operations or cash ﬂows, which may adversely aﬀect investor conﬁdence in us and, as a result, the value of our common stock. Further, we continue to incur signiﬁcant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. • Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks. • • • Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal control over ﬁnancial reporting, are costly and may increase substantially and, as a smaller reporting company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to investors. Clinical trials are very expensive, time-consuming, diﬃcult to design and implement and involve an uncertain outcome, and if they fail to demonstrate safety and eﬃcacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101 and other Versamune® based products. Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more diﬃcult or rendered impossible by multiple factors outside our control. • We face signiﬁcant competition from other biotechnology and pharmaceutical companies, and our operating results will suﬀer if we fail to compete effectively. • Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and eﬃcacy of our product candidates; early results and early understanding of product candidate potential may not be predictive of later success. • We have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such. • • • If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, it may not be successful in commercializing PDS0101, if approved. If we obtain approval to commercialize PDS0101 outside of the United States, a variety of risks associated with international operations could harm our business. Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the diﬃculty and cost for us to obtain marketing approval of and commercialize PDS0101 and affect the prices we may obtain and our profitability. • We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse eﬀect on our business, ﬁnancial condition, results of operations and prospects. • Our stock price is expected to be volatile, and the market price of our common stock may drop in the future. • We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. • If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited. • Our business could be adversely aﬀected by the eﬀects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, in regions where we or third parties on which we rely have signiﬁcant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially aﬀect our operations, including at our headquarters in New Jersey, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business. • If we are unable to obtain and maintain patent protection for our Versamune ® platform, PDS0101, or other Versamune ® Products or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets. • We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful. • • If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, ﬁnes, disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm, and the curtailment of our operations, any of which could harm our business. Changes in tax laws and regulations or our operations may impact our eﬀective tax rate and may adversely aﬀect our business, financial condition and operating results. 36 Index Risks Related to Our Business, Financial Position and Capital Requirements We have a limited operating history and have never generated any product revenue. We are a clinical-stage biopharmaceutical company with a limited operating history. Our operations to date have been limited to organizing our company and developing the Versamune® platform and related immunotherapy product candidates that incorporate the technology of our Versamune ® platform. We have not yet successfully completed a large-scale, pivotal clinical trial, obtained marketing approval, manufactured Versamune® at commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize our Versamune ® products. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing immunotherapies. Our ability to generate revenue and achieve and maintain proﬁtability will depend upon our ability to successfully complete the development of our Versamune®-based products for the treatment of HPV-related cancers, or PDS0101, and/or complete the development of our PDS0102, PDS0103, or PDS0104 products, or, collectively with PDS0101, the Versamune® Products, for treatment of non-HPV-related cancers and other infectious diseases and to obtain the necessary regulatory approvals. We have never generated any product revenue and have no immunotherapy candidate in late-stage clinical development or approved for commercial sale. Even if we receive regulatory approval for the sale of the Versamune ® Products, we do not know when we will begin to generate revenue from PDS0101, if at all. Our ability to generate revenue depends on a number of factors, including our ability to: ● ● ● ● ● ● ● set an acceptable price for Versamune ®-based immunotherapy candidates, including the Versamune ® Products, and obtain coverage and adequate reimbursement from third-party payors; establish sales, marketing, manufacturing and distribution systems; add operational, financial and management information systems and personnel, including personnel to support our clinical, manufacturing and planned future clinical development and commercialization efforts and operations as a public company; develop manufacturing capabilities for bulk materials and manufacture commercial quantities of PDS0101 and other Versamune ® Products at acceptable cost levels; achieve broad market acceptance of PDS0101 and other Versamune ® Products in the medical community and with third-party payors and consumers; attract and retain an experienced management and advisory team; launch commercial sales of PDS0101 and other Versamune ® Products, whether alone or in collaboration with others; and ● maintain, expand and protect our intellectual property portfolio. Because of the numerous risks and uncertainties associated with immunotherapy development and manufacturing, we are unable to predict the timing or amount of increased development expenses, or when we will be able to achieve or maintain proﬁtability, if at all. Our expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or comparable non-U.S. regulatory authorities, to perform studies or clinical trials in addition to those we currently anticipate. Even if PDS0101 is approved for commercial sale, we anticipate incurring signiﬁcant costs associated with the commercial launch of and the related commercial-scale manufacturing requirements for PDS0101 and other Versamune® Products. If we cannot successfully execute on any of the factors listed above, our business may not succeed, and your investment will be adversely affected. 36 Index We have incurred signiﬁcant losses since our inception and expect to continue to incur signiﬁcant losses for the foreseeable future and may never achieve or maintain profitability. We have never generated any product revenues and expect to continue to incur substantial and increasing losses as we continue to develop PDS0101 and other Versamune® based Products. PDS0101 has not been approved for marketing in the United States and may never receive such approval. As a result, we are uncertain when or if we will achieve proﬁtability and, if so, whether we will be able to sustain it. Our ability to generate revenue and achieve proﬁtability is dependent on our ability to complete development, obtain necessary regulatory approvals, and have PDS0101 manufactured and successfully marketed. We cannot assure you that we will be proﬁtable even if we successfully commercialize PDS0101 or other Versamune® Products. If we successfully obtain regulatory approval to market PDS0101, our revenues will be dependent, in part, upon, the size of the markets in the territories for which regulatory approval is received, the number of competitors in such markets for the approved indication, and the price at which we can oﬀer PDS0101. If the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate signiﬁcant revenue from sales of PDS0101, even if approved. Even if we do achieve proﬁtability, we may not be able to sustain or increase proﬁtability on a quarterly or annual basis. If we fail to become and remain proﬁtable the market price of our common stock and our ability to raise capital and continue operations will be adversely affected. We expect research and development expenses to increase signiﬁcantly for PDS0101 and other Versamune ® Products. In addition, even if we obtain regulatory approval, signiﬁcant sales and marketing expenses will be required to commercialize PDS0101. As a result, we expect to continue to incur signiﬁcant and increasing operating losses and negative cash ﬂows for the foreseeable future. These losses have had and will continue to have an adverse effect on our financial position and working capital. As of December 31, 2020 and 2019, we had an accumulated deficit of $43.8 and $28.9 million, respectively. We are dependent on the success of PDS0101, which is still in early-stage clinical development, and if PDS0101 does not receive regulatory approval or is not successfully commercialized, our business may be harmed. PDS0101 is only in early clinical development, and as a consequence, it is too early to determine whether the Versamune ® Products will ever be approved for commercial sale or marketable. We expect that a substantial portion of our eﬀorts and expenditures over the next few years will be devoted to PDS0101 and other Versamune® Products. Accordingly, our business currently depends heavily on the successful development, regulatory approval and commercialization of PDS0101. PDS0101 may not receive regulatory approval or be successfully commercialized even if regulatory approval is received. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of PDS0101 is and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have diﬀering regulations. We are not permitted to market PDS0101 in the United States until it receives approval of a biologics license application, or BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. To date, we have only completed Phase 1/2A clinical trials for certain applications of PDS0101. As a result, we have not submitted a BLA to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so for the foreseeable future. Obtaining approval of a BLA is an extensive, lengthy, expensive and inherently uncertain process, and the FDA may delay, limit or deny approval of PDS0101 for many reasons, including: ● we may not be able to demonstrate that PDS0101 is safe and effective to the satisfaction of the FDA; ● ● ● ● ● ● ● the FDA may not agree that the completed Phase 1/2A clinical trials of PDS0101 satisfy the FDA’s requirements and may require us to conduct additional testing; the results of our future clinical trials may not meet the level of statistical or clinical significance required by the FDA for marketing approval; the FDA may disagree with the number, design, size, conduct or implementation of one or more of our clinical trials; the contract research organizations, or CROs, that we retain to conduct clinical trials may take actions outside of our control that materially and adversely impact our clinical trials; the FDA may not ﬁnd the data from our preclinical studies and clinical trials suﬃcient to demonstrate that the clinical and other beneﬁts of PDS0101 outweigh the safety risks; the FDA may disagree with our interpretation of data from our preclinical studies and clinical trials; the FDA may not accept data generated at our clinical trial sites; 37 Index ● ● ● ● if our BLA is reviewed by an advisory committee, the FDA may have diﬃculties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions; the FDA may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval; the FDA may identify deficiencies in our manufacturing processes or facilities; or the FDA may change its approval policies or adopt new regulations. We will require additional capital to fund our operations, and if we fail to obtain necessary ﬁnancing, we may not be able to complete the development and commercialization of our Versamune® Products. We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize PDS0101. Even with our current cash reserves, we will require substantial additional capital to complete the development and potential commercialization of PDS0101 and the development of other Versamune® Products. If we are unable to raise capital or find appropriate partnering or licensing collaborations, when needed or on acceptable terms, if at all, we could be forced to delay, reduce or eliminate one or more of our development programs or any future commercialization eﬀorts. In addition, attempting to secure additional ﬁnancing may divert the time and attention of our management from day-to-day activities and harm our development efforts. Based upon our current operating plan, we believe that our cash reserves will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this report. Our estimate as to what we will be able to accomplish is based on assumptions that may prove to be inaccurate, and we could exhaust our available capital resources sooner than is currently expected. Because the length of time and activities associated with successful development of PDS0101 is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: ● ● ● ● ● ● ● the initiation, progress, timing, costs and results of our planned clinical trials; the outcome, timing and cost of meeting regulatory requirements established by the FDA 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 any 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 PDS0101 on our own; and the initiation, progress, timing and results of the commercialization of PDS0101, if approved, for commercial sale. Additional funding may not be available on acceptable terms, or at all. If we are unable to raise additional capital in suﬃcient amounts or on terms acceptable to us, we may have to signiﬁcantly delay, scale back or discontinue the development or commercialization of PDS0101 or potentially discontinue operations. In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, at our discretion, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock, or the Purchased Shares, over the 30-month 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 the Company’s 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. 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. As of December 31, 2020, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement. Further, our use of the Aspire Purchase Agreement is subject to certain additional limitations set forth elsewhere in this report. As such, our ability to use the Aspire Purchase Agreement to raise additional capital is uncertain. 38 Index Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights. We expect that signiﬁcant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, as we can generate substantial product revenues, we expect to ﬁnance our cash needs through a combination of equity oﬀerings, including through the Aspire Purchase Agreement (assuming all conditions for the issuance of the Purchased Shares under the Aspire Purchase Agreement are satisﬁed), debt ﬁnancings, strategic alliances and license and development agreements in connection with any collaborations. 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. We received gross proceeds of approximately $13 million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions. 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. To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely aﬀect your rights as a common stockholder. Debt ﬁnancing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming our stock or making investments. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or Versamune® Products or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt ﬁnancings when needed, or through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties on acceptable terms, we may be required to delay, limit, reduce or terminate our PDS0101 development or future commercialization eﬀorts or grant rights to develop and market other Versamune® Products that we would otherwise develop and market. Our future success depends on our ability to retain executive officers and attract, retain and motivate qualified personnel. We are highly dependent on our executive oﬃcers and the other principal members of the executive and scientiﬁc teams, particularly our President and Chief Executive Oﬃcer, Dr. Frank K. Bedu-Addo, our Chief Medical Oﬃcer, Dr. Lauren Wood, our Chief Financial Oﬃcer, Dr. Seth Van Voorhees and our Chief Scientiﬁc Oﬃcer, Dr. Gregory L. Conn. The employment of our executive oﬃcers are at-will and our executive oﬃcers may terminate their employment at any time, subject to applicable notice requirements. The loss of the services of any of our senior executive oﬃcers could impede the achievement of our research, development and commercialization objectives. We do not maintain “key person” insurance for any executive officer or employee. Recruiting and retaining qualiﬁed scientiﬁc, clinical, and operational personnel is also critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. we also experience competition for the hiring of scientiﬁc and clinical personnel from universities and research institutions. Our industry has experienced an increasing rate of turnover of management and scientiﬁc personnel in recent years. In addition, we rely on consultants and advisors, including scientiﬁc and clinical advisors, to assist us in devising our research and development and commercialization strategy. Our consultants and advisors may be employed by third parties and have commitments under consulting or advisory contracts with other entities that may limit their availability to advance our strategic objectives. If any of these advisors or consultants can no longer dedicate a suﬃcient amount of time to the company, our business may be harmed 39 Index If we fail to obtain or maintain adequate coverage and reimbursement for PDS0101, our ability to generate revenue could be limited. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to aﬀord expensive treatments. Sales of any of PDS0101 that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of PDS0101 will be paid by health maintenance, managed care, pharmacy beneﬁt and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only on a limited basis, we may not be able to successfully commercialize PDS0101. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow it to realize a suﬃcient return on our investment. Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price PDS0101 on less favorable terms than we currently anticipate. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-eﬀectiveness of PDS0101 to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to ﬁx their own prices for products, but monitor and control company proﬁts. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for PDS0101. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits. Moreover, increasing eﬀorts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for PDS0101. We expect to experience pricing pressures in connection with the sale of PDS0101 due to the trend toward managed healthcare, the increasing inﬂuence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market. We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations. We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations. Our future ﬁnancial performance and our ability to commercialize PDS0101 and compete eﬀectively will depend, in part, on our ability to effectively manage any future growth. As of December 31, 2020, we had 15 employees and 5 consultants. We expect to hire additional employees for our managerial, clinical, scientiﬁc and engineering, operational, manufacturing, sales and marketing teams. We may have operational diﬃculties in connection with identifying, hiring and integrating new personnel. Future growth would impose signiﬁcant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of our attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to eﬀectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require signiﬁcant capital expenditures and may divert ﬁnancial resources from other projects, such as the development of PDS0101. If we are unable to eﬀectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Many of the other pharmaceutical companies that we compete against for qualiﬁed personnel and consultants have greater ﬁnancial and other resources, diﬀerent risk proﬁles and a longer history in the industry than us. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what it has to oﬀer. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can select and develop PDS0101 and our business will be limited. 40 Index Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations. We are exposed to the risk that our employees and contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies, manufacturing standards, federal and state healthcare fraud and abuse and health regulatory laws and other similar foreign fraudulent misconduct laws, or laws that require the true, complete and accurate reporting of ﬁnancial information or data. Misconduct by these parties may also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter third-party misconduct, and the precautions we take to detect and prevent this activity may not be eﬀective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a signiﬁcant impact on our business and ﬁnancial results, including the imposition of signiﬁcant civil, criminal and administrative penalties, damages, monetary ﬁnes, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished proﬁts and future earnings, and curtailment of our operations, any of which could adversely aﬀect our ability to operate our business and our results of operations. Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks Our computer systems and those of our service providers, including our CROs, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our or their operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval eﬀorts and signiﬁcantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of PDS0101 could be delayed. A cyberattack or similar incident could occur and result in information theft, data corruption, operational disruption, damage to our reputation or ﬁnancial loss. Our industry has become increasingly dependent on digital technologies to conduct certain development and ﬁnancial activities. Our technologies, systems, networks, or other proprietary information, and those of our vendors, suppliers and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or could otherwise lead to the disruption of our business operations. Cyberattacks are becoming more sophisticated and certain cyber incidents, such as surveillance, may remain undetected for an extended period and could lead to disruptions in critical systems or the unauthorized release of conﬁdential or otherwise protected information. These events could lead to ﬁnancial loss from remedial actions, loss of business, disruption of operations, damage to our reputation or potential liability. Our systems and insurance coverage for protecting against cybersecurity risks may not be suﬃcient. Further, as cyberattacks continue to evolve, we may be required to expend signiﬁcant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyberattacks. Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and signiﬁcant penalties against us, and adversely impact our operating results. EU member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose signiﬁcant compliance obligations. Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of the EU Data Protection Directive, was replaced with the EU General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide- ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and conﬁdentiality of the personal data, data breach notiﬁcation and the use of third party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for ﬁnes of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business. 41 Index Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results. There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act, or HIPAA, and associated regulations. For example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went into eﬀect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. The CCPA was recently amended by the California Privacy Rights Act, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modiﬁcations will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential eﬀects of the CCPA and CPRA and implementing regulations are significant and may cause us to incur substantial costs and expenses to comply. If we fail to maintain an eﬀective system of internal control over ﬁnancial reporting in the future, we may not be able to accurately report our ﬁnancial condition, results of operations or cash ﬂows, which may adversely aﬀect investor conﬁdence in us and, as a result, the value of our common stock. Further, we continue to incur signiﬁcant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. As a public company, we continue to incur signiﬁcant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on public companies, including requiring establishment and maintenance of eﬀective disclosure controls and internal control over ﬁnancial reporting and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. Eﬀective internal controls over ﬁnancial reporting are necessary for us to provide reliable ﬁnancial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or diﬃculties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. If we are unable to conclude that our internal control over ﬁnancial reporting is eﬀective, or if our independent registered public accounting ﬁrm determines we have a material weakness or signiﬁcant deﬁciency in our internal control over ﬁnancial reporting once that ﬁrm begins its Section 404 reviews or becomes aware of either during the conduct of an audit, we could lose investor conﬁdence in the accuracy and completeness of our ﬁnancial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal control over ﬁnancial reporting, are costly and may increase substantially and, as a smaller reporting company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to investors. We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods speciﬁed in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and ﬁnancial compliance costs and will make some activities more time-consuming and costly. 42 Index In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain eﬀective disclosure controls and procedures and internal control over ﬁnancial reporting. In particular, Section 404 of the Sarbanes-Oxley Act will require us to perform system and process evaluation and testing of our internal control over ﬁnancial reporting to allow management to report on, and our independent registered public accounting ﬁrm to attest to, the eﬀectiveness of our internal control over ﬁnancial reporting. We are a “smaller reporting company,” meaning that our outstanding common stock held by nonaﬃliates had a value of less than $75 million at the end of our most recently completed second ﬁscal quarter. Thus, as a smaller reporting company, we could take advantage of certain reduced governance and disclosure requirements, including not being required to comply with the auditor attestation requirements in the assessment of our internal control over ﬁnancial reporting. As a result, investors and others may be less comfortable with the eﬀectiveness of our internal controls and the risk that material weaknesses or other deﬁciencies in internal controls go undetected may increase. In addition, as a smaller reporting company, we take advantage of our ability to provide certain other less comprehensive disclosures in our SEC ﬁlings, including, among other things, providing only two years of audited ﬁnancial statements in annual reports and simpliﬁed executive compensation disclosures. Consequently, it may be more challenging for investors to analyze our results of operations and ﬁnancial prospects, as the information we provide to stockholders may be different from what one might receive from other public companies. Risks Related to Clinical Development, Regulatory Approval and Commercialization Clinical trials are very expensive, time-consuming, diﬃcult to design and implement and involve an uncertain outcome, and if they fail to demonstrate safety and eﬃcacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101 and other Versamune® based products. PDS0101 is still in early-stage clinical development and will require extensive additional clinical testing before we are prepared to submit a BLA for regulatory approval for any indication or for any other treatment regime. We cannot predict with any certainty if or when it might submit a BLA for regulatory approval for PDS0101 and other Versamune® based products or whether any such BLAs will be approved by the FDA. Human clinical trials are very expensive and diﬃcult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not agree with our proposed endpoints for any clinical trial we propose, which may delay the commencement of our clinical trials. The clinical trial process is also time-consuming. We estimate that the clinical trials we need to conduct to be in a position to submit BLAs for PDS0101 will take several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In later stages of clinical trials, PDS0101 may fail to show the desired safety and eﬃcacy traits despite having progressed through preclinical studies and initial clinical trials, and the results of early clinical trials of PDS0101 therefore may not be predictive of the results of our planned Phase 1 and 2 trials. A number of companies in the biopharmaceutical industry have suﬀered signiﬁcant setbacks in advanced clinical trials due to lack of eﬃcacy or adverse safety profiles, notwithstanding promising results in earlier trials. Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their immunotherapies performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Success in preclinical testing and early clinical trials does not ensure that later clinical trials, which involve many more subjects and diﬀerent cancers than we have studied in Phase 1/2A clinical trials to date, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize PDS0101 and other Versamune® based products, including that: ● regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts with prospective trial sites, or they may be unwilling to conduct studies based on out protocols; ● ● clinical trials of PDS0101 may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; the number of subjects required for clinical trials of PDS0101 and other Versamune® based products may be larger than we anticipate; enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; ● Our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; 43 Index ● ● ● regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; the cost of clinical trials of PDS0101 and other Versamune® based products may be greater than we anticipate; and the supply or quality of PDS0101 or other materials necessary to conduct clinical trials of PDS0101 and other Versamune® based products may be insufficient or inadequate. If we are required to conduct additional clinical trials or other testing of PDS0101 beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of PDS0101 or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may: ● ● ● ● ● ● be delayed in obtaining marketing approval for PDS0101; not obtain marketing approval at all; obtain approval for indications or patient populations that are not as broad as intended or desired; obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings; be subject to additional post-marketing testing requirements; or have the product removed from the market after obtaining marketing approval. Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Signiﬁcant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize PDS0101, could allow our competitors to bring products to market before we do, and could impair our ability to successfully commercialize PDS0101, any of which may harm our business and results of operations. Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more diﬃcult or rendered impossible by multiple factors outside our control. We may encounter delays in enrolling, or be unable to enroll, a suﬃcient number of participants to complete any of our clinical trials. Once enrolled, we may be unable to retain a suﬃcient number of participants to complete any of our trials. Late-stage clinical trials of PDS0101 may require the enrollment and retention of large numbers of subjects. Subject enrollment and retention in clinical trials depends on many factors, including the size of the subject population, the nature of the trial protocol, the existing body of safety and eﬃcacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of subjects to clinical sites and the eligibility criteria for the study. Moreover the current pandemic is negatively impacting enrollment in many oncology clinical trials. Furthermore, any negative results we may report in clinical trials of PDS0101 may make it diﬃcult or impossible to recruit and retain participants in other clinical trials of PDS0101. Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could have a harmful eﬀect on our ability to develop PDS0101, or could render further development impractical. In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance in compliance with applicable regulations. Enforcement actions brought against these third parties may cause further delays and expenses related to our clinical development programs. 44 Index The successful development of immunotherapies is highly uncertain. Successful development of immunotherapies is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Immunotherapies that appear promising in the early phases of development may fail to reach, or be delayed in reaching, the market for several reasons including: preclinical study results that may show the immunotherapy to be less eﬀective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic side eﬀects; clinical study results that may show the immunotherapy to be less eﬀective than expected (e.g., the study failed to meet its primary endpoint) or to have unacceptable side effects; failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, delays in receiving the necessary products or supplies for the conduct of clinical or pre-clinical trials, additional time requirements for data analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical or clinical data, FDA delays in inspecting manufacturing establishments, failure to receive FDA approval for manufacturing processes or facilities, or unexpected safety or manufacturing issues; manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and the proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized. Success in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one immunotherapy to the next and may be difficult to predict. Even if our product candidates are approved, they may be subject to limitations on the indicated uses and populations for which they may be marketed. They may also be subject to other conditions of approval, may contain signiﬁcant safety warnings, including boxed warnings, contraindications, and precautions, may not be approved with label statements necessary or desirable for successful commercialization, or may contain requirements for costly post-market testing and surveillance, or other requirements, including the submission of a REMS, to monitor the safety or eﬃcacy of the products. If we do not receive FDA approval for, and successfully commercialize our product candidates, we will not be able to generate revenue from these product candidates in the United States in the foreseeable future, or at all. Any signiﬁcant delays in obtaining approval for and commercializing our product candidates will have a material adverse impact on our business and financial condition. We face signiﬁcant competition from other biotechnology and pharmaceutical companies, and our operating results will suﬀer if we fail to compete effectively. The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As a result, PDS0101 could become obsolete before we recoup any portion of our related research and development and commercialization expenses. Competition in the biopharmaceutical industry is based signiﬁcantly on scientiﬁc and technological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical ﬁrms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development eﬀorts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualiﬁed scientiﬁc personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical ﬁeld will also depend to a considerable degree on the continuing availability of capital to us. We are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention, diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical products that have the potential to directly compete with PDS0101 even though their approach to may be diﬀerent. We believe our top clinical-stage competitors pursuing cancer vaccines and/or immunotherapies include Etubics, Vaccibody, Admedus, Cel-Sci, Neo-ImmuneTech, Kite Pharma, Immune Design, Dynavax, Bavarian Nordic, Seattle Genetics, Selecta Biosciences Hookipa Pharm, ZIOPHARM Oncology, Heat Biologics, Genocea Biosciences, OncoSec Medical, Harpoon Therapeutics, and Gritstone Oncology. Many of these companies have substantially greater ﬁnancial, marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience competition in the development of our immunotherapies from universities and other research institutions and competes with others in acquiring technology from such universities and institutions. . Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more eﬀective or less costly than PDS0101. 45 Index We will face competition from other drugs currently approved or that will be approved in the future for the treatment of the other cancers and infectious diseases we are currently targeting. Therefore, our ability to compete successfully will depend largely on our ability to: ● ● ● ● ● ● ● develop and commercialize immunotherapies that are superior to other alternatives in the market; demonstrate through our clinical trials that PDS0101 is differentiated from existing and future therapies; attract qualified scientific, immunotherapy development and commercial personnel; obtain additional patent or other proprietary protection for PDS0101; obtain required regulatory approvals; obtain coverage and adequate reimbursement from, and negotiate competitive pricing with, third-party payors; and successfully develop and commercialize, independently or with collaborators, new applications for PDS0101 or immunotherapies. The availability of our competitors’ immunotherapies and other treatments could limit the demand, and the price we are able to charge, for PDS0101. The inability to compete with existing or subsequently introduced immunotherapies and other treatments would have an adverse impact on our business, financial condition and prospects. Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to license novel compounds that could make PDS0101 less competitive. In addition, any new immunotherapy that competes with an approved treatment must demonstrate compelling advantages in eﬃcacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving the FDA’s approval for or commercializing medicines before we do, which would have an adverse impact on our business and results of operations. PDS0101 may cause adverse eﬀects or have other properties that could delay or prevent its regulatory approval or limit the scope of any approved label or market acceptance. Adverse events caused by PDS0101 could cause reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. If clinical trials for PDS0101 report an unacceptable frequency or severity of adverse events, our ability to obtain regulatory approval for PDS0101 may be negatively impacted. Furthermore, if PDS0101 is approved and then causes serious or unexpected side eﬀects, a number of potentially signiﬁcant negative consequences could result, including: ● ● regulatory authorities may withdraw their approval of PDS0101 or impose restrictions on its distribution or other risk management measures; regulatory authorities may require the addition of labeling statements, such as warnings or contraindications; ● we may be required to change the way PDS0101 is administered or to conduct additional clinical trials; ● we could be sued and held liable for injuries sustained by patients; ● we could elect to discontinue the sale of PDS0101; and ● our reputation may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of PDS0101 and could substantially increase the costs of commercialization. 46 Index If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, PDS0101, and our ability to generate revenue will be impaired. PDS0101 and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, eﬃcacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for PDS0101 will prevent us from commercializing PDS0101. We have not received approval to market a PDS0101 from regulatory authorities in any jurisdiction. We have only limited experience in ﬁling and supporting the applications necessary to gain marketing approvals and expect to rely on CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the safety and eﬃcacy of PDS0101. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. PDS0101 may not be eﬀective, may be only moderately eﬀective or may prove to have undesirable or unintended side eﬀects, toxicities or other characteristics that may preclude it from obtaining marketing approval or prevent or limit commercial use. The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors. We cannot assure you that we will ever obtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insuﬃcient for approval and require additional preclinical or other studies, and clinical trials. In addition, varying interpretations of the data obtained from preclinical testing and clinical trials could delay, limit or prevent marketing approval of PDS0101. Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects. There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects to another qualiﬁed clinical trial site, which may be diﬃcult or impossible. In addition, certain of our scientiﬁc advisors or consultants who receive compensation from us are clinical trial investigators for our clinical trial. Although we believe our existing relationships are within the FDA’s guidelines, if these relationships and any related compensation result in perceived or actual conﬂicts of interest, or the FDA concludes that the ﬁnancial relationship may have aﬀected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA. Any such delay or rejection could prevent us from commercializing PDS0101 or any other product candidates. Even if we obtain FDA approval in the United States, we may never obtain approval for or commercialize PDS0101 in any other jurisdiction, which would limit our ability to realize each product’s full market potential. In order to market PDS0101 in a particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and eﬃcacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in diﬃculties and costs for us and require additional preclinical studies or clinical trials that could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of PDS0101 in those countries. PDS0101 is not approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced. 47 Index Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and eﬃcacy of our product candidates; early results and early understanding of product candidate potential may not be predictive of later success. Our product candidates are susceptible to the risks of failure inherent at any stage of product development, including the occurrence of unexpected or unacceptable adverse events or the failure to demonstrate eﬃcacy in clinical trials. Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. The results of preclinical studies, preliminary study results, and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Our product candidates may not perform as we expect, may ultimately have a diﬀerent or no impact than expected, may have a different mechanism of action than we initially understand or that we expect in humans, and may not ultimately prove to be safe and effective. Preliminary and ﬁnal results from preclinical studies and early stage trials, and trials in compounds that we believe are similar to ours, may not be representative of results that are found in larger, controlled, blinded, and longer-term studies. Product candidates may fail at any stage of preclinical or clinical development. Product candidates may fail to show the desired safety and efficacy traits even if they have progressed through preclinical studies or initial clinical trials. Preclinical studies and clinical trials may also reveal unfavorable product candidate characteristics, including safety concerns. A number of companies in the biopharmaceutical industry have suﬀered signiﬁcant setbacks in clinical trials, notwithstanding promising results in earlier preclinical studies or clinical trials or promising mechanisms of action. In some instances, there can be signiﬁcant variability in safety or eﬃcacy results between diﬀerent clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, diﬀerences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Moreover, should there be an issue with the design of a clinical trial, our results may be impacted. We may not discover such a ﬂaw until the clinical trial is at an advanced stage. We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. There may be emerging new data or regulatory questions or disagreements regarding interpretations of data and results at any stage. For example FDA or comparable foreign regulatory authorities may disagree with our study design, including endpoints, or our interpretation of data from preclinical studies and clinical trials or ﬁnd that a product candidate’s beneﬁts do not outweigh its safety risks. Even if we obtain regulatory approval, we will still face extensive ongoing regulatory requirements and PDS0101 may face future development and regulatory difficulties. Marketing of PDS0101, if approved, along with the manufacturing processes, post- approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for PDS0101, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety, eﬃcacy and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and current Good Clinical Practice, or cGCP requirements for any clinical trials that we conduct post-approval. Even if marketing approval of PDS0101 is granted, the approval may be subject to limitations on the indicated uses for which PDS0101 may be marketed or to the conditions of approval. If PDS0101 receives marketing approval, an accompanying label may limit the approved use of PDS0101, which could limit sales. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety and/or eﬃcacy of PDS0101. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding oﬀ- label use and if we promote or otherwise market PDS0101 for indications other than those for which it is approved, we may be subject to certain enforcement actions. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription biopharmaceutical products may lead to FDA enforcement actions and investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws. 48 Index In addition, later discovery of previously unknown adverse events or other problems with PDS0101, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: ● ● ● ● restrictions on manufacturing PDS0101; restrictions on the labeling or marketing of PDS0101; restrictions on PDS0101 distribution or use; requirements to conduct post-marketing studies or clinical trials; ● warning letters; ● withdrawal of PDS0101 from the market; ● ● ● ● ● ● ● refusal to approve pending applications or supplements to approved applications that we submit; recalls of PDS0101; fines, restitution or disgorgement of profits or revenues; suspension or withdrawal of marketing approvals; refusal to permit the import or export of PDS0101; seizures of PDS0101; or injunctions or the imposition of civil or criminal penalties. The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of PDS0101. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approvals or licenses that we may have obtained. Even if PDS0101 receives licensure, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success. If PDS0101 receives marketing approval, it may nonetheless fail to gain suﬃcient market acceptance by physicians, patients, third-party payors and others in the medical community. If PDS0101 does not achieve an adequate level of acceptance, we may not generate signiﬁcant revenues and become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a number of factors, including but not limited to: ● ● ● ● ● ● ● ● ● ● ● the efficacy and potential advantages compared to alternative treatments; effectiveness of sales and marketing efforts; the cost of treatment in relation to alternative treatments; our ability to offer PDS0101 for sale at competitive prices; the convenience and ease of administration compared to alternative treatments; the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; the willingness of the medical community to offer customers PDS0101 in addition to or in the place of other immunotherapies; the strength of marketing and distribution support; the availability of third-party coverage and adequate reimbursement; the prevalence and severity of any side effects; and any restrictions on the use of PDS0101 together with other medications. 49 Index Because we expect sales of PDS0101, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of PDS0101 to achieve market acceptance would harm our business and could require us to seek additional financing sooner than we otherwise plan. We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. Because we have limited financial and managerial resources, we are initially developing our lead product candidate, PDS0101 and the other Versamune ® Products. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or proﬁtable market opportunities. Our spending on current and future research and development programs and product candidates for speciﬁc indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, ﬁnes, disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm, and the curtailment of our operations, any of which could harm our business. Although we do not provide healthcare services or submit claims for third-party reimbursement, we are subject to healthcare fraud and abuse regulation and enforcement by federal and state governments, which could signiﬁcantly impact our business, particularly if and when we commercialize any product candidates and if and when payment becomes available from payors for our products. Additionally, our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or ﬁnancial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. The laws that may affect our ability to operate include, but are not limited to: The Federal Anti-Kickback Statute (AKS), which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. The Affordable Care Act, among other things, amended the intent requirements of the federal AKS. A person or entity can now be found guilty of violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provides that a claim including items or services resulting from a violation of the federal AKS constitutes a false or fraudulent claim for purposes of the FCA. The False Claims Act’s civil provisions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent; knowingly making using, or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Intent to deceive is not required to establish liability under the civil False Claims Act. The False Claims Act’s criminal provisions, which imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, prohibits, among other actions, executing or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. HIPAA, as amended by the HITECH Act, and its respective implementing regulations, now makes HIPAA’s privacy and security standards directly applicable to business associates independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. 50 Index Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a), given that even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or aﬀecting commerce in violation of its laws. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. The federal ”Sunshine” and “Open Payments” requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively, the Affordable Care Act, which require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures.” In 2022 the Sunshine Act will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to healthcare providers. State law equivalents of each of the above federal laws and state laws otherwise addressing the pharmaceutical and healthcare industries, such as anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers, and in some cases that may apply regardless of payor, i.e., even if reimbursement is not available; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines (the PhRMA Code) and the relevant compliance program guidance promulgated by the federal government (HHS-OIG), or otherwise prohibit, restrict or impose tracking and disclosure requirements related to payments, gifts, or others remuneration that may be made to healthcare providers and other potential referral sources, or marketing practices to such persons and entities or drug pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) and state laws governing the privacy and security of information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, and may apply more broadly than HIPAA, thus complicating compliance efforts – for example, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA was recently amended by the California Privacy Rights Act, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modifications will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential effects of the CCPA and CPRA are significant and may cause us to incur substantial costs and expenses to comply. In our business, healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of our product candidates, if approved for marketing. Moreover, while we do not plan to submit claims and our customers will make the ultimate decision on how to submit claims, from time to time, we may provide reimbursement guidance to our customers. Current or future arrangements with physicians and other healthcare providers and customers, and third-party payors, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or ﬁnancial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. If a government authority were to conclude that we provided improper advice to our customers or encouraged the submission of false claims for reimbursement or failed to comply with government price reporting requirements, or engaged in oﬀ-label promotion of products, we could face action by government authorities. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition. 51 Index We have entered into consulting and employment arrangements with individuals, physicians and other healthcare providers.. While we have worked to structure our arrangements to comply with applicable laws, because of the complex and far-reaching nature of these laws, regulatory agencies may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely aﬀected if regulatory agencies interpret our ﬁnancial relationships with providers who serve as clinical investigators in our clinical trials, or influence the ordering of and use our products to be in violation of applicable laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time- and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse eﬀect on our business. Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of PDS0101. We face an inherent risk of product liability exposure related to the testing of PDS0101 in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop after approval. Regardless of merit or eventual outcome, liability claims may result in: ● ● decreased demand for PDS0101 or other immunotherapies that we may develop; injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● ● ● ● significant costs to defend any related litigation; substantial monetary awards to trial subjects or patients; loss of revenue; and the inability to commercialize any products we may develop. Although we maintain product liability insurance coverage in the amount of up to $5 million per claim and $5 million in the aggregate, it may not be adequate to cover all liabilities that it may incur. We anticipate that we will need to increase our insurance coverage as we continue clinical trials and if we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, it may not be successful in commercializing PDS0101, if approved. We do not have any infrastructure for the sales, marketing or distribution of PDS0101, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market PDS0101, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. To achieve commercial success for PDS0101, we will need either our own, or a third party’s, sales and marketing organization. There are signiﬁcant expenses and risks involved with creating teams for, or contracting for, sales, marketing and distribution capabilities. Any failure or delay in the development of our sales, marketing and distribution capabilities, either internally or in collaboration with third parties, could delay the launch of PDS0101, which would adversely affect commercialization. We may be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies. 52 Index If we obtain approval to commercialize PDS0101 outside of the United States, a variety of risks associated with international operations could harm our business. If PDS0101 is approved for commercialization, we may enter into agreements with third parties to market them in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international operations or entering into international business relationships, including: ● ● ● ● ● ● ● ● different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries; reduced protection for intellectual property rights; unexpected changes in tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign reimbursement, pricing and insurance regimes; foreign taxes; foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● ● ● potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions; shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires. We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply. Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the diﬃculty and cost for us to obtain marketing approval of and commercialize PDS0101 and affect the prices we may obtain and our profitability. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of PDS0101, restrict or regulate post-approval activities and affect our ability to profitably sell PDS0101. For example, in March 2010, Aﬀordable Care Act was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Although the full eﬀect of the Aﬀordable Care Act may not yet be fully understood, the law has continued the downward pressure on pharmaceutical pricing, especially under the Medicare program, and increased the industry’s regulatory burdens and operating costs. As another example, the Drug Supply Chain Security Act imposes obligations on manufacturers of prescription biopharmaceuticals in ﬁnished dosage forms for commercial distribution. We have not yet adopted the signiﬁcant measures that will be required to comply with this law. We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or what the impact of such changes on our business, if any, may be. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for immunotherapies, which could result in reduced demand for PDS0101 or additional pricing pressures. 53 Index Risks Related to Our Dependence on Third Parties We have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such. We currently have agreements with various third-party manufacturing facilities for production of PDS0101 for research and development and testing purposes. We depend on third-party manufacturers to supply our preclinical and clinical materials and will be reliant on a third-party manufacturer to produce PDS0101 on a commercial scale, should that product receive regulatory approval. Third-party manufacturers must be able to meet our deadlines and adhere to quality standards and speciﬁcations. Our predominant reliance on third parties for the manufacture of PDS0101 creates a dependency that could severely disrupt our research and development, clinical testing, and sales and marketing eﬀorts if the source of such supply proves to be unreliable or unavailable. There is no assurance that any third-party manufacturers will be able to meet commercialized scale production requirements in a timely manner or in accordance with applicable standards or cGMP. We intend to rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business. We intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over their actual performance. We intend to rely upon CROs to monitor and manage data for our clinical programs, as well as the execution of future nonclinical studies. We expect to control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientiﬁc standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with the Good Laboratory Practices and GCPs, which are regulations and guidelines enforced by the FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Conference on Harmonization guidelines for PDS0101. The Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a suﬃcient number of subjects, we may be required to repeat clinical trials, which would delay the regulatory approval process. Our CROs will not be our employees, and we will not control whether or not they devote suﬃcient time and resources to our future clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize PDS0101. As a result, our ﬁnancial results and the commercial prospects for PDS0101 would be harmed, our costs could increase, and our ability to generate revenues could be delayed. If our relationship with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects. If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited. Our strategy may include potential reliance upon strategic collaborations for marketing and commercialization of PDS0101 and other Versamune® Products. We also rely on strategic collaborations for research, development, marketing and commercialization for PDS0101 and other Versamune® Products. We have also been heavily reliant upon third party outsourcing for our clinical trials execution and production of drug supplies for use in clinical trials. 54 Index Establishing strategic collaborations is diﬃcult and time-consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all. We face signiﬁcant competition in seeking appropriate collaborators. Whether we reach a deﬁnitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for PDS0101 and other Versamune ® Products, the costs and complexities of manufacturing and delivering PDS0101 and other Versamune® Products to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative immunotherapies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for PDS0101 and other Versamune® Products. Our current collaborations, as well as any future new collaborations, may never result in the successful development or commercialization of PDS0101 and other Versamune® Products or the generation of sales revenue. To the extent that we have entered or will enter into co-promotion or other collaborative arrangements, PDS0101 and other Versamune® Products revenues are likely to be lower than if we directly marketed and sold any products that we develop. Management of our relationships with our collaborators will require: ● ● ● ● significant time and effort from our management team; financial funding to support said collaboration; coordination of our research and development programs with the research and development priorities of our collaborators; and effective allocation of our resources to multiple projects. If we continue to enter into research and development collaborations, our success will in part depend on the performance of our collaborators. We will not directly control the amount or timing of resources devoted by our collaborators to activities related to PDS0101 and other Versamune ® Products. Our collaborators may not commit suﬃcient resources to our research and development programs or the commercialization, marketing or distribution of PDS0101 and other Versamune® Products. If any collaborator fails to commit suﬃcient resources, our preclinical or clinical development programs related to this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with us. If we fail to make required milestone or royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those agreements. Additionally, our collaborators may seek to renegotiate agreements we has entered into, or may disagree with us about the terms and implementation of these agreements. If collaborators disagree with us about the terms or implementation of our agreements, we may face legal claims that may involve considerable expense and could negatively affect our financial results. Our business could be adversely aﬀected by the eﬀects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, in regions where we or third parties on which we rely have signiﬁcant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially aﬀect our operations, including at our headquarters in New Jersey, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business. Our business could be adversely aﬀected by health epidemics in regions where we have concentrations of clinical trial sites or other business operations and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom we rely. 55 Index For example, in December 2019, a novel strain of coronavirus, COVID-19, was identiﬁed in Wuhan, China. This virus continues to spread globally and in March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created signiﬁcant volatility and disruption of ﬁnancial markets. The COVID-19 pandemic began to have a material adverse impact on our results of operations in the quarter ended March 31, 2020, and we expect it to continue to adversely affect our business. In response to the COVID-19 outbreak, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States, Europe and Asia, including in the locations of our oﬃces, clinical trial sites, key vendors and partners. Our clinical development program timelines have been and continue to be negatively aﬀected by COVID-19, as evidenced by the delay in the initiation of our planned Phase 2 study of PDS0101 in combination with KEYTRUDA® in ﬁrst-line treatment of recurrent/metastatic head and neck cancer and initiation of the Phase 2 clinical study at The MD Anderson Cancer Center in combination with CRT. Even though both of these 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. Such facilities and oﬃces have been and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, thereby decreasing availability, in whole or in part, for clinical trial services. Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a work-from-home policy for all staﬀ members excluding those necessary to maintain minimum basic operations. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business. In addition, the COVID-19 pandemic has aﬀected and may continue to aﬀect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals. For example, during the course of the pandemic the FDA has at points delayed both domestic and foreign inspections. The agency announced in July 2020 that it will continue to conduct only “mission-critical” inspections or domestic facility inspections which will be prioritized through a risk-based approach. Additionally, the FDA plans to use other approaches to inspections during the COVID-19 pandemic, including records or other informational requests. We expect the impact of COVID-19 on the FDA’s operations will continue to evolve. As a result of the COVID-19 outbreak, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have and may in the future experience disruptions that materially and adversely impact our clinical trials, business, ﬁnancial condition and results of operations. Potential disruptions include but are not limited to: ● ● ● ● ● ● ● ● ● ● ● delays or difficulties in enrolling patients in our clinical trials; delays or diﬃculties in initiating or expanding clinical trials, including delays or diﬃculties with clinical site initiation and recruiting clinical site investigators and clinical site staff; increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine; diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints; interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines; delays or disruptions in preclinical experiments and investigational new drug application-enabling studies due to restrictions of on-site staﬀ and unforeseen circumstances at contract research organizations and vendors; interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staﬃng shortages, production slowdowns or stoppages and disruptions in delivery systems; limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions and “shelter in place” orders; limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and interruption or delays to our sourced discovery and clinical activities. Further, on March 25, 2020, the FDA issued Guidance on Conduct of Clinical Trials of Medical Products during the COVID-19 pandemic for Industry, Investigators, and Institutional Review Boards to assist sponsors in assuring the safety of trial participants, maintaining compliance with good clinical practices, and minimizing risks to trial integrity during the COVID-19 pandemic, or the COVID-19 Guidelines. The policy is intended to remain in effect only for the duration of the public health emergency related to COVID-19 declared by the Department of Health and Human Services on January 31, 2020. We have implemented several procedures in accordance with the COVID-19 Guidelines to address patient safety and clinical trial conduct during the COVID-19 pandemic, including remote monitoring of patients through telemedical visits, remote monitoring of sites by our clinical trial monitors, remote data entry, and follow-up visits at sites other than the site where the patient was initially treated. Our implementation of the COVID-19 Guidelines and potential disruptions to patient follow up, site monitoring or the timely completion of our trials may have a negative eﬀect on our ability to complete trials and associated regulatory filings. 56 Index While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is diﬃcult to assess or predict, the impact of the COVID-19 pandemic on the global ﬁnancial markets has reduced and may continue to reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. We do not yet know the full extent of potential delays or impacts on our business, ﬁnancing or clinical trial activities or on healthcare systems or the global economy as a whole. However, these eﬀects have had and may continue to have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely and a recession or market correction resulting from the spread of COVID-19 could materially aﬀect our business and the value of our common stock. In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. We will continue to monitor the COVID-19 situation closely. Risks Related to Our Intellectual Property If we are unable to obtain and maintain patent protection for our Versamune ® platform, PDS0101, or other Versamune ® Products or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets. We rely upon a combination of patents, trade secret protection and conﬁdentiality agreements to protect the intellectual property related to Versamune®. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries. We seek to protect our proprietary position by ﬁling patent applications in the United States and abroad related to PDS0101. The patent prosecution process is expensive and time-consuming, and we may not be able to ﬁle and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications that we own or license may fail to result in issued patents with claims that cover PDS0101 or its applications in the United States or in other countries. There is no assurance that all potentially relevant prior art relating, which can invalidate a patent or prevent a patent from issuing from a pending patent application is known to us. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful challenge to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of PDS0101 and other Versamune® Products that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could exclusively market PDS0101 and other Versamune® Products under patent protection could be reduced. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientiﬁc literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after ﬁling, or in some cases not at all. Therefore, we cannot know with certainty whether we were the ﬁrst to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the ﬁrst to ﬁle for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect PDS0101 or other Versamune® Products, in whole or in part, or which eﬀectively prevent others from commercializing competitive technologies and immunotherapies. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. Recent patent reform legislation in the United States could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act was signed into law. The Leahy-Smith Act includes a number of signiﬁcant changes to United States patent law. These include provisions that aﬀect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent Office recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the ﬁrst to ﬁle provisions, only became eﬀective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have an adverse eﬀect on our business and ﬁnancial condition. 57 Index Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent Oﬃce, or become involved in derivation, reexamination, inter parties review, post-grant review or interference proceedings challenging its patent rights or the patent rights of others. In other countries, we may be subject to or become involved in opposition proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or immunotherapies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize PDS0101 without infringing third- party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize PDS0101 and other Versamune® Products. The issuance of a patent is not conclusive as to our inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent oﬃces in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and immunotherapies, or limit the duration of the patent protection of our technology and immunotherapies. Moreover, patents have a limited lifespan. In the United States and other countries, the natural expiration of a patent is generally 20 years after it is ﬁled. Various extensions may be available; however, the life of a patent, and the protection it aﬀords, is limited. Without patent protection for PDS0101 and other Versamune® Products, we may be open to competition from generic versions of PDS0101 or other similar products using our technology. Given the amount of time required for the development, testing and regulatory review of new immunotherapy candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with suﬃcient rights to exclude others from commercializing immunotherapies similar or identical to ours. We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful. Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to ﬁle legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that such patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third-party may also cause the third-party to bring counter claims against us, such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non- enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third-party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on PDS0101 and other Versamune® Products. Such a loss of patent protection could harm our business. We may also face claims that our products infringe patents that our competitors hold. Claims for alleged infringement and any resulting lawsuit, if successful, could subject us to signiﬁcant liability for damages and invalidations of our proprietary rights. Any such lawsuit, regardless of our success, would likely be time consuming and expensive to resolve and would divert management time and attention. Any potential intellectual property litigation could also force us to do one or more of the following: (a) stop selling our products; (b) obtain a license(s), from the owner of any asserted intellectual property, to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or (c) redesign our products to avoid using the relevant technology. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not oﬀer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees. 58 Index Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our conﬁdential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock. Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect the Versamune® platform, PDS0101 and other Versamune ® Products. As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. Patent reform legislation in the United States and in other jurisdictions could increase those uncertainties and costs. The United States has enacted and implemented wide-ranging patent reform legislation. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. We may not be able to protect our intellectual property rights throughout the world, which could impair our business. Filing, prosecuting and defending patents covering PDS0101 throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own immunotherapies and, further, may export otherwise infringing immunotherapies to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These immunotherapies may compete with PDS0101 in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed. We seek to protect our proprietary technology in part by entering into conﬁdentiality agreements with third parties and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our conﬁdential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other conﬁdential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations. In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our eﬀorts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business. 59 Index General Market Risk Factors Our stock price is expected to be volatile, and the market price of our common stock may drop in the future. The market price of our common stock may be subject to signiﬁcant ﬂuctuations in the future. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include: ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● the ability of us and our partners to develop product candidates and conduct clinical trials that demonstrate such product candidates are safe and effective; the ability of us or our partners to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals; failure of any of our product candidates to demonstrate safety and efficacy, receive regulatory approval and achieve commercial success; failure by us to maintain our existing third-party license, manufacturing and supply agreements; impact of COVID-19 on business operations and clinical trials; failure by us or our licensors to prosecute, maintain, or enforce our intellectual property rights; changes in laws or regulations applicable to our product candidates; any inability to obtain adequate supply of product candidates or the inability to do so at acceptable prices; adverse regulatory authority decisions; introduction of new or competing products by our competitors; failure to meet or exceed financial and development projections we may provide to the public; the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors; disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain intellectual property protection for our technologies; additions or departures of key personnel; significant lawsuits, including intellectual property or stockholder litigation; if securities or industry analysts do not publish research or reports about us, or if they issue an adverse or misleading opinions regarding our business and stock; if large short positions are taken in our stock and or negative reports are provided, whether they are based in fact or otherwise; changes in the market valuations of similar companies; general market or macroeconomic conditions; sales of our common stock by us or our stockholders in the future; trading volume of our common stock; adverse publicity relating to our markets generally, including with respect to other products and potential products in such markets; changes in the structure of health care payment systems; and period-to-period fluctuations in our financial results. 60 Index Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation. We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, and if we fail to meet such rules and requirements, we may be subject to delisting. Delisting could negatively aﬀect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock. We are required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share. If we do not meet these continued listing requirements, our common stock could be delisted. Delisting from the Nasdaq Capital Market would cause us to pursue eligibility for trading of these securities on other markets or exchanges, including the OTC BB or QB markets, or on the OTC “pink sheets.” In such case, our stockholders’ ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of our securities. There can be no assurance that our securities, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national quotation service, the OTC markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more diﬃcult for us to raise additional capital, cause us to lose eligibility to register the sale or resale of our shares on Form S-3 and the automatic exemption from registration under state securities laws for exchange-listed securities, adversely aﬀect the market liquidity of our securities, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence. We do not anticipate that we will pay any cash dividends in the foreseeable future. We currently expect to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our company will be the sole source of our stockholders’ gain, if any, for the foreseeable future. Future sales of shares by existing stockholders could cause our stock price to decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after certain legal restrictions on resale lapse, the trading price of our common stock could decline. As of December 31, 2020, we had 22,261,619 shares of common stock outstanding. Approximately 18,335,053 of such shares are freely tradable, without restriction, in the public market. Approximately 3,926,566 of such shares of common stock are held by directors, executive oﬃcers and other aﬃliates and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements. Our principal stockholders and management own a signiﬁcant percentage of our stock and will be able to exert signiﬁcant control over matters subject to stockholder approval. As of March 18, 2021, our executive oﬃcers, directors, and 5% stockholders and their aﬃliates beneﬁcially owned an aggregate of approximately 23% of the outstanding shares of our common stock as of December 31, 2020. Accordingly, these executive officers, directors and their affiliates, acting as a group, may have substantial inﬂuence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other signiﬁcant corporate transactions. These stockholders may also delay or prevent a change of control of our company, even if such a change of control would beneﬁt our other stockholders. This concentration of ownership could delay or prevent any acquisition of our company on terms that other stockholders may desire, and may adversely aﬀect the market price of our common stock. 61 Index Because the Merger resulted in an ownership change under Section 382 of the Code for Edge, pre-merger U.S. net operating loss carryforwards and certain other tax attributes will be subject to limitations. As of December 31, 2018, prior to completion of the Merger, Edge had federal and state net operating loss carryforwards, or NOLs, of $128.6 million and $27.1 million, respectively, due to prior period losses. If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s U.S. net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds ﬁfty percentage points over a rolling three-year period. Similar rules may apply under state and foreign tax laws. We believe that Edge may have already undergone one or more ownership changes prior to the Merger. However, the Merger also resulted in an ownership change for Edge and, accordingly, Edge’s U.S. net operating loss carryforwards and certain other tax attributes available to us are subject to limitations on their use. Changes in tax laws and regulations or our operations may impact our eﬀective tax rate and may adversely aﬀect our business, financial condition and operating results. Changes in tax laws in any jurisdiction in which we operate, or adverse outcomes from any tax audits that we may be subject to in any such jurisdictions, could result in an unfavorable change in our eﬀective tax rate, which could adversely aﬀect our business, ﬁnancial condition, and operating results. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The changes included in the Tax Act are broad and complex. The impact of these changes on how our earnings are taxed include, among other items, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) repealing the corporate alternative minimum tax and changing how existing credits can be utilized; (iii) temporarily providing for elective immediate expensing for certain depreciable property; (iv) creating a new limitation on the deductibility of interest expense; and (v) changing rules related to uses and limitations of net operating losses created in tax years beginning after December 31, 2017. It is possible that the Tax Act will be subject to further changes either in a technical corrections bill or entirely new legislation. The overall impact of the Tax Act also depends on the future interpretations and regulations that may be issued by U.S. tax authorities. We expect there will be further guidance provided by these authorities potentially having a material adverse eﬀect on our ﬁnancial condition or results of operations. The impact of broad proposals or of regulatory issuances on our business can vary substantially depending upon the specific changes or further guidance made and how the changes or guidance are implemented by the authorities. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted and signed into law, and GAAP requires recognition of the tax eﬀects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that beneﬁts business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses, or NOLs, carryovers and carrybacks to oﬀset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act provides other reliefs and stimulus measures. We have evaluated the impact of the CARES Act, and do not expect that any provision of the CARES Act would result in a material cash beneﬁt to us or have a material impact on our financial statements or internal controls over financial reporting. Anti-takeover provisions under Delaware law could make an acquisition more diﬃcult and may prevent attempts by our stockholders to replace or remove our current or future management. Because we are incorporated in Delaware, our company is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of our voting stock from merging or combining with us. Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if the oﬀer may be considered beneﬁcial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then current management by making it more diﬃcult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management. 62 Index Our eighth amended and restated certiﬁcate of incorporation, as amended, provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. Our eighth amended and restated certiﬁcate of incorporation, as amended, provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum, to the fullest extent permitted by law, for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a ﬁduciary duty owed by any of our directors, oﬃcers or other employees to us or our stockholders; (c) any action asserting a claim arising pursuant to the DGCL, our eighth amended and restated certiﬁcate of incorporation, as amended, or our second amended and restated bylaws; or (d) any action asserting a claim against us governed by the internal aﬀairs doctrine. This choice of forum provision does not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act. Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its’ choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to ﬁnd the choice of forum provision contained in our eighth amended and restated certiﬁcate of incorporation, as amended, to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and ﬁnancial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. ITEM 1B. Unresolved Staff Comments None. ITEM 2. Properties We maintain a month-to-month lease for our research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton, NJ 08540. We entered into a temporary month-to-month lease as of September 1, 2019 for oﬃce space located at 830 Morris Turnpike, Short Hills, NJ 07078 until we entered into a new lease for permanent office space. This lease was terminated on May 31, 2020. On March 10, 2020, we entered into a sublease agreement, eﬀective as of March 5, 2020, to occupy our corporate and executive oﬃce located at 25B Vreeland Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and continues for a term of approximately forty (40) months with an option to renew through October 31, 2027. On March 17, 2020, the master lessor provided its consent to the sublease in accordance with the terms of the sublease. On July 8, 2019, we entered into a lease termination agreement for our oﬃce space located at 300 Connell Drive, Suite 4000, Berkeley Heights, NJ 07922 eﬀective August 31, 2019, or the Lease Termination Agreement. Pursuant to the Lease Termination Agreement, we were required to pay 50% of the remaining lease payments of $665,802 over three installments on September 1, 2019, December 1, 2019, and March 1, 2020. We believe our current facilities are suitable and adequate to meet our current needs. ITEM 3. Legal Proceedings We, and our subsidiaries, are not a party to, and our property is not the subject of, any material pending legal proceedings; however, we may become involved in various claims and legal actions arising in the ordinary course of business. ITEM 4. Mine Safety Disclosures Not applicable. 63 Index PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Capital Market under the symbol “PDSB”. Prior to the Merger, our common stock was trading under the symbol “EDGE”. Holders As of March 11, 2021, there were 52 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by brokers. Dividends We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our ﬁnancial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other factors that our board may deem relevant. Equity Compensation Plans See “Part III, Item 11. Equity Compensation.” Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period covered by this Annual Report. 64 Index 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): PDS projects Clinical consulting Regulatory consulting Salaries and other costs Total General and Administrative Expenses Year Ended December 31, 2020 2019 $ $ 4,601 942 - 2,381 7,924 $ $ 3,194 399 287 2,220 6,100 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 Operating expenses: Research and development expenses General and administrative expenses Impairment expenses IPRD Lease termination and disposal costs Depreciation Total operating expenses Loss from operations Bargain purchase gain Interest income, net Loss before incomes taxes Income taxes (benefit) Net loss and comprehensive loss Year Ended December 31, 2020 2019 (in thousands) Increase (Decrease) % $ $ $ 7,924 6,962 – – 16 14,902 (14,902) – 55 (14,847) – $ (14,847) $ 70 $ 6,100 10,982 2,974 979 – 21,035 (21,035) 13,335 320 (7,380) (382) (6,998) $ 1,824 (4,020) (2,974) (979) 16 (6,133) 6,133 (13,335) (265) (7,467) 382 (7,849) 30% (37)% (100)% (100)% 100% (29)% (29)% (100)% (83)% 101% – 112% 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): Net cash used in operating activities Net cash provided by investing activities Net cash provided by financing activities Net increase in cash Net Cash Used in Operating Activities Year Ended December 31, 2020 2019 $ $ (13,149) – 29,827 16,678 $ $ (18,073) 29,382 750 12,059 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 Operating lease obligations Total contractual obligations Total Less than One Year 1-3 Years 3-5 Years More than 5 Years $ $ 705,651 705,651 $ $ 170,836 170,836 $ $ 534,815 534,815 $ $ – – $ $ – – 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. ITEM 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Oﬃcer and Chief Financial Oﬃcer, of the eﬀectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon that evaluation, the Company’s Chief Executive Oﬃcer and Chief Financial Oﬃcer concluded that the Company’s disclosure controls and procedures are eﬀective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company’s periodic SEC ﬁlings. Our oﬃcers have concluded that as of December 31, 2020 our disclosure controls and procedures are designed, and are eﬀective, to ensure that information required to be disclosed by our company in the reports we ﬁle or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods speciﬁed in the commission’s rules and forms, and are also eﬀective to ensure that information required to be disclosed in the reports that we ﬁle or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. 75 Index Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial reporting (as such term is deﬁned in Rules 13a—15(f) and 15d-15(f) under the Exchange Act).Our internal control over ﬁnancial reporting is a process designed under the supervision of our principal executive oﬃcer and principal ﬁnancial oﬃcer, to provide reasonable assurance regarding the reliability of ﬁnancial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP. Because of inherent limitations, internal control over ﬁnancial reporting may not prevent or detect misstatements. A control system, no matter how well conceived, operated, tested and monitored, can provide only reasonable, not absolute, assurance that the objectives of the control system are met because of inherent limitations. Under the supervision and with the participation of our management, including our chief executive oﬃcer and chief ﬁnancial oﬃcer, we conducted an evaluation of the eﬀectiveness of our internal control over ﬁnancial reporting based on the framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013), or the COSO Framework. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Oﬃcer and Chief Financial Oﬃcer concluded that, as of such date, our internal control over financial reporting were effective. Our independent registered public accounting ﬁrm has not performed an evaluation of our internal control over ﬁnancial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act. Changes in Internal Control over Financial Reporting In 2020 we continued the integration of our pre-Merger business into the pre-established internal control framework of Edge Therapeutics through the acquisition, including internal controls and information systems. This work began upon completion of the Merger in March 2019 and was completed in calendar year 2020. As of December 31, 2019, we identified a material weakness in four components of internal control as defined by COSO 2013. Throughout 2020 we undertook various remediation activities as previously disclosed and an evaluation of their effectiveness, which was completed during the fourth quarter of 2020. Based on that evaluation, we have concluded that the material weaknesses previously identified have been fully remediated as of December 31, 2020. ITEM 9B. Other Information Not applicable. 76 Index PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will ﬁle a deﬁnitive Proxy Statement for the Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the Proxy Statement), not later than 120 days after the end of the ﬁscal year covered by this Annual Report on Form 10-K, and the applicable information included in the Proxy Statement is incorporated herein by reference. ITEM 10. Directors, Executive Officers and Corporate Governance The information required by this Item is incorporated herein by reference to the Proxy Statement. ITEM 11. Executive Compensation The information required by this Item is incorporated herein by reference to the Proxy Statement. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference to the Proxy Statement. ITEM 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated herein by reference to the Proxy Statement. ITEM 14. Principal Accounting Fees and Services The information required by this Item is incorporated herein by reference to the Proxy Statement. PART IV ITEM 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this report: (1) Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity (Deficit) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) Financial Statement Schedules: All ﬁnancial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto. (3) Exhibits. The exhibits ﬁled as part of this Annual Report are set forth on the Exhibit Index immediately following our consolidated ﬁnancial statements. The Exhibit Index is incorporated herein by reference. ITEM 16. Form 10-K Summary We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information. 77 Index Exhibit Number 2.1 2.2 3.1 3.2 3.3 3.4 4.1 4.2 4.3 10.1+ 10.2 10.3 10.4 10.5 10.6 Exhibit Description Agreement and Plan of Merger and Reorganization, dated November 23, 2018, by and among Edge Therapeutics, Inc., Echos Merger Sub, Inc. and PDS Biotechnology Corporation (ﬁled as Exhibit 2.1 to the Company’s Current Report on Form 8-K ﬁled on November 26, 2018, and incorporated by reference herein). Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated January 24, 2019, by and among Edge Therapeutics, Inc., Echos Merger Sub, Inc. and PDS Biotechnology Corporation (ﬁled as Exhibit 2.1 to the Company’s Current Report on Form 8-K ﬁled on January 30, 2019, and incorporated by reference herein). Eighth Amended and Restated Certiﬁcate of Incorporation of Edge Therapeutics, Inc. (ﬁled as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 6, 2015, and incorporated by reference herein). Second Amended and Restated Bylaws of Edge Therapeutics, Inc. (ﬁled as Exhibit 3.2 to the Company’s Current Report on Form 8-K ﬁled on October 6, 2015, and incorporated by reference herein). Certiﬁcate of Amendment to Amended and Restated Certiﬁcate of Incorporation (ﬁled as Exhibit 3.1 to the Company’s Current Report on Form 8-K on March 18, 2019, and incorporated by reference herein). Certiﬁcate of Amendment to Amended and Restated Certiﬁcate of Incorporation (ﬁled as Exhibit 3.2 to the Company’s Current Report on Form 8-K on March 18, 2019, and incorporated by reference herein). Form of Certiﬁcate of Common Stock (ﬁled as Exhibit 4.1 to the Company’s Pre-Eﬀective Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein). Description of Securities (ﬁled as Exhibit 4.10 to the Company’s Annual Report on Form 10-K ﬁled on March 27, 2020, and incorporated by reference herein). Form of Indenture (ﬁled as Exhibit 4.3 to the Company’s registration statement on Form S-3 (File No. 333-240011) on July 22, 2020, and incorporated by reference herein). Employment Agreement, dated October 11, 2018, by and between PDS Biotechnology Corporation and Frank K. Bedu-Addo (ﬁled as Exhibit 10.19 to the Company’s Registration Statement on Form S-4 on December 21, 2018, and incorporated by reference herein). Clinical Trial Collaboration and Supply Agreement, dated May 19, 2017, by and between PDS Biotechnology Corporation and MSD International GmbH (filed as Exhibit 10.24 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). Patent License Agreement, dated January 5, 2015, by and between PDS Biotechnology Corporation and National Institutes of Health, as amended by First Amendment, dated August 5, 2015 (ﬁled as Exhibit 10.25 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). Cost Reimbursement Agreement, dated November 1, 2015, by and between PDS Biotechnology Corporation and University of Kentucky Research Foundation (ﬁled as Exhibit 10.26 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). Cost Reimbursement Agreement, dated November 1, 2015, by and between PDS Biotechnology Corporation and University of Kentucky Research Foundation (ﬁled as Exhibit 10.27 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). Public Health Service Cooperative Research & Development Agreement for Intramural-PHS Clinical Research, dated eﬀective as of February 2, 2015, by and between the National Cancer Institute and PDS Biotechnology Corporation (ﬁled as Exhibit 10.28 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). 78 Index 10.7 10.8+ 10.9** 10.10** 10.11+ 10.12+ 10.13+ 10.14+ 10.15+ 10.16+ 10.17+ 10.18+ 10.19+ 10.20+ 10.21+ 10.22+ 10.23 DOTAP Chloride Enantiomer License Agreement eﬀective November 1, 2008, between Merck Eprova AG and PDS Biotechnology Corporation (ﬁled as Exhibit 10.29 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein). Employment Agreement, eﬀective June 1, 2019, by and between PDS Biotechnology Corporation and Gregory Conn (ﬁled as Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q on August 1, 2019, and incorporated by reference herein). Licensing Agreement by and between Evonik Corporation (as successor in interest to SurModics Pharmaceuticals, Inc.) and Edge Therapeutics, Inc., dated as of October 20, 2010 (ﬁled as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 on August 14, 2015, and incorporated by reference herein). Amendment No. 1 to the License Agreement, eﬀective as of September 21, 2015, by and between Edge Therapeutics, Inc. and Evonik Corporation (ﬁled as Exhibit 10.15 to the Company’s Registration Statement on Form S-1/A on September 21, 2015, and incorporated by reference herein). PDS Biotechnology 2010 Equity Incentive Plan, and forms of agreement thereunder (ﬁled as Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A on September 21, 2015, and incorporated by reference herein). Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (ﬁled as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein). Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (ﬁled as Exhibit 10.3 to the Company’s Current Report on Form 8-K on December 9, 2020, and incorporated by reference herein). Employee Stock Option Agreement under the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 9, 2020, and incorporated by reference herein). PDS Biotechnology Corporation 2009 Stock Option Plan, as amended (ﬁled as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein). PDS Biotechnology Corporation 2018 Stock Option Plan (ﬁled as Exhibit 99.2 to the Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein). Form of PDS Biotechnology Corporation Option Agreement for 2009 Stock Option Plan, as amended (ﬁled as Exhibit 99.3 to the Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein). Form of PDS Biotechnology Corporation Option Agreement for 2018 Stock Incentive Plan (ﬁled as Exhibit 99.4 to the Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein). PDS Biotechnology Corporation 2019 Inducement Plan, as amended (ﬁled as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 9, 2020, and incorporated by reference herein). Form of Stock Option Grant Notice and Stock Option Agreement under the 2019 Inducement Plan (ﬁled as Exhibit 10.2 to the Company’s Current Report on Form 8-K on June 20, 2019, and incorporated by reference herein). Form of Indemniﬁcation Agreement for oﬃcers and directors (ﬁled as Exhibit 10.9 to the Company’s Registration Statement on Form S-1 on August 14, 2015, and incorporated by reference herein). Oﬀer Letter, dated February 1, 2019, by and between PDS Biotechnology Corporation and Lauren Wood, MD. (ﬁled as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q on August 1, 2019, and incorporated by reference herein). Common Stock Purchase Agreement, dated July 29, 2019, by and among the Company and Aspire Capital Fund, LLC (ﬁled as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 30, 2019, and incorporated by reference herein). 79 Index 10.24 10.25+ 23.1* 31.1* 31.2* 32.1* 32.2* Sublease Agreement, eﬀective as of March 5, 2020, by and between PDS Biotechnology Corporation and COWI North America, Inc. (ﬁled as Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed on March 27, 2020, and incorporated by reference herein). Executive Employment Agreement, dated January 1, 2021, by and between PDS Biotechnology Corporation and Seth L. Van Voorhees, Ph.D. (ﬁled as Exhibit 10.1 to the Company’s Current Report on Form 8-K ﬁled on December 9, 2020, and incorporated by reference herein). Consent of KPMG LLP. Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance 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 + * Indicates management contract or compensatory plan. Filed Herewith. ** Conﬁdential Treatment has been requested with respect to certain portions of this Exhibit. Omitted portions have been ﬁled separately with the Securities and Exchange Commission. 80 Index SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. March 18, 2021 March 18, 2021 PDS Biotechnology Corporation By: By: /s/ Frank Bedu-Addo Frank Bedu-Addo, Ph.D. President and Chief Executive Officer /s/ Seth Van Voorhees Seth Van Voorhees Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed by the following persons in the capacities indicated below and on the dates indicated: Signature Title /s/ Frank Bedu-Addo Frank Bedu-Addo /s/ Seth Van Voorhees Seth Van Voorhees /s/ De Lyle W. Bloomquist De Lyle W. Bloomquist, /s/ Gregory Freitag Gregory Freitag J.D., CPA /s/ Stephen Glover Stephen Glover /s/ Sir Richard Sykes Sir Richard Sykes /s/ Kamil Ali-Jackson Kamil Ali-Jackson /s/ Otis W. Brawley Otis W. Brawley /s/ Ilian Iliev Ilian Iliev President and Chief Executive Officer and Director (Principal Executive Officer) Chief Financial Officer (Principal Financial and Accounting Officer) Director Director Director Director Director Director Director 81 Date March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 March 18, 2021 Index Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors PDS Biotechnology Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of PDS Biotechnology Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deﬁcit), and cash ﬂows for the years then ended December 31, 2020, and the related notes (collectively, the consolidated ﬁnancial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the ﬁnancial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audits. We are a public accounting ﬁrm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over ﬁnancial reporting. As part of our audits, we are required to obtain an understanding of internal control over ﬁnancial reporting but not for the purpose of expressing an opinion on the eﬀectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated ﬁnancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated ﬁnancial statements. Our audits also included evaluating the accounting principles used and signiﬁcant estimates made by management, as well as evaluating the overall presentation of the consolidated ﬁnancial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated ﬁnancial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated ﬁnancial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. We have served as the Company’s auditor since 2019. Short Hills, New Jersey March 18, 2021 82 Index PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ASSETS Current assets: Cash and cash equivalents Prepaid expenses and other Total current assets Property and equipment, net Operating lease right-to-use asset Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Accrued expenses Restructuring reserve Operating lease obligation - short term Total current liabilities Noncurrent liability: Operating lease obligation - long term Total liabilities STOCKHOLDERS’ EQUITY December 31, 2020 December 31, 2019 $ $ 28,839,565 1,497,665 30,337,230 12,161,739 2,308,462 14,470,201 5,443 547,706 21,051 – $ 30,890,379 $ 14,491,252 $ $ 1,415,224 1,735,322 – 119,904 3,270,450 1,197,720 1,097,640 498,185 - 2,793,545 490,353 3,760,803 $ – 2,793,545 $ Common stock, $0.00033 par value, 75,000,000 shares authorized at December 31, 2020 and December 31, 2019, 22,261,619 shares and 5,281,237 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively Additional paid-in capital Accumulated deficit Total stockholders’ equity 7,346 70,907,315 (43,785,085) 27,129,576 1,742 40,633,670 (28,937,705) 11,697,707 Total liabilities and stockholders’ equity $ 30,890,379 $ 14,491,252 See accompanying notes to the consolidated financial statements. 83 Index PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Loss Operating expenses: Research and development expenses General and administrative expenses Impairment expense IPRD Lease termination costs Depreciation Total operating expenses Loss from operations Other income (expense): Gain on bargain purchase upon merger Interest income Interest expense Loss before income taxes Income taxes (benefit) Net loss and comprehensive loss Per share information: Net loss per share, basic and diluted Year Ended December 31, 2020 2019 $ $ 7,924,450 6,962,328 – – 15,608 6,099,580 10,981,765 2,974,000 979,273 – 14,902,386 21,034,618 (14,902,386) (21,034,618) – 55,006 – (14,847,380) 13,334,568 353,490 (33,559) (7,380,119) – $ (14,847,380) $ (381,513) (6,998,606) $ (0.89) $ (1.44) Weighted average common shares outstanding basic and diluted 16,745,044 4,868,079 See accompanying notes to the consolidated financial statements. 84 Index PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity (Deficit) Common Stock Shares Issued Amount Additional Paid-in Capital Accumulated Deficit $ 19,871,759 3,139,053 749,984 $ (21,939,099) $ Total Equity (Deficit) (2,066,212) 3,139,053 750,000 Balance - December 31, 2018 Stock based compensation expense Issuance of common stock, net of issuance costs Issuance of warrant in consideration for settlement agreement Issuance of common stock for antidilution Issuance of common stock for convertible debt Issuance of common stock from 401K match Issuance of common stock from equity transaction Equity from merger transaction Net loss Balance - December 31, 2019 Stock based compensation expense Issuances of common stock, net of issuance costs Issuance of common stock for warrant exercise Issuance of common stock from 401K match Net loss Balance - December 31, 2020 See accompanying notes to the financial statements. 1,128 – 16 – 32 3 2 33 528 – 1,742 – 5,581 22 1 – 7,346 $ 3,417,187 – 48,930 – 97,960 9,683 7,645 100,654 1,599,178 – 5,281,237 – 16,900,000 65,240 15,142 – 22,261,619 $ 85 – – – – – – – – 372,925 (32) 65,903 37,078 603,891 15,793,109 – 40,633,670 432,321 29,750,921 70,437 19,966 – 70,907,315 $ (6,998,606) (28,937,705) – – – – (14,847,380) $ (43,785,085) $ 372,925 – 65,906 37,080 603,924 15,793,637 (6,998,606) 11,697,707 432,321 29,756,502 70,459 19,967 (14,847,380) 27,129,576 Index PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense Issuance of common stock from equity transaction Stock-based 401K company common match Depreciation expense Impairment charge - IPR&D Deferred income tax benefit Operating lease expense Loss on disposal of fixed assets related to lease termination Write off of remaining ROU asset and lease liability pursuant to a lease termination Bargain purchase gain Interest expense from beneficial conversion feature Increase in warrants liability Changes in operating assets and liabilities: Prepaid expenses and other assets Accounts payable Accrued expenses Restructuring reserve Operating lease liabilities Net cash used in operating activities Cash flows from investing activities: Cash received in reverse merger transaction Proceeds from sale of equipment Net cash provided by investing activities Cash flows from financing activities: Proceeds from exercise of warrants Proceeds from issuances of common stock Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Year Ended December 31, 2020 2019 $ (14,847,380) $ (6,998,606) 432,321 – 19,967 15,608 – – 160,684 – – – – – 810,797 217,504 637,682 (498,185) (98,133) (13,149,135) 3,139,053 603,924 37,080 98,414 2,974,000 (381,513) – 310,951 (32,309) (13,334,568) 32,953 81,700 (1,138,548) (1,977,667) 83,753 (1,572,086) – (18,073,469) – – – 29,106,513 275,000 29,381,513 70,459 29,756,502 29,826,961 – 750,000 750,000 16,677,826 12,161,739 12,058,044 103,695 Cash and cash equivalents at end of period $ 28,839,565 $ 12,161,739 Supplemental cash flow information: Conversion of convertible notes and accrued interest into common stock Consideration in connection with reverse merger transaction Conversion of warrants liability into additional common stock See accompanying notes to the consolidated financial statements. 86 $ $ $ $ $ – – – 32,953 15,793,638 372,925 Index Note 1 – Nature of Operations PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements PDS Biotechnology Corporation, a Delaware corporation (the “Company,” or “PDS”), is a clinical stage immuno-oncology company with a growing pipeline of clinical-stage immunotherapies to treat cancer at various stages, including head and neck cancer, prostate cancer, breast cancer, cervical cancer, anal cancer, and other cancers. All of PDS’s products are based on the proprietary Versamune ® platform technology, which activates and directs the human immune system to unleash a powerful and targeted attack against cancer cells. The Versamune ®-based immunotherapies may be used as monotherapies or in combination with other agents. PDS is initially prioritizing the development of the Versamune®-based products as combination therapies to be administered with other potentially synergistic agents such as FDA-approved therapeutic or immunotherapeutic agents and promising therapeutic agents still in clinical development. PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune ® platform. As of December 31, 2020, PDS holds six (6) U.S. patents with granted claims directed to its platform technology and eight (8) pending patent applications. These issued patents will expire in 2028, 2029, 2031 and 2033. Should the more recently submitted patent applications currently in prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of March 8, 2021, PDS holds thirty (30) issued foreign patents and thirty-four (34) pending or published foreign patent applications. Most of our international issued patents are issued in multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform technology. These issued patents will expire in 2031-2034, or later if patent term extension applies. Licensed patents Licensed Patent Families 1 and 2 cover the Versamune ®-based product candidates, as they are directed to the currently utilized Versamune ® ingredient, (R)-DOTAP and its crystal forms, manufacturing methods, and pharmaceutical compositions using the compounds. PDS Biotechnology has an exclusive worldwide license from Merck & Cie to Licensed Patent Families 1 and 2, which are owned by Merck Patent GmbH, for use in the Company’s immunotherapy compositions and immunotherapies. Licensed Patent Families 3 and 4 are licensed from the US government, and are directed to mucin-1 (“MUC-1”) antigens to be used by the Company in future cationic lipid immunotherapy or vaccine products. Such immunotherapies can be used for treating a range of cancers, including colon, breast, ovarian and lung cancers. Reverse acquisition On March 15, 2019, the Company, then operating as Edge Therapeutics, Inc. (“Edge”), completed its reverse merger with privately held PDS Biotechnology Corporation (“Private PDS”), pursuant to and in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 23, 2018, as amended on January 24, 2019, by and among the Company, Echos Merger Sub, a wholly-owned subsidiary of the Company (“Merger Sub”), and Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as the Company’s wholly-owned subsidiary (the “Merger”). In connection with and immediately following completion of the Merger, the Company eﬀected a 1-for-20 reverse stock split (the “Reverse Stock Split”) and changed its corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation. For accounting purposes, the Merger is treated as a “reverse acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Private PDS is considered the accounting acquirer. Accordingly, upon consummation of the Merger, the historical ﬁnancial statements of Private PDS became the Company’s historical ﬁnancial statements, and the historical ﬁnancial statements of Private PDS are included in the comparative prior periods. See “Note 4 – Reverse Merger” for more information on the Merger. As part of the Merger, the Company acquired all of Edge’s assets relating to current and future research and development. 87 Index Note 2 – Summary of Significant Accounting Policies (A) Use of estimates: The preparation of 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 revenues and 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 estimates relate to the prior recognition and measurement of assets acquired and liabilities assumed in the business acquisition, assessment of indicators of impairment of intangible assets in the prior year, and the fair value of securities underlying stock-based compensation. (B) 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 ability to add product candidates to its pipeline, the Company’s intellectual property, 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, and the Company’s ability to raise capital. 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. (C) Business acquisition: The Company’s consolidated ﬁnancial statements include the operations of an acquired business after the completion of the acquisition. 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. The Company measures 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). • 88 Index (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) Property and equipment: Property and equipment are recorded at cost. Depreciation is recorded for property and equipment using the straight-line method over the estimated useful life of ﬁve years. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. (F) 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. (G) 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. (H) Intangibles asset and impairment: As part of the reverse merger transaction on March 15, 2019, the Company acquired an in-process research and development (“IPR&D”) intangible asset valued at $2,974,000 using a discounted cash ﬂow method. In determining the value of IPR&D, management considers, among other factors, the stage of completion of the project, the technological feasibility of the project, whether the project have an alternative future use, and the estimated residual cash ﬂows that could be generated from the various projects and technologies over their respective projected economic lives. The discount rate used is determined at the time of acquisition and includes a rate of return which accounts for the time value of money, as well as risk factors reflecting the economic risk that the projected cash flows may not be realized. The Company reviews all of its long-lived assets for impairment indicators throughout the year. The Company performs impairment testing for indeﬁnite-lived intangible assets annually and for all other long-lived assets whenever impairment indicators are present. When necessary, the Company records charges for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. See Note 7 for further discussion on prior year impairment. (I) 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. In lieu of higher cash compensation, the Company has granted non-employee options to consultants and expensed $1,027 and $18,425 during the years ended December 31, 2020 and 2019, respectively. 89 Index (J) Net loss per common share: Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common stock shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share, because potentially dilutive securities would have an antidilutive effect as the Company incurred a net loss for the years ended December 31, 2020 and 2019. The potentially dilutive securities excluded from the determination of diluted loss per share as their effect is antidilutive, are as follows: Stock options to purchase Common Stock Warrants to purchase Common Stock Total (K) Income taxes: Year Ended December 31, 2020 1,650,898 197,518 1,848,416 2019 1,421,797 258,825 1,680,622 The Company provides for deferred income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the future tax consequences attributable to net operating loss carryforwards and for diﬀerences between the ﬁnancial statement carrying amounts and the respective tax bases of assets and liabilities. Deferred tax assets are reduced if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. (L) Fair value of financial instruments: FASB ASC 820, Fair Value Measurement Disclosures, speciﬁes a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reﬂect market data obtained from independent sources, while unobservable inputs reﬂect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: • • • Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of ﬁnancial instruments whose value is based on quoted market prices such as exchange- traded instruments and listed equities. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation methodologies. Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. (M) Subsequent events: Subsequent events have been evaluated through the date these financial statements were issued. See Note 16. 90 Index (N) New accounting standards adopted: In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). ASU 2018-15 reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). On January 1, 2020, the Company adopted ASU 2018-07 and there was no impact to its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”). ASU 2018-13 modiﬁes disclosure requirements related to fair value measurement. On January 1, 2020, the Company adopted ASU 2018-07 and there was no impact to its ﬁnancial statements. Note 3 – Liquidity and Capital Resources As of December 31, 2020, the Company had $28.8 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, 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. 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, the Company 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. 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. 91 Index 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, 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. 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. Note 4 – Reverse Merger On March 15, 2019, the Company (then operating as Edge), Merger Sub and Private PDS completed the Merger in accordance with the Agreement and Plan of Merger and Reorganization, dated as of November 23, 2018, as amended on January 24, 2019, pursuant to and in accordance with which Merger Sub merged with and into Private PDS, with Private PDS surviving as the Company’s wholly-owned subsidiary. Immediately following completion of the Merger, the Company eﬀected the Reverse Stock Split at a ratio of one new share for every twenty shares of its common stock then- outstanding, and changed its corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS, now the Company’s wholly-owned subsidiary, changed its name to PDS Operating Corporation. The Merger is intended to qualify for federal income tax purposes as a tax- free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. In connection with the Merger, each share of Private PDS’s common stock outstanding immediately prior to the Merger was converted into 0.3262 shares (on a post-Reverse Stock Split basis) of the Company’s common stock. As a result, the Company issued 3,573,760 shares of its common stock to the stockholders of Private PDS in exchange for all of the outstanding shares of common stock of Private PDS. For accounting purposes, Private PDS was considered to be the accounting acquirer in the Merger. As the accounting acquirer, Private PDS’s assets and liabilities continue to be recorded at their historical carrying amounts and the historical operations that will be reﬂected in the Company’s consolidated ﬁnancial statements will be those of Private PDS. All references in the consolidated ﬁnancial statements to the number of shares and per share amounts of the Company’s common stock have been retroactively restated to reflect completion of the Merger and the Reverse Stock Split. Purchase Price Pursuant to the Agreement and Plan of Merger and Reorganization, as amended, Edge issued to Private PDS’s stockholders a number of shares of Edge’s common stock representing approximately 70% of the outstanding shares of our common stock. The purchase price, which represents the consideration transferred to Edge’s stockholders in the Merger is calculated based on the number of shares of our common stock that Edge’s stockholders owned as of the closing of the Merger on March 15, 2019, which consists of the following: Number of our shares of common stock to be owned by Edge security holders (1) Multiplied by the price per share of Edge’s common stock as of March 15, 2019 Purchase price (in thousands) 1,600,166 9.87 15,794 $ $ (1) The amount includes 1,576,916 shares of Edge’s common stock outstanding as of March 15, 2019 plus 23,250 stock options of Edge that were in the money and vested immediately upon closing of the Merger. At closing, 753 of in-the-money options and 235 fractional shares paid out in cash to shareholders were not issued as common stock, resulting in 1,599,178 common shares issued. 92 Index Final Purchase Price Allocation The Company completed its analysis of the allocation of the purchase price as of December 31, 2019 . The purchase price was allocated to the net assets acquired of Edge based upon their preliminary estimated fair values as of March 15, 2019. The in-process research and development asset (“IPR&D”) that is recognized relates to Edge’s NEWTON 2 clinical trial for EG-1962 that has not reached technological feasibility. The Company was actively looking to license out EG-1962 and had preliminary discussions with third parties who were actively looking at the data of EG-1962 during the year. Accordingly, the IPR&D was capitalized as an indeﬁnite-lived intangible asset and tested for impairment at least annually until it is determined that there is no future economic beneﬁt from EG-1962. As a result of capitalizing the IPR&D, the Company recognized an indeﬁnite life deferred tax liability. During the three months ended June 30, 2019, two adjustments were made to the preliminary allocation. The ﬁrst was for $275,000 relating to an oﬀer to purchase equipment that was given a value of $0 in the preliminary allocation. The second was for $65,551 relating to Edge’s bonus plan that was eﬀective prior to the date of acquisition. During the three months ended December 31, 2020 two additional adjustments were made to the preliminary valuation. The ﬁrst was for an increase of $1,751,000 relating to the IPR&D in which the Company ﬁnalized the valuation of the IPR&D and as a result recognized an additional deferred tax liability of $224,513. The second was for a write-oﬀ relating to a transition service arrangement that was eﬀective prior to the date of the acquisition for $131,250. In accordance with ASC 805, Business Combinations any excess fair value of the acquired net assets over the purchase price has been recognized as a bargain purchase gain in the consolidated statement of operations and comprehensive loss. In the fourth quarter 2019, the Company has reassessed whether all the assets acquired, and the liabilities assumed have been identiﬁed and recognized in the purchase price allocation. The final allocation of the purchase price to the net assets of Edge, based on the fair values as of March 15, 2019, is as follows: Cash and cash equivalents Prepaid expense and other assets Right to use asset Intangible assets-IPR&D Total identifiable assets acquired Accounts payable, accrued expenses, other liabilities Lease liability Deferred tax liability Total liabilities assumed Net identifiable assets acquired Bargain purchase gain Purchase price $ $ 29,106,513 1,585,482 1,384,810 2,974,000 35,050,805 (4,595,934) (945,152) (381,513) (5,922,599) 29,128,206 (13,334,568) 15,793,638 The fair value of the IPR&D was determined 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. The rates utilized to discount the net cash ﬂows to the present value are commensurate with the stage of development of the projects and uncertainties in the economic estimates used in the projections. Pro Forma Financial Information The following pro forma consolidated results of net loss for the year ended December 31, 2019: Pro forma operating expenses Pro forma net loss Pro forma basic and diluted net loss per share $ (31,152,190) (31,134,293) (6.40) $ The December 31, 2019 pro forma net loss excludes the bargain purchase gain that resulted from the Merger. 93 Index Note 5 – Fair Value of Financial Instruments There were no transfers between Levels 1, 2, or 3 during the years ended December 31, 2020 or 2019. Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets (Level 1) Quoted Prices in Inactive Markets (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2020: Cash and cash equivalents As of December 31, 2019: Cash and cash equivalents Note 6 – Property and Equipment Property and equipment is summarized as follows: Furniture and equipment Computer and Telephone equipment Lab equipment Total furniture and equipment Less accumulated depreciation Property and equipment, net $ 28,839,565 $ 28,839,565 $ $ 12,161,739 $ 12,161,739 $ – $ – $ – – December 31, 2020 2019 $ $ 14,964 13,545 86,911 115,420 (109,977) 5,443 $ $ 14,964 13,545 86,911 115,420 (94,369) 21,051 Depreciation expense for the years ended December 31, 2020 and 2019 was $15,608 and $98,414, respectively. Note 7 – Impairment Charge In the prior year, the Company determined that the intangible asset related to Edge’s NEWTON 2 clinical trial for EG-1962 was impaired due to signiﬁcantly reduced activity in the data room and a lack of new interest from third parties to purchase or license the product. Further the Company does not have the internal resources to pursue EG 1962 as an internal development project and has stated publicly that it had intended to ﬁnd a partner to fund and run the EG 1962 program. The drop oﬀ in interest from third parties and the lack of any new inbound interest has made this an extremely low probability of success. As a result for the year ended December 31, 2019, the Company recorded an impairment charge - IPR&D of $2,974,000 for the estimated value of the IPR&D asset of $2,974,000 in its consolidated statement of operations and comprehensive loss. Note 8 – Leases The Company adopted Accounting Standards Codiﬁcation (ASC) Topic 842 on the date of the Merger and recognized an operating right-of-use (ROU) asset of $1.4 million and operating lease liabilities of $1.4 million at upon acquiring the lease in the reverse merger. The Company leased oﬃce space in Berkeley Heights, New Jersey that was expected to expire on November 15, 2021 under an operating lease. In addition to the monthly base amount in the lease agreement, the Company is required to pay its proportionate share of real estate taxes and operating expenses during the lease term which are expensed as incurred. The discount rate implicit within the lease is not determinable, therefore Company estimated an incremental borrowing rate based on the information available on the date of the Merger. On July 8, 2019, the Company entered into a lease termination agreement for its oﬃce space located at 300 Connell Drive, Suite 4000, Berkeley Heights, NJ 07922 eﬀective August 31, 2019 (the “Lease Termination Agreement”). Pursuant to the Lease Termination Agreement, the Company was required to pay 50 percent of the remaining lease payments of $665,802 over three installments on September 1, 2019, December 1, 2019, and March 1, 2020, which was recorded as lease termination costs in the third quarter of 2019. On August 31, 2019, the right-of-use asset of $1.2 million and operating lease liability of $1.2 million was written oﬀ. Leasehold improvements amounting to approximately $0.3 million were also written oﬀ and are included in lease termination costs. The Company entered into a temporary month-to-month lease as of September 1, 2019 for oﬃce space located at 830 Morris Turnpike, Short Hills, NJ 07078 until the Company entered into a new lease for permanent office space. This lease was terminated on May 31, 2020. 94 Index Eﬀective March 5, 2020, the Company entered into a sublease for approximately 11,200 square feet of oﬃce space located at 25B Vreeland Road, 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. 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. Cash paid for amounts included in measurement of lease liabilities: Operating cash outflows for operating lease Right-of use asset obtained in exchange for new operating lease liability Remaining lease term - operating lease liability Discount rate - operating lease Reported as of December 31, 2020 Operating lease right-to-use asset Current portion of operating lease liability Operating leases, net of current portion Total For the year ended December 31, 2020 the Company’s operating lease expense was $160,685. Year ended December 31, 2021 2022 2023 2024 2025 and after Total future minimum lease payments Less inputed interest Note 9 – Accrued Expenses and Restructuring Reserve Accrued expenses and other liabilities consist of the following: Accrued research and development costs Accrued professional fees Accrued compensation Accrued rent Total 95 Year Ended December 31, 2020 $ $ $ $ $ 98,133 668,764 32.0 9.15% 547,706 119,904 490,353 610,257 $ $ 170,836 295,346 239,469 - - 705,651 (95,394) 610,257 December 31, 2020 204,780 219,822 1,310,720 - 1,735,322 $ $ 2019 16,415 256,062 603,229 221,934 1,097,640 $ $ Index Restructuring Reserve Restructuring reserve relates to the severance costs incurred by Edge Therapeutics in 2019 prior to the merger transaction and assumed by the Company as part of the purchase accounting, but not yet paid. Through September 2020, restructuring costs of $498,185 was paid. As of December 31, 2020, the balance of the restructuring reserve was $0. Note 10 – Convertible Promissory Note In November 2017, the Company received $30,000 from an investor in exchange for a convertible promissory note bearing interest at 7.50% per annum. The original terms of the promissory note was amended in December 2018 and states that in the event the Company consummates a sale of the Company prior to the conversion or repayment in full of this Note, the outstanding principal amount and all accrued but unpaid interest due shall automatically convert into the numbers of shares of the Company’s common stock equal to (a) the principal amount plus all accrued but unpaid interest thereon, divided by the lesser of (a) $1.11 and (b) the parent closing price multiplied by the exchange ratio (each, as deﬁned in the merger agreement of $3.22). This event occurred on March 15, 2019, the date of the Merger, and as a result, the outstanding principal amount of $30,000 and accrued unpaid interest of $2,950 was converted into 9,683 shares of the Company’s common stock. At the date of the Merger the eﬀective conversion price was less than the parent’s closing stock price of $3.22. As a result, for the year ended December 31, 2019, the Company recorded a beneﬁcial conversion charge of $32,953 which was recorded to interest expense in the consolidated statement of operations and comprehensive loss and an increase to additional paid in capital for the same amount in its consolidated statement of changes in stockholder’s equity (deficit). Note 11 – 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. On January 1, 2016, 2017, 2018 and 2019 the Plan Limit was increased to 152,366 shares, 210,203 shares, 271,941 shares and 323,529 shares, respectively. In March 2019, the Plan was amended and restated which removed the annual increase component and was limited to 826,292 shares. 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 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 term and NQs generally vest over a one to ﬁve year terms. 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. As of December 31, 2020, there were 190,799 shares available for grant under the 2018 Stock Incentive Plan. 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 December 9, 2020, 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 200,000 shares to 500,000 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 December 31, 2020, there were 421,500 shares available for grant under the 2019 Inducement Plan. 96 Index The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and 2019: Research and development General and administrative Total Year Ended December 31, 2020 $ $ 229,977 202,344 432,321 $ $ 2019 550,605 2,588,448 3,139,053 The following table summarizes the stock option activity for the Company’ stock option plans for the year ended December 31, 2020: Balance at January 1, 2020 Granted Exercised Forfeited Expired Options outstanding at December 31, 2020 Vested and expected to vest at December 31, 2020 Exercisable at December 31, 2020 Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value 15.95 1.46 – 41.19 4.69 11.87 11.87 16.29 6.99 7.03 7.03 5.47 $ $ $ 226,731 226,731 – Number of Shares 1,421,797 331,407 – (84,583) (17,724) 1,650,897 1,650,897 1,090,493 $ $ $ $ $ $ $ $ As of December 31, 2020 there was approximately $1,317,615 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 2.91 years. The weighted-average grant date fair value of the stock options granted in 2020 was $1.14 per share. The fair value of options granted during the year ended December 31, 2020 was estimated using the Black-Scholes option valuation model utilizing the following assumptions: Volatility Risk-Free Interest Rate Expected Term in Years Dividend Rate Year Ended December 31, 2020 2019 Weighted Average 97.50% 0.39% 6.04 - 88.70% 2.31% 5.54 - Fair Value of Option on Grant Date $ 1.14 $ 5.67 Expected volatility. The expected volatility assumption is based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available. Risk-free interest rate . The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants. Expected term. The expected term represents the period options are expected to be outstanding. The expected term of the options is based on using the simpliﬁed method, which is the midpoint between the requisite service period and the contractual term of the option, since the Company has 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 the stock options grants. Expected dividend rate. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. 97 Index Note 12 - Stockholders’ Equity (Deficit) Preferred Stock The Company currently has 5,000,000 shares of preferred stock authorized. Voting Shares of preferred stock may be issued in one or more series, from time to time, with each such series to consist of such number of shares and to have such voting powers relative to other classes or series of preferred stock, if any, or common stock, full or limited or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and such qualiﬁcations, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the Company’s Board of Directors. Common Stock The Company currently has 75,000,000 shares of common authorized. Voting Each holder of a share of common stock is entitled to one vote for each share of common stock. Dividends Dividends may be declared and paid as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding preferred stock. Preemptive Rights. The holders of common stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Company whether now or hereafter authorized. Liquidation Rights Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of the common stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential rights of any then outstanding preferred stock. 2019 Issuance of Common Stock In January 2019, Private PDS’s Board of Directors approved an amendment to the terms of the 2018 ﬁnancing. The amendment increased the warrant coverage (which is the amount of warrants each investor is entitled to, based on how much they paid for the common stock) from 20% to 45% in connection with the 2018 bridge ﬁnancing term sheet. As a result of the amendment, in 2019 investors who purchased shares of common stock in 2018 received an additional $32,500 in warrant coverage. In February 2019, Private PDS issued 48,930 shares of common stock resulting in proceeds of $750,000 and the investors collectively received a warrant coverage of $337,500. The exercise price of the warrants to purchase shares of Private PDS’s common stock is $9.87, which is the stock price as of the date of the Merger. Accordingly, during the year ended December 31, 2019, Private PDS issued 37,487 warrants to purchase shares of Private PDS’s common stock. These warrants were determined to be equity instruments under ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging. Warrant Liability Classified to Additional Paid in Capital On March 13, 2019, in connection with the settlement agreement entered into with one of its vendors, Private PDS granted a warrant to purchase 45,288 shares of its common stock at an exercise price of $9.87 which is the stock price as of the date of the Merger. At March 13, 2019, the estimated fair value of the warrant was $372,925. As a result, at March 13, 2019, Private PDS marked the warrant liability to the estimated fair value by $81,700 from $291,225 at December 31, 2018 to $372,925 and recorded an increase to general and administrative expenses in its statement of operations in 2019 for the $81,700. Since Private PDS issued a ﬁxed number of warrants and a ﬁxed exercise price to the vendor the warrant liability of $372,925 was classified to additional paid in capital. 98 Index At March 13, 2019, Private PDS estimated the fair value of the warrant using the Black-Scholes option pricing model utilizing the following assumptions. Private PDS determined the expected stock price volatility based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available. The expected term of the warrant was based on the contractual term. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the term of the warrant grant. The expected dividend rate is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. Volatility Risk-Free Interest Rate Expected Term in Years Dividend Rate Fair Value of Warrant Note 13 – Income Taxes A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows: Federal statutory rate State taxes Extraordinary gain Permanent differences Research and development Valuation Allowance Other Effective tax rate 83% 2.63% 10 0.00% 8.23 $ December 31, 2020 2019 21.0% 6.7% 0.0% (4.5)% 2.3% (27.1)% 1.6% 0.0% 21.0% 21.1% 38.0% (4.1)% 4.1% (74.6)% (0.3)% 5.2% The tax effects of temporary differences that give rise to significant portions of the deferred tax assets were as follows: Federal net operating losses State net operating losses Stock options Restricted stock/warrants Federal tax credit State tax credits Amortization Accrued expense Depreciation Lease liabilities Other Total gross deferred tax assets Less valuation allowance Deferred tax assets, net Right of use asset Total gross deferred tax liabilities Deferred tax, net 99 December 31, 2020 2019 $ $ $ $ 19,757,859 5,704,791 1,687,123 - 1,089,138 752,791 41,695 352,642 721,024 171,543 18,098 30,296,704 (30,142,744) 153,960 (153,960) (153,960) $ $ $ - $ 16,620,765 4,653,462 2,153,487 143,841 740,040 657,376 47,811 363,617 719,263 - 18,098 26,117,760 (26,117,760) - - - - Index 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 of the deferred income tax 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. At December 31, 2020 and 2019, the Company has recorded a full valuation allowance against its net deferred tax assets of approximately $30.1 and $26.1 million respectively. The change in the valuation allowance during the year ended 2020 was approximately $4.0 million. At December 31, 2020, the Company had federal net operating loss (“NOL”) carryforwards of approximately $94.1 million. At December 31, 2020, the Company had federal research and development credit carryforwards of approximately $1.1 million. The federal net operating loss carryforwards begin to expire in 2028, losses generated in 2018 or later will carry forward indefinitely. The federal credit carryforwards begin to expire in 2032. Section 382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event certain ownership changes, as deﬁned. The Company 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 the value of the Company immediately before the change, changes to the Company’s capital during a speciﬁed period prior to the change, and the federal published interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited. At December 31, 2020, the Company had approximately $80.4 million of State of New Jersey NOLs which expire between 2029 and 2040. At December 31, 2020, the Company had approximately $1.0 million of the State of New Jersey research development credits carryforwards. The State of New Jersey has enacted legislation permitting certain corporations located in New Jersey to sell state tax loss carryforwards and state research and development credits, or net loss carryforwards. The Technology Business Tax Certiﬁcate Transfer Program enables qualiﬁed, unproﬁtable NJ-based technology or biotechnology companies with fewer than 225 US employees (including parent company and all subsidiaries) to sell a percentage of New Jersey NOLs and research and development (“R&D”) tax credits to unrelated proﬁtable corporations. In 2020 the company applied to sell its New Jersey NOL and is currently awaiting a final decision regarding this program. 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 December 31, 2020, there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2009 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. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the years ended December 31, 2020 and 2019. Note 14 – Commitments and Contingencies Employment Matters The Company has entered into employment agreements or oﬀer letters 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 for as long as 24 months in connection with a termination following a change of 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. Rent For the years ended December 31, 2020 and 2019, rent was $183,372 and $113,009, respectively, for month-to-month arrangements not impacted by the adoption of ASC 842. 100 Index Note 15 – 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 contribution for the years ended December 31, 2020 and 2019 plan years were $19,967 and $37,080 respectively. Note 16– Subsequent Events On March 11, 2021, the Company announced that its COVID-19 vaccine consortium consisting of PDS Biotech, Farmacore Biotechnology and Blanver Farmoquímica, received a commitment from the Secretary for Research and Scientiﬁc Training of The Ministry of Science, Technology and Innovation of Brazil (“MCTI”), to fund up to approximately US$60 million to support the clinical development and commercialization of a Versamune®- based, second generation COVID-19 vaccine in Brazil. MCTI intends to start making the funds available to prepare to perform a combined Phase 1/2 clinical trial, upon authorization by the Brazilian regulatory agency, Agência Nacional de Vigilância Sanitária (Anvisa) to initiate the proposed Versamune®-based COVID-19 vaccine clinical program in Brazil. 101

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