UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM __ TO __
COMMISSION FILE NO. 000-54318
ONCOSEC MEDICAL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| nevada | 98-0573252 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 24 NORTH MAIN STREET | ||
| PENNINGTON, NJ | 08534 | |
| (Address of principal executive offices) | (Zip Code) |
(855) 662-6732
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 per share | ONCS | Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the Registrant’s Common Stock, $0.0001 par value, was as of March 15, 2022.
OncoSec Medical Incorporated
Form 10-Q
for the Quarterly Period Ended January 31, 2022
| 2 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements:
OncoSec Medical Incorporated
Condensed Consolidated Balance Sheets
| January 31, 2022 | July 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 25,230,993 | $ | 45,951,233 | ||||
| Prepaid expenses and other current assets | 2,696,899 | 3,228,191 | ||||||
| Total Current Assets | 27,927,892 | 49,179,424 | ||||||
| Property and equipment, net | 1,071,001 | 928,821 | ||||||
| Intangible assets, net | 413,471 | 448,412 | ||||||
| Operating lease right-of-use assets | 5,149,229 | 5,445,744 | ||||||
| Other long-term assets | 527,733 | 273,523 | ||||||
| Total Assets | $ | 35,089,326 | $ | 56,275,924 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 3,454,209 | $ | 5,561,645 | ||||
| Accrued compensation related | 582,842 | 320,655 | ||||||
| Operating lease liabilities | 1,037,252 | 845,483 | ||||||
| Note payable | 497,223 | 1,234,133 | ||||||
| Total Current Liabilities | 5,571,526 | 7,961,916 | ||||||
| Operating lease liabilities, net of current portion | 4,702,622 | 5,238,207 | ||||||
| Liability under co-promotion agreement - related party | 5,000,000 | 5,000,000 | ||||||
| Total Liabilities | 15,274,148 | 18,200,123 | ||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock authorized – common shares with a par value of $ as of January 31, 2022 and July 31, 2021, common stock issued and outstanding – and common shares as of January 31, 2022 and July 31, 2021, respectively | 3,935 | 3,916 | ||||||
| Additional paid-in capital | 287,539,711 | 286,337,291 | ||||||
| Warrants issued and outstanding – 1,706,190 warrants as of January 31, 2022 and July 31, 2021 | 3,591,734 | 3,591,734 | ||||||
| Accumulated other comprehensive income (loss) | 173,874 | (79,109 | ) | |||||
| Accumulated deficit | (271,494,076 | ) | (251,778,031 | ) | ||||
| Total Stockholders’ Equity | 19,815,178 | 38,075,801 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 35,089,326 | $ | 56,275,924 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
OncoSec Medical Incorporated
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31, 2022 | January 31, 2021 | January 31, 2022 | January 31, 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Expenses: | ||||||||||||||||
| Research and development | 6,825,540 | 8,915,381 | 13,471,311 | 18,714,740 | ||||||||||||
| General and administrative | 2,590,893 | 2,110,696 | 5,860,616 | 5,351,429 | ||||||||||||
| Loss from operations | (9,416,433 | ) | (11,026,077 | ) | (19,331,927 | ) | (24,066,169 | ) | ||||||||
| Other expense, net | (2,583 | ) | (440 | ) | (4,594 | ) | (1,063 | ) | ||||||||
| Interest expense | (5,382 | ) | (4,722 | ) | (13,427 | ) | (10,856 | ) | ||||||||
| Foreign currency exchange gain (loss), net | (480,072 | ) | 328,592 | (363,147 | ) | 151,674 | ||||||||||
| Loss before income taxes | (9,904,470 | ) | (10,702,647 | ) | (19,713,095 | ) | (23,926,414 | ) | ||||||||
| Income tax expense | 2,950 | 1,450 | 2,950 | 2,950 | ||||||||||||
| Net loss | $ | (9,907,420 | ) | $ | (10,704,097 | ) | $ | (19,716,045 | ) | $ | (23,929,364 | ) | ||||
| Basic and diluted net loss per common share | $ | (0.25 | ) | $ | (0.37 | ) | $ | (0.50 | ) | $ | (0.86 | ) | ||||
| Weighted average shares used in computing basic and diluted net loss per common share | 39,314,860 | 28,676,719 | 39,246,095 | 27,723,948 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
OncoSec Medical Incorporated
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
January 31, 2022 | January 31, 2021 | January 31, 2022 | January 31, 2021 | |||||||||||||
| Net Loss | $ | (9,907,420 | ) | $ | (10,704,097 | ) | $ | (19,716,045 | ) | $ | (23,929,364 | ) | ||||
| Foreign currency translation adjustments | 383,376 | (358,134 | ) | 252,983 | (265,819 | ) | ||||||||||
| Comprehensive Loss | $ | (9,524,044 | ) | $ | (11,062,231 | ) | $ | (19,463,062 | ) | $ | (24,195,183 | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
OncoSec Medical Incorporated
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months Ended January 31, 2022
| Common Stock | Additional Paid-In | Warrants | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance, October 31, 2021 | 39,202,590 | $ | 3,921 | $ | 286,979,197 | 1,706,190 | $ | 3,591,734 | $ | (209,502 | ) | $ | (261,586,656 | ) | $ | 28,778,694 | ||||||||||||||||
| Stock-based compensation expense | 15,179 | 1 | 356,666 | — | 356,667 | |||||||||||||||||||||||||||
| Tax withholdings paid on equity awards | — | (4,886 | ) | — | (4,886 | ) | ||||||||||||||||||||||||||
| Tax shares sold to pay for tax withholdings on equity awards | — | 4,762 | — | 4,762 | ||||||||||||||||||||||||||||
| Exercise of common stock options | 130,000 | 13 | 202,787 | — | 202,800 | |||||||||||||||||||||||||||
| Common stock issued for employee stock purchase plan | 1,500 | 1,185 | — | 1,185 | ||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 383,376 | 383,376 | ||||||||||||||||||||||||||||
| Net loss | — | — | (9,907,420 | ) | (9,907,420 | ) | ||||||||||||||||||||||||||
| Balance, January 31, 2022 | 39,349,269 | $ | 3,935 | $ | 287,539,711 | 1,706,190 | $ | 3,591,734 | $ | 173,874 | $ | (271,494,076 | ) | $ | 19,815,178 | |||||||||||||||||
Six Months Ended January 31, 2022
| Common Stock | Additional Paid-In | Warrants | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance, July 31, 2021 | 39,152,610 | $ | 3,916 | $ | 286,337,291 | 1,706,190 | $ | 3,591,734 | $ | (79,109 | ) | $ | (251,778,031 | ) | $ | 38,075,801 | ||||||||||||||||
| Stock-based compensation expense | 52,659 | 5 | 956,569 | — | 956,574 | |||||||||||||||||||||||||||
| Tax withholdings paid on equity awards | — | (33,005 | ) | — | (33,005 | ) | ||||||||||||||||||||||||||
| Tax shares sold to pay for tax withholdings on equity awards | — | 32,385 | — | 32,385 | ||||||||||||||||||||||||||||
| Common stock issued for services | 12,500 | 1 | 42,499 | — | 42,500 | |||||||||||||||||||||||||||
| Exercise of common stock options | 130,000 | 13 | 202,787 | — | 202,800 | |||||||||||||||||||||||||||
| Common stock issued for employee stock purchase plan | 1,500 | 1,185 | — | 1,185 | ||||||||||||||||||||||||||||
| Other comprehensive income | — | — | 252,983 | 252,983 | ||||||||||||||||||||||||||||
| Net loss | — | — | (19,716,045 | ) | (19,716,045 | ) | ||||||||||||||||||||||||||
| Balance, January 31, 2022 | 39,349,269 | $ | 3,935 | $ | 287,539,711 | 1,706,190 | $ | 3,591,734 | $ | 173,874 | $ | (271,494,076 | ) | $ | 19,815,178 | |||||||||||||||||
| 6 |
Three Months Ended January 31, 2021
| Common Stock | Additional Paid-In | Warrants | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Income (Loss) | Deficit | Equity | |||||||||||||||||||||||||
| Balance, October 31, 2020 | 27,694,604 | $ | 2,769 | $ | 230,282,585 | 3,114,288 | $ | 5,708,127 | $ | 72,811 | $ | (219,835,567 | ) | $ | 16,230,725 | |||||||||||||||||
| Common stock issued for employee stock purchase plan | 1,538 | 5,798 | — | 5,798 | ||||||||||||||||||||||||||||
| Exercise of common stock warrants | 882,261 | 88 | 4,178,747 | (882,261 | ) | (1,135,035 | ) | 3,043,800 | ||||||||||||||||||||||||
| Exercise of common stock options | 158,248 | 16 | 261,710 | — | 261,726 | |||||||||||||||||||||||||||
| Stock-based compensation expense | 6,541 | 1 | 478,158 | — | 478,159 | |||||||||||||||||||||||||||
| Tax withholdings paid on equity awards | — | (12,927 | ) | — | (12,927 | ) | ||||||||||||||||||||||||||
| Tax shares sold to pay for tax withholdings on equity awards | — | 13,937 | — | 13,937 | ||||||||||||||||||||||||||||
| Cancellation of expired warrants | — | 242,143 | (10,712 | ) | (242,143 | ) | ||||||||||||||||||||||||||
| January 2021 Public Offering, net of $2,970,165 issuance costs | 7,711,284 | 771 | 39,055,561 | — | 39,056,332 | |||||||||||||||||||||||||||
| Common stock issued for services | 37,500 | 4 | 127,496 | — | 127,500 | |||||||||||||||||||||||||||
| Dividends declared ($ per share) | — | — | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (358,134 | ) | (358,134 | ) | ||||||||||||||||||||||||||
|
Net loss | — | — | (10,704,097 | ) | (10,704,097 | ) | ||||||||||||||||||||||||||
| Balance, January 31, 2021 | 36,491,976 | $ | 3,649 | $ | 274,633,208 | 2,221,315 | $ | 4,330,949 | $ | (285,323 | ) | $ | (230,539,664 | ) | $ | 48,142,819 | ||||||||||||||||
Six Months Ended January 31, 2021
| Common Stock | Additional Paid-In | Warrants | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Income (Loss) | Deficit | Equity | |||||||||||||||||||||||||
| Balance, July 31, 2020 | 23,054,474 | $ | 2,305 | $ | 214,789,808 | 3,114,288 | $ | 5,708,127 | $ | (19,504 | ) | $ | (206,610,300 | ) | $ | 13,870,436 | ||||||||||||||||
| Common stock issued for employee stock purchase plan | 1,538 | 5,798 | — | 5,798 | ||||||||||||||||||||||||||||
| Exercise of common stock warrants | 882,261 | 88 | 4,178,747 | (882,261 | ) | (1,135,035 | ) | 3,043,800 | ||||||||||||||||||||||||
| Exercise of common stock options | 158,248 | 16 | 261,710 | 261,726 | ||||||||||||||||||||||||||||
| Stock-based compensation expense | 13,082 | 1 | 2,372,180 | — | 2,372,181 | |||||||||||||||||||||||||||
| Tax withholdings paid on equity awards | — | (26,459 | ) | — | (26,459 | ) | ||||||||||||||||||||||||||
| Tax shares sold to pay for tax withholdings on equity awards | — | 28,049 | — | 28,049 | ||||||||||||||||||||||||||||
| Cancellation of expired warrants | — | 242,143 | (10,712 | ) | (242,143 | ) | ||||||||||||||||||||||||||
| August 2020 Registered Direct Offering, net of $1,464,276 issuance costs | 4,608,589 | 461 | 13,513,177 | — | 13,513,638 | |||||||||||||||||||||||||||
| January 2021 Public Offering, net of $2,970,165 issuance costs | 7,711,284 | 771 | 39,055,561 | — | 39,056,332 | |||||||||||||||||||||||||||
| Common stock issued for services | 62,500 | 7 | 212,494 | — | 212,501 | |||||||||||||||||||||||||||
| Dividends declared ($per share) | — | — | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (265,819 | ) | (265,819 | ) | ||||||||||||||||||||||||||
| Net loss | — | — | (23,929,364 | ) | (23,929,364 | ) | ||||||||||||||||||||||||||
| Balance, January 31, 2021 | 36,491,976 | $ | 3,649 | $ | 274,633,208 | 2,221,315 | $ | 4,330,949 | $ | (285,323 | ) | $ | (230,539,664 | ) | $ | 48,142,819 | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
OncoSec Medical Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||
| January 31, 2022 | January 31, 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (19,716,045 | ) | $ | (23,929,364 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 129,959 | 108,068 | ||||||
| Amortization of right-of-use asset | 325,316 | 417,059 | ||||||
| Stock-based compensation | 956,574 | 2,372,181 | ||||||
| Common stock issued for services | 42,500 | 212,501 | ||||||
| Foreign currency exchange (gain) loss, net | 363,147 | (151,674 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | 508,205 | 246,393 | ||||||
| Other long-term assets | (290,876 | ) | (21 | ) | ||||
| Accounts payable and accrued liabilities | (2,118,642 | ) | 240,307 | |||||
| Accrued compensation related | 262,186 | 84,041 | ||||||
| Operating lease liabilities | (343,817 | ) | (189,373 | ) | ||||
| Net cash used in operating activities | (19,881,493 | ) | (20,589,882 | ) | ||||
| Investing activities | ||||||||
| Purchase of fixed assets | (244,857 | ) | ||||||
| Purchase of intangible assets | (250,000 | ) | ||||||
| Net cash used in investing activities | (244,857 | ) | (250,000 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of common stock through ESPP | 1,185 | 5,798 | ||||||
| Proceeds from issuance of common stock | 57,004,411 | |||||||
| Payment of financing and offering costs | (15,500 | ) | (4,157,379 | ) | ||||
| Proceeds from exercise of warrants | 3,043,800 | |||||||
| Proceeds from exercise of options | 202,800 | 261,726 | ||||||
| Proceeds from co-promotion agreement | 5,000,000 | |||||||
| Principal payments on note payable | (736,910 | ) | (330,144 | ) | ||||
| Tax withholdings paid on equity awards | (33,005 | ) | (26,459 | ) | ||||
| Tax shares sold to pay for tax withholdings on equity awards | 32,385 | 28,049 | ||||||
| Net cash provided by (used in) financing activities | (549,045 | ) | 60,829,802 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (44,845 | ) | (13,811 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (20,720,240 | ) | 39,976,109 | |||||
| Cash and cash equivalents, at beginning of period | 45,951,233 | 20,354,462 | ||||||
| Cash and cash equivalents, at end of period | $ | 25,230,993 | $ | 60,330,571 | ||||
| Supplemental disclosure for cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 13,427 | $ | 6,089 | ||||
| Income taxes | $ | 2,950 | $ | 2,950 | ||||
| Noncash investing and financing transactions: | ||||||||
| Amount accrued for purchase of intangible asset | $ | $ | 245,000 | |||||
| Expiration of warrants | $ | $ | 242,143 | |||||
| Increase in right-of-use assets and operating lease liabilities resulting from contract modification | $ | $ | 338,819 | |||||
| Amounts accrued for offering costs | $ | $ | 277,062 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
OncoSec Medical Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1—Nature of Operations and Basis of Presentation
OncoSec Medical Incorporated (together with its subsidiary, unless the context indicates otherwise, being collectively referred to as the “Company”) began its operations as a biotechnology company in March 2011. The Company has not generated any revenues since its inception. The Company was incorporated in the State of Nevada on February 8, 2008 under the name of Netventory Solutions, Inc. and changed its name to OncoSec Medical Incorporated in March 2011 when it began operating as a biotechnology company.
The Company is a late-stage immuno-oncology company focused on designing, developing and commercializing innovative, proprietary, intra-tumoral DNA-based therapeutics to stimulate and augment anti-tumor immune responses for the treatment of cancers. Its core technology platform ImmunoPulse® is a drug-device therapeutic modality platform comprised of a proprietary intratumoral electroporation (“EP”) delivery device (the “OMS EP Device”) and a proprietary DNA plasmid that triggers transient expression of target protein in cells. The OMS EP Device is designed to deliver plasmid DNA-encoded drugs directly into a solid tumor and promote an immunological response against the cancer. The OMS EP Device can be adapted to treat different tumor types, and consists of an electrical pulse generator and disposable applicators. The Company’s lead product candidate is a DNA-encoded interleukin-12 (“IL-12”) called tavokinogene telseplasmid (“TAVO™”). The OMS EP Device is used to deliver TAVO™ intratumorally, with the aim of reversing the immunosuppressive microenvironment in the treated tumor and elicit systemic tumor-specific immune responses in cancer patients. The activation of the appropriate inflammatory response in the treated tumor can drive a systemic anti-tumor response against untreated tumors in other parts of the body. In 2017, the Company received Fast Track Designation and Orphan Drug Designation from the U.S. Food and Drug Administration (“FDA”) for TAVO™ in metastatic melanoma, which could qualify TAVO™ for expedited FDA review, a rolling Biologics License Application (“BLA”) review and certain other benefits.
The Company’s primary focus is to pursue its study of TAVO™ in combination with KEYTRUDA® (pembrolizumab) in melanoma and triple negative breast cancer (“TNBC”).
The Company’s KEYNOTE-695 study is a registration-directed, Phase 2b open-label, single-arm, multicenter study in approximately 100 patients treated with TAVO™ in combination with KEYTRUDA® (pembrolizumab) in anti-PD-1 checkpoint inhibitor (nivolumab or pembrolizumab) relapsed or refractory metastatic melanoma, being conducted in the United States, Canada, Australia and Europe. In May 2017, the Company entered into a clinical trial collaboration and supply agreement with a subsidiary of Merck & Co., Inc. (“Merck”) in connection with the KEYNOTE-695 study. Pursuant to the terms of the agreement, each company will bear its own costs related to manufacturing and supply of its product, as well as be responsible for its own internal costs. The Company is the study sponsor and is responsible for external costs. The study completed enrollment of the primary cohort in December 2020. In December 2020, the protocol was amended to include an additional cohort, consisting of patients who progressed on prior treatment with ipilimumab in addition to prior anti-PD-1 checkpoint inhibitor. The amendment also enabled enrollment of approximately 25 additional patients to be treated with an updated version of the OMS EP Device (i.e., GenPulseTM generator and Series 3 Applicator), in preparation for seeking FDA approval. Based on and subject to the outcome of the study and feedback from the FDA, the Company plans to file for accelerated approval with the FDA for this patient population in 2023.
| 9 |
The Company’s KEYNOTE-890 study is a Phase 2, open-label, single-arm, multicenter study conducted in the United States and Australia to evaluate the safety and efficacy of TAVO™ in combination with KEYTRUDA® in patients with inoperable locally advanced or metastatic TNBC who have previously failed at least one systemic chemotherapy or immunotherapy (Cohort 1) or who have had no prior systemic therapy in the advanced or metastatic setting (Cohort 2). In May 2018, the Company entered into a second clinical trial collaboration and supply agreement with a subsidiary of Merck with respect to the KEYNOTE-890 study, Cohort 1. Pursuant to the terms of the agreement, each company will bear its own costs related to manufacturing and supply of its product, as well as be responsible for its own internal costs. The Company is the study sponsor and is responsible for external costs. In June 2020, the Company amended its second clinical trial collaboration and supply agreement to include KEYNOTE-890, Cohort 2. Enrollment of Cohort 1 was completed (26 patients) in December 2020. Interim data for Cohort 1 was initially presented at the San Antonio Breast Cancer Symposium (“SABCS”) in December 2019, and an update on this cohort was presented at the SABCS in December 2021. Enrollment of Cohort 2 (target 40 patients) began in January 2021 and is expected to be completed in 2022.
In May 2019, the Company supported commencement of an investigator-initiated Phase 1 clinical trial conducted by the University of California San Francisco (“UCSF”) Helen Diller Family Comprehensive Cancer Center. This study targets patients with Squamous Cell Carcinoma of the Head & Neck and is a single-arm open-label clinical trial in which 68 evaluable patients will receive TAVO™, KEYTRUDA® and epacadostat. Recruitment on this study has been halted after the last patient was treated in June 2021 while the Company and UCSF consider alterations in the design of the study.
In August 2020, the Company supported commencement of an investigator-initiated Phase 2 study conducted by the H. Lee Moffitt Cancer Center and Research Institute and the University of South Florida Morsani College of Medicine to evaluate TAVO™ as neoadjuvant treatment (administered before surgery) in combination with intravenous OPDIVO® (nivolumab) in up to 33 patients with operable locally/regionally advanced melanoma. This study has been designed to evaluate whether the addition of TAVO™ can increase the published anti-tumor response observed with monotherapy OPDIVO®, an anti-PD-1 checkpoint inhibitor, in patients with locally/regionally advanced melanoma prior to surgical resection of tumors. This study began enrolling patients in December of 2020. Enrollment for this trial was expected to be completed in 2022. However, the completion date is under evaluation given current recruitment rates and may extend beyond 2022.
In November 2020, the Company obtained an exclusive license to the Cliniporator® electroporation gene electrotransfer platform from IGEA Clinical Biophysics. This platform has been used for electrochemotherapy in and outside of Europe in over 200 major oncological centers to treat cutaneous metastatic cancer nodules, including melanoma. The license encompasses a broad field of use for gene delivery in oncology, including use as part of the Company’s visceral lesion applicator (“VLA”) program.
In April 2020, the Company announced that Providence Cancer Institute, a part of Providence St. Joseph Health (“Providence”), was pursuing a first-in-human Phase 1 clinical trial of the Company’s novel DNA-encodable, investigational vaccine, CORVax12, which is designed to act as a prophylactic vaccine to prevent COVID-19. CORVax12 consists of the Company’s existing product candidate, TAVO™, in combination with an immunogenic component of the SARS-CoV-2 virus developed by researchers at the National Institutes of Health National Institute of Allergy and Infectious Diseases (“NIAID”). Providence investigators filed and received an Investigator-Initiated Investigational New Drug (“IND”) Application; however, at this time, Providence does not intend to continue further enrollment in this study.
In April 2021, the Company announced that it received authorization to CE mark the OMS EP Device for use in solid tumors. That CE mark indicates compliance with Medical Device Directives (MDD) of the European Commission for the OMS EP Device as configured at the time. Subsequent to receiving the CE mark for that version of the OMS EP Device, the Company has advanced the design of the applicator component of the OMS EP Device. This newer version of the OMS EP Device, which still includes the GenPulseTM generator, is currently used as an investigational device in clinical trial sites in Australia, the EU and Switzerland. The Company is currently seeking FDA agreement for investigational use of the GenPulseTM as the generator component of the OMS EP Device in US clinical sites.
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The Company intends to continue to pursue potential new trials and studies related to TAVO™, in various tumor types. In addition, the Company is also developing its next-generation EP device and applicator, including advancements toward prototypes, pursuing discovery research to identify other product candidates that, in addition to IL-12, can be encoded into proprietary plasmid-DNA and delivered intratumorally using EP. Specifically, the Company is developing proprietary technology to potentially treat liver, lung, bladder, pancreatic and other difficult to treat visceral lesions through the direct delivery of plasmid-based IL-12 with the VLA.
The VLA is being designed to work with low voltage EP generators, including but not limited to the Company’s proprietary APOLLOTM EP generator and Cliniporator®, and is expected to enable transfection of immunologically relevant genes into cells located in visceral organs. In early 2020, the Company had two poster presentations, one at the Society for Interventional Oncology and one at the Society for Interventional Radiology, where it presented preclinical data pertaining to visceral delivery of plasmid therapy. Additionally, the Company has successfully completed several large animal studies to assess VLA design. The Company expected to bring a VLA into the clinic in 2023. However, this timeline is under evaluation and may extend beyond 2023. The Company believes that the flexibility of the Company’s proprietary plasmid-DNA technology allows the Company to deliver other immunologically relevant molecules into the tumor microenvironment in addition to the delivery of plasmid-DNA encoding for IL-12.
The Company established a collaboration with Emerge Health Pty (“Emerge”), the leading Australian company providing full registration, reimbursement, sales, marketing and distribution services of therapeutic products in Australia and New Zealand, to commercialize TAVO™ and make it available under Australia’s Special Access Scheme (“SAS”). Emerge was acquired in late 2019 and in June 2021 informed the Company that oncology will not be a core therapeutic focus for Emerge into the future. The collaboration was terminated effective October 1, 2021, and the Company will not continue to participate in the SAS program.
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of January 31, 2022, the condensed consolidated statements of operations for the three and six months ended January 31, 2022 and 2021, the condensed consolidated statements of comprehensive loss for the three and six months ended January 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and six months ended January 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended January 31, 2022 and 2021, are unaudited, but include all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, is necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The condensed consolidated results of operations for the three and six months ended January 31, 2022 shown herein are not necessarily indicative of the consolidated results that may be expected for the year ending July 31, 2022, or for any other period. These condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the fiscal year ended July 31, 2021, included in the Company’s Annual Report on Form 10-K (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) on October 29, 2021. The condensed consolidated balance sheet at July 31, 2021 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by U.S. GAAP for complete financial statements.
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Note 2—Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, OncoSec Medical Australia PTY LTD. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Such estimates include the Company’s ability to continue as a going concern and certain calculations related to that determination, stock-based compensation, the accrual of research, product development and clinical obligations, impairment of long-lived assets, determining the Incremental Borrowing Rate for calculating Right-Of-Use (“ROU”) assets and lease liabilities and accounting for income taxes, including the related valuation allowance on the deferred tax asset and uncertain tax positions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, the Company reviews its estimates to ensure that they appropriately reflect changes in the business or as new information becomes available. Actual results may differ from these estimates.
Segment Reporting
The Company operates in a single industry segment—the discovery and development of novel immunotherapeutic product candidates to improve treatment options for patients and physicians, intended to treat a wide range of oncology indications.
Cash and Cash Equivalents
The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.
Concentrations and Credit Risk
The Company maintains cash balances at a small number of financial institutions in both the United States and Australia and such balances commonly exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation and $250,000 AUD (approximately $176,000 USD) insured by the Australian Financial Claims Scheme. The Company has not experienced any losses in such accounts and management believes that the Company does not have significant credit risk with respect to such cash and cash equivalents.
Property and Equipment
The Company’s capitalization threshold is $5,000 for property and equipment. The cost of property and equipment is depreciated on a straight-line basis over the estimated useful lives of the related assets. The useful lives of property and equipment for the purpose of computing depreciation are as follows:
| Computers and equipment: | 3 to 10 years | |
| Computer software: | 1 to 3 years | |
| Leasehold improvements: | Shorter of lease period or useful life |
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Construction-in-progress is stated at cost, which relates to the cost of equipment not yet placed into service. No depreciation expense is recorded on construction-in-progress until such time as the relevant assets are completed and put into use.
Intangible Assets
Definite life intangible assets include a license. Intangible assets are recorded at cost. License agreement cost represent the fair value of the license agreement on the date acquired. Intangible assets are amortized on a straight-line basis over their estimated useful life.
Impairment of Long-Lived Assets
The Company periodically assesses the carrying value of intangible and other long-lived assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The assets are considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment, which includes consideration of the following events or changes in circumstances:
| ● | the asset’s ability to continue to generate income from operations and positive cash flow in future periods; | |
| ● | loss of legal ownership or title to the asset(s); | |
| ● | significant changes in the Company’s strategic business objectives and utilization of the asset(s); and | |
| ● | the impact of significant negative industry or economic trends. |
If the assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by the application of discounted cash flow models to project cash flows from the assets. In addition, the Company bases estimates of the useful lives and related amortization or depreciation expense on its subjective estimate of the period the assets will generate revenue or otherwise be used by it. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less selling costs. The Company also periodically reviews the lives assigned to long-lived assets to ensure that the initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from its assets.
Research and Development Expenses
Research and development expenses consist of costs incurred for internal projects, as well as partner-funded collaborative research and development activities. These costs include direct and research-related overhead expenses, which include salaries, stock-based compensation and other personnel-related expenses, facility costs, supplies, depreciation of facilities and laboratory equipment, as well as research consultants and the cost of funding research at universities and other research institutions, and are expensed as incurred. Costs to acquire technologies that are utilized in research and development that have no alternative future use, are expensed when incurred. In accordance with Accounting Standards Codification (“ASC”) 730-20, the Company accounts for upfront, non-refundable research and development payments received from a related party as a long-term liability as there has not been a substantive and genuine transfer of risk and there is a presumption that the Company is obligated to repay the related party.
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Accruals for Research and Development Expenses and Clinical Trials
The Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company accounts for these expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company determines accrual estimates through financial models and takes into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates.
Fair Value of Financial Instruments
The carrying amounts for cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses and notes payable approximate fair value due to the short-term nature of these instruments. It is management’s opinion that the Company is not exposed to significant interest, currency, or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where expressly disclosed.
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. |
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities. |
| ● | Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
The Company had no assets or liabilities that required remeasurement on a recurring basis as of January 31, 2022 and July 31, 2021.
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Warrants
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the Company’s balance sheet at their fair value on the date of issuance and are re-measured on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. Management estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate. As of January 31, 2022 and July 31, 2021, all outstanding warrants issued by the Company were classified as equity.
The Company computes basic net loss per common share by dividing the applicable net loss by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the applicable net loss by the weighted-average number of common shares outstanding during the period plus additional shares to account for the dilutive effect of potential future issuances of common stock relating to stock options and other potentially dilutive securities using the treasury stock method.
The Company did not include shares underlying stock options, restricted stock units and warrants issued and outstanding during any of the periods presented in the computation of net loss per share, as the effect would have been anti-dilutive. The following potentially dilutive outstanding securities were excluded from diluted net loss per share because of their anti-dilutive effect:
For the Three and Six Months Ended | For the Three and Six Months Ended | |||||||
| January 31, 2022 | January 31, 2021 | |||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
| Warrants | ||||||||
| Total | ||||||||
The Company grants equity-based awards (typically stock options or restricted stock units) under its stock-based compensation plan and outside of its stock-based compensation plan, with terms generally similar to the terms under the Company’s stock-based compensation plan. The Company estimates the fair value of stock option awards using the Black-Scholes option valuation model. For employees, directors and consultants, the fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. The Company estimates the fair value of restricted stock unit awards based on the closing price of the Company’s common stock on the date of issuance.
Employee Stock Purchase Plan
Employees may elect to participate in the Company’s stockholder-approved employee stock purchase plan. The stock purchase plan allows for the purchase of the Company’s common stock at not less than 85% of the lesser of (i) the fair market value of a share of common stock on the beginning date of the offering period and (ii) the fair market value of a share of common stock on the purchase date of the offering period, subject to a share and dollar limit as defined in the plan and subject to the applicable legal requirements. There are two six-month offering periods during each fiscal year, ending on January 31 and July 31.
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In accordance with applicable accounting guidance, the fair value of awards under the stock purchase plan is calculated at the beginning of each offering period. The Company estimates the fair value of the awards using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and the offering period. This fair value is then amortized at the beginning of the offering period. Stock-based compensation expense is based on awards expected to be purchased at the beginning of the offering period, and therefore is reduced when participants withdraw during the offering period.
Leases
The Company determines if an arrangement is a lease at inception. Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets.
Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the condensed consolidated balance sheets. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease and non-lease components as a single lease component for all its leases.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Australian dollar.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s condensed consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “Foreign currency exchange gain (loss), net” on the Company’s condensed consolidated statements of operations.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Australia and is excluded from the accompanying condensed consolidated statements of operations.
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Australia Research and Development Tax Credit
The Company’s wholly-owned Australian subsidiary incurs research and development expenses, primarily in the course of conducting clinical trials. The Company’s Australian research and development activities qualify for the Australian government’s tax credit program, which provides a 43.5% credit for qualifying research and development expenses. The tax credit does not depend on the Company’s generation of future taxable income or ongoing tax status or position. Accordingly, the credit is not considered an element of income tax accounting under ASC 740 “Income Taxes” and is recorded against qualifying research and development expenses.
The CARES Act
On March 27, 2020, the president signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) providing nearly $trillion in economic relief to eligible businesses impacted by the coronavirus outbreak. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss (“NOL”) utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In addition to the Small Business Administration (“SBA”) loan received in April 2020, the Company continues to review, and intends to seek, any other available potential benefits under the CARES Act as well as any future legislation signed into law during 2022. The effects of the CARES Act did not have a significant impact on the Company’s condensed consolidated financial statements during the three and six months ended January 31, 2022 and 2021.
Recent Accounting Pronouncements
No recent accounting pronouncements are anticipated to have an impact on or related to the Company’s financial condition, results of operations, or related disclosures.
Note 3—Going Concern and Management’s Plans
The Company has sustained losses in all reporting periods since inception, with an accumulated deficit of approximately $271 million as of January 31, 2022. These losses are expected to continue for an extended period of time. Further, the Company has never generated any cash from its operations and does not expect to generate such cash in the near term. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the condensed consolidated financial statements. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.
As of March 2, 2022, the Company had cash and cash equivalents of $22.1 million. Since inception, cash flows from financing activities have been the primary source of the Company’s liquidity. Based on the Company’s current cash levels, the Company believes its cash resources are insufficient to meet the Company’s anticipated needs for the 12 months following the date the condensed consolidated financial statements are issued.
The Company recognizes it will need to raise additional capital to continue operating its business and fund its planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of its product candidates. In addition, the Company will require additional financing if it desires to in-license or acquire new assets, research and develop new compounds or new technologies and pursue related patent protection, or obtain any other intellectual property rights or other assets. There is no assurance that additional financing will be available to the Company when needed, that management will be able to obtain financing on terms acceptable to the Company, or whether the Company will become profitable and generate positive operating cash flow. The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development programs. Similarly, if our common stock is delisted from the Nasdaq Capital Market, it may limit our ability to raise additional funds. See Note 12—Nasdaq Deficiency Notices. The ongoing COVID-19 pandemic has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all. If the Company is unable to raise sufficient additional funds when needed, on favorable terms or at all, the Company will not be able to continue the development of its product candidates as currently planned or at all, will need to reevaluate its planned operations and may need to delay, scale back or eliminate some or all of its development programs, reduce expenses or cease operations, any of which would have a significant negative impact on its prospects and financial condition.
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Note 4—Balance Sheet Details
Property and Equipment
Property and equipment, net, is comprised of the following:
| January 31, 2022 | July 31, 2021 | |||||||
| Equipment and furniture | $ | 1,944,540 | $ | 1,919,301 | ||||
| Computer software | 109,242 | 109,242 | ||||||
| Leasehold improvements | 32,651 | 32,651 | ||||||
| Construction in progress | 446,367 | 234,409 | ||||||
| Property and equipment, gross | 2,532,800 | 2,295,603 | ||||||
| Accumulated depreciation and amortization | (1,461,799 | ) | (1,366,782 | ) | ||||
| Total | $ | 1,071,001 | $ | 928,821 | ||||
Depreciation and amortization expense recorded for the three months ended January 31, 2022 and 2021 was approximately $48,000 and $46,000, respectively.
Depreciation and amortization expense recorded for the six months ended January 31, 2022 and 2021 was approximately $95,000 and $96,000, respectively.
Intangible Assets
Intangible assets, net, is comprised of the following:
| January 31, 2022 | July 31, 2021 | |||||||
| License | $ | 495,000 | $ | 495,000 | ||||
| Accumulated amortization | (81,529 | ) | (46,588 | ) | ||||
| Total | $ | 413,471 | $ | 448,412 | ||||
In November 2020, the Company licensed generator technology for use in its clinical trials and other research and development efforts. Unless earlier terminated, the term of the license agreement will remain in effect for 85 months. The Company has determined that the license has alternative future uses in research and development projects. The value of the acquired license is recorded as an intangible asset with amortization over the estimated useful life of 85 months.
Intangible asset amortization expense recorded for the three months ended January 31, 2022 and 2021 was approximately $17,000 and $12,000, respectively.
Intangible asset amortization expense recorded for the six months ended January 31, 2022 and 2021 was approximately $35,000 and $12,000, respectively.
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At January 31, 2022, the estimated amortization expense by fiscal year based on the current carrying value of intangible assets is as follows:
| Years ending July 31, | ||||
| 2022 – the remainder of the fiscal year | $ | 34,942 | ||
| 2023 | 69,882 | |||
| 2024 | 69,882 | |||
| 2025 | 69,882 | |||
| 2026 | 69,882 | |||
| Thereafter | 99,001 | |||
| Total | $ | 413,471 |
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are comprised of the following:
| January 31, 2022 | July 31, 2021 | |||||||
| Research and development costs | $ | 2,622,088 | $ | 4,206,926 | ||||
| Professional services fees | 748,483 | 1,229,040 | ||||||
| Other | 83,638 | 125,679 | ||||||
| Total | $ | 3,454,209 | $ | 5,561,645 | ||||
Accrued Compensation
Accrued compensation is comprised of the following:
| January 31, 2022 | July 31, 2021 | |||||||
| Accrued payroll | $ | 319,304 | $ | 311,590 | ||||
| 401K payable | 8,584 | 9,065 | ||||||
| Accrued severance | 254,954 | - | ||||||
| Total | $ | 582,842 | $ | 320,655 | ||||
Note 5—Note Payable
On July 1, 2021, the Company entered into a finance agreement with AFCO Premium Credit LLC (“AFCO”). Pursuant to the terms of the agreement, AFCO loaned the Company the principal amount of $1,355,919, which would accrue interest at 2.894% per annum, to partially fund the payment of the premium of the Company’s Director & Officer insurance. The agreement requires the Company to make eleven monthly payments of $125,056, including interest starting on July 18, 2021. At January 31, 2022, the outstanding balance related to this finance agreement was $497,223.
Note 6—Stockholders’ Equity
January 2021 Offering
On January 25, 2021, the Company completed the offer and sale of an aggregate of shares of its common stock at a purchase price of $ per share in a public offering. The gross proceeds from the offering were approximately $42.0 million, and the net proceeds, after deducting the placement agent’s fee and other offering fees and expenses paid by the Company, were approximately $39.1 million. In connection with the offering, the Company paid the underwriters an aggregate cash fee equal to 6.0% of the gross proceeds of the offering, as well as legal and other expenses equal to approximately $0.4 million.
August 2020 Offering
On August 19, 2020, the Company completed the offer and sale of an aggregate of shares of its common stock at a purchase price of $ per share in a registered direct public offering. The gross proceeds from the offering were approximately $15.0 million, and the net proceeds, after deducting the placement agent’s fee and other offering fees and expenses paid by the Company, were approximately $13.5 million. In connection with the offering, the Company paid the placement agent and other financial advisors an aggregate cash fee equal to 8.0% of the gross proceeds of the offering, as well as legal and other expenses equal to approximately $0.3 million.
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Outstanding Warrants
At January 31, 2022, the Company had outstanding warrants to purchase 1,706,190 shares of its common stock, with exercise prices ranging from $3.45 to $16.80, all of which were classified as equity instruments. These warrants expire at various dates between October 2022 and May 2024.
China Grand Pharmaceutical and Healthcare Holdings Limited and Sirtex Medical US Holdings, Inc.
On October 10, 2019, the Company and China Grand Pharmaceutical and Healthcare Holdings Limited, a company formed under the laws of the British Virgin Islands (“CGP”), and its affiliate, Sirtex Medical US Holdings, Inc., a Delaware corporation (“Sirtex”) entered into Stock Purchase Agreements (as amended, the “Purchase Agreements”). Pursuant to which CGP and Sirtex were given the right to purchase additional shares of common stock at a purchase price equal to the same exercise price paid by each warrant holder in order to maintain CGP and Sirtex’s respective ownership percentages of the outstanding shares of common stock of the Company as of October 10, 2019.
The OncoSec Medical Incorporated 2011 Stock Incentive Plan (as amended and approved by the Company’s stockholders (the “2011 Plan”)), authorizes the Company’s Board of Directors to grant equity awards, including but not limited to, stock options and restricted stock units, to employees, directors and consultants. The 2011 Plan authorizes a total of shares of common stock for issuance. Under the 2011 Plan, incentive stock options are to be granted at a price that is no less than % of the fair value of the Company’s common stock at the date of grant. Stock options vest over a period specified in the individual option agreements entered into with grantees and are exercisable for a maximum period of years after the date of grant. Incentive stock options granted to stockholders who own more than 10% of the outstanding stock of the Company at the time of grant must be issued at an exercise price of no less than % of the fair value of the Company’s common stock on the date of grant.
Modification of Stock Option Awards
During the six months ended January 31, 2021, the compensation committee of the Company’s Board of Directors approved the accelerated vesting of and previously granted time-vesting awards for employees and directors, respectively. The Company accounted for the effects of the stock option modifications described above under the guidance of ASC 718 as follows:
● The unamortized compensation costs associated with the time-vesting options was expensed on the date of acceleration, which was approximately $million and $ million for the employees and directors, respectively.
● Upon modification, it is required under ASC 718 to analyze the fair value of the instruments, before and after the modification, recognizing additional compensation cost for any incremental value. The Company computed the fair value of the award immediately prior to the modification and compared the fair value to that of the modified award. Since the value of the awards were less after the modification as compared to immediately prior to the modification, no additional compensation expense was recorded.
Stock Options
During the six months ended January 31, 2022, the Company granted options to purchase and shares of its common stock to employees and a consultant under the 2011 Plan, respectively. The stock options issued to employees have a -year term, vest over two years and have exercise prices ranging from $ to $. The stock options issued to the consultant have a -year term, vest over one year and have an exercise price of $.
During the six months ended January 31, 2021, the Company granted options to purchase , and shares of its common stock to employees, directors and a consultant under the 2011 Plan, respectively. The stock options issued to employees have a -year term, vest over three years and have exercise prices ranging from $ to $. The stock options issued to directors have a -year term, vest over one year and have an exercise price of $. The stock options issued to the consultant have a -year term, vest over one year and have an exercise price of $.
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During the six months ended January 31, 2021, in accordance with Nasdaq Listing Rule 5635(c)(4), the Company granted an inducement equity award that consisted of options to purchase shares of its common stock to an employee outside the 2011 Plan. The stock options issued to the employee are nonqualified, have a -year term, vest over one year and have an exercise price of $.
The Company accounts for stock-based compensation based on the fair value of the stock-based awards granted and records forfeitures as they occur. As such, the Company recognizes stock-based compensation cost only for those stock-based awards that vest over their requisite service period, based on the vesting provisions of the individual grants. The service period is generally the vesting period, with the exception of stock options granted pursuant to a consulting agreement, in which case the stock option vesting period and the service period are defined pursuant to the terms of the consulting agreement.
Six Months Ended January 31, 2022 |
Six Months Ended January 31, 2021 |
|||||||
| Expected term (years) | – years | – years | ||||||
| Risk-free interest rate | – | % | – | % | ||||
| Volatility | – | % | – | % | ||||
| Dividend yield | % | % | ||||||
The Company’s expected volatility is derived from the historical daily change in the market price of its common stock. The Company uses the simplified method to calculate the expected term of options issued to employees, non-employees and directors, as the Company does not have much stock option exercise history and thus does not have enough information on exercise behavior to calculate a refined expected term based on that information. The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S. Treasury yield in effect at the time of grant, commensurate with the expected term. For the expected dividend yield used in the Black-Scholes calculation, the Company has never paid any dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future.
| Options | Weighted Average Exercise Price | Weighted - average
Remaining Contract | Aggregate Intrinsic Value ($000) | |||||||||||||
| Outstanding - July 31, 2021 | 3,111,642 | $ | 3.27 | |||||||||||||
| Granted | 48,400 | $ | 1.76 | |||||||||||||
| Exercised | (130,000 | ) | $ | 1.56 | ||||||||||||
| Forfeited/Cancelled | (593,983 | ) | $ | 3.75 | ||||||||||||
| Outstanding - January 31, 2022 | 2,436,059 | $ | 3.22 | 8.7 | $ | |||||||||||
| Exercisable - January 31, 2022 | 1,877,040 | $ | 3.07 | 8.6 | $ | |||||||||||
The weighted-average grant date fair value of stock options granted during the six months ended January 31, 2022 and 2021 was $ and $, respectively.
As of January 31, 2022, the Company has approximately $ million in unrecognized stock-based compensation expense attributable to the outstanding options, which is expected to be recognized over a weighted-average period of years.
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Stock-based compensation expense recorded in the Company’s condensed consolidated statements of operations for the three and six months ended January 31, 2022 resulting from stock options awarded to the Company’s employees, directors and consultants was approximately $ million and $ million, respectively. Of the total expense, $ million and $ million, respectively, was recorded to research and development and $ million and $ million, respectively was recorded in general and administrative in the Company’s condensed consolidated statements of operations for the three and six months ended January 31, 2022.
Stock-based compensation expense recorded in the Company’s condensed consolidated statements of operations for the three and six months ended January 31, 2021 resulting from stock options awarded to the Company’s employees, directors and consultants was approximately $ million and $ million, which included approximately $ and $ million, respectively, related to the accelerated vesting of time-vesting options. Of the total expense, $million and $ million, respectively, was recorded to research and development and $ million and $ million, respectively, was recorded in general and administrative in the Company’s condensed consolidated statements of operations for the three and six months ended January 31, 2021.
Restricted Stock Units (“RSUs”)
For the three months ended January 31, 2022 and 2021, the Company recorded approximately $ and $ in stock-based compensation related to RSUs, which is reflected in the condensed consolidated statements of operations.
For the six months ended January 31, 2022 and 2021, the Company recorded approximately $ and $ in stock-based compensation related to RSUs, which is reflected in the condensed consolidated statements of operations.
| RSUs | Weighted Average Grant Date Fair Value | |||||||
| Nonvested - July 31, 2021 | 442,749 | $ | 3.24 | |||||
| Vested | (52,659 | ) | $ | 3.35 | ||||
| Forfeited/Cancelled | (300,105 | ) | $ | 3.16 | ||||
| Nonvested - January 31, 2022 | 89,985 | $ | 3.43 | |||||
As of January 31, 2022, there was approximately $ million unrecognized compensation cost related to unvested RSUs. This amount is expected to be recognized over a weighted-average period of years.
Shares Issued to Consultants
During the three months ended January 31, 2022 and 2021, and shares of common stock valued at $0 and approximately $0.1 million, respectively, were issued to a consultant for services. During the six months ended January 31, 2022 and 2021, and shares of common stock valued at approximately $0.04 million and $0.2 million, respectively, were issued to a consultant for services. The common stock share values were based on the date the shares were granted.
2015 Employee Stock Purchase Plan
Under the Company’s 2015 Employee Stock Purchase Plan (“ESPP”), the Company is authorized to issue shares of the Company’s common stock. At January 31, 2022, there were shares remaining available for issuance under the ESPP.
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The ESPP is considered a Type B plan under FASB ASC Topic 718 because the number of shares a participant is permitted to purchase is not fixed based on the stock price at the beginning of the offering period and the expected withholdings. The ESPP enables the participant to “buy-up” to the plan’s share limit, if the stock price is lower on the purchase date. As a result, the fair value of the awards granted under the ESPP is calculated at the beginning of each offering period as the sum of:
| ● | % of the share price of an unvested share at the beginning of the offering period, | |
| ● | % of the fair market value of a six-month call on the unvested share aforementioned, and | |
| ● | % of the fair market value of a six-month put on the unvested share aforementioned. |
The fair market value of the six-month call and six-month put are based on the Black-Scholes option valuation model. For the six-month offering period to end on January 31, 2022, the following assumptions were used: maturity, % risk free interest, % volatility, % forfeitures and $ dividends. For the six-month offering period ended January 31, 2021, the following assumptions were used: maturity, % risk free interest, % volatility, % forfeitures and $ dividends.
Approximately $and $ was recorded as stock-based compensation during the six months ended January 31, 2022 and 2021, respectively.
Common Stock Reserved for Future Issuance
The following table summarizes all common stock reserved for future issuance at January 31, 2022:
| Common Stock options outstanding (within the 2011 Plan and outside of the terms of the 2011 Plan) | 2,436,059 | |||
| Common Stock reserved for restricted stock unit release | 89,985 | |||
| Common Stock authorized for future grant under the 2011 Plan | 1,569,829 | |||
| Common Stock reserved for warrant exercise | 1,706,190 | |||
| Shares issuable under CGP and Sirtex stock purchase agreements (Note 6) | 1,924,001 | |||
| Common Stock reserved for future ESPP issuance | 28,294 | |||
| Total Common Stock reserved for future issuance | 7,754,358 |
Note 8—Commitments and Contingencies
Contingencies
The Company is not a party to any other legal proceeding or aware of any other threatened action as of the date of this report.
Employment Agreements
The Company has entered into employment agreements with certain executive officers and certain other key employees. Generally, the terms of these agreements provide that, if the Company terminates the officer or employee other than for cause, death or disability, or if the officer terminates his or her employment with the Company for good cause, the officer shall be entitled to receive certain severance compensation and benefits as described in each such agreement.
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Note 9—Leases
Lease Agreements
The Company has operating leases for corporate offices and lab space. These leases have remaining lease terms of approximately one year to seven years, some of which include options to extend the lease. For any lease where the Company is reasonably certain that a renewal option will be exercised, the lease payments associated with the renewal option period are included in the ROU asset and lease liability as of January 31, 2022.
Supplemental balance sheet information related to leases as of January 31, 2022 was as follows:
| Operating Leases: | ||||
| Operating lease right-of-use assets | $ | 5,149,229 | ||
| Operating Leases: | ||||
| Current portion included in current liabilities | $ | 1,037,252 | ||
| Long-term portion included in non-current liabilities | 4,702,622 | |||
| Total operating lease liabilities | $ | 5,739,874 | ||
Supplemental lease expense related to leases is as follows:
For the Three Months Ended January 31, 2022 | For the Six Months Ended January 31, 2022 | |||||||
| Operating lease cost | $ | 377,318 | $ | 747,110 | ||||
| Total lease expense | $ | 377,318 | $ | 747,110 | ||||
Other information related to leases where the Company is the lessee is as follows:
As of January 31, 2022 | ||||
| Weighted-average remaining lease term | 4.5 years | |||
| Weighted-average discount rate | 9.96 | % | ||
Supplemental cash flow information related to operating leases is as follows:
For the Three Months Ended January 31, 2022 |
For the Six Months Ended January 31, 2022 |
|||||||
| Cash paid for operating lease liabilities | $ | 385,327 | $ | 765,611 | ||||
| Total cash flows related to operating lease liabilities | $ | 385,327 | $ | 765,611 | ||||
Future minimum lease payments under non-cancellable leases as of January 31, 2022 is as follows:
| Years ending July 31, | ||||
| 2022 – the remainder of the fiscal year | $ | 777,389 | ||
| 2023 | 1,585,224 | |||
| 2024 | 1,539,142 | |||
| 2025 | 1,516,126 | |||
| 2026 | 1,533,882 | |||
| Thereafter | 240,688 | |||
| Total minimum lease payments | 7,192,451 | |||
| Less: Imputed interest | (1,452,577 | ) | ||
| Total | $ | 5,739,874 | ||
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Note 10—401(k) Plan
Effective May 15, 2012, the Company adopted a defined contribution savings plan pursuant to Section 401(k) of the Code. The plan is for the benefit of all qualifying employees and permits voluntary contributions by employees of up to 100% of eligible compensation, subject to the maximum limits imposed by Internal Revenue Service. The terms of the plan allow for discretionary employer contributions and the Company currently matches 100% of its employees’ contributions, up to 3% of their annual compensation. The Company’s contributions are recorded as expense in the accompanying condensed consolidated statements of operations and totaled approximately $28,000 and $32,000 for the three months ended January 31, 2022 and 2021, respectively. The Company’s contributions totaled approximately $81,000 and $60,000 for the six months ended January 31, 2022 and 2021, respectively.
Note 11—Related Party Transactions
Except as disclosed elsewhere herein, below are the Company’s related party transactions for the three and six months ended January 31, 2022 and 2021.
Equity Offerings
On January 25, 2021, the Company completed the offer and sale of an aggregate of shares of its common stock at a purchase price of $ per share in a public offering (See Note 6). CGP and Sirtex participated in the offering. Each of CGP and Sirtex exercised its right of participation in future offerings in order to maintain respective ownership percentages of the outstanding shares of common stock of the Company upon close, and purchased and shares of common stock, respectively, at a purchase price of $ per share.
On August 19, 2020, the Company completed the offer and sale of an aggregate of shares of its common stock at a purchase price of $ per share in a registered direct offering (See Note 6). CGP and Sirtex participated in the registered direct offering and maintained their respective ownership percentages of the outstanding shares of common stock of the Company upon close, and purchased and shares of common stock, respectively, at a purchase price of $ per share.
Co-Promotion Agreement
In January 2021, the Company entered into a co-promotion agreement with Sirtex, pursuant to which the Company granted Sirtex the option to co-promote TAVO™ for the treatment of anti-PD-1 refractory locally advanced or metastatic melanoma in the U.S., including its territories and possessions. In consideration for the option, the Company received an upfront, non-refundable payment of $5.0 million from Sirtex (the “option fee”). The option to co-promote is non-exclusive and may be exercised at any time by Sirtex from the effective date until 90 days following the receipt by Sirtex of a complete copy of the final BLA filed by the Company with the FDA (the “option period”). If Sirtex exercises the option, the Company will receive an additional non-refundable and non-creditable option exercise fee of $25.0 million, comprised of $20.0 million in cash, and $million for the issuance of common shares of the Company determined by the average closing price of the stock for the 30 days prior to the date of receipt of the exercise notice for the option.
Under the terms of the co-promotion agreement, if Sirtex exercises the co-promote option, the Company will pay to Sirtex a high-teens to low-twenties royalty (“promotion fee”) of U.S. net sales of the TAVO™ products. The co-promotion agreement will continue until the earlier of the expiration of the option period without Sirtex extending the option or the eighth anniversary of the first FDA approval of the BLA, and can be extended by mutual agreement between the Company and Sirtex. During the co-promotion term, the Company is responsible for funding approximately two-thirds of the promotional costs incurred by Sirtex and Sirtex shall be responsible for approximately one-third.
The Company has determined that the co-promotion agreement represents a funded research and development arrangement within the scope of ASC Subtopic 730-20, Research and Development—Research and Development Arrangements (ASC 730-20). The Company concluded that there has not been a substantive and genuine transfer of risk related to the co-promotion agreement and the Company’s ongoing development of TAVO™ as there is a presumption that the Company is obligated to repay Sirtex based on the significant related party relationship that exists between the parties. This significant related party relationship is based on Sirtex’s approximate 8% ownership of the outstanding shares of the Company’s common stock, and that of its significant equity holder, CGP (which owns 49% of Sirtex), which, at the time of entering into the agreement, owned approximately 42% of the outstanding shares of the Company’s common stock and is the Company’s largest shareholder.
The Company has determined that the appropriate accounting treatment under ASC 730-20 is to record any proceeds received from Sirtex for the co-promote option or upon exercise of the option as cash and cash equivalents as the Company has the ability to direct the usage of funds, and as a corresponding long-term liability (“Liability under co-promotion agreement – related party”) on the Company’s condensed consolidated balance sheet when received. The liability will remain on the balance sheet until (i) Sirtex exercises the option which results in royalties paid by the Company to Sirtex based on the net sales of the TAVO™ products, or (ii) Sirtex does not exercise the option and the co-promotion agreement is terminated by the parties.
As of January 31, 2022, the balance of the Liability under co-promotion agreement – related party relates to the option fee payment of $5.0 million received from Sirtex.
Note 12—Nasdaq Deficiency Notices
On February 9, 2022, the Company received notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) that the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of the Company’s common stock had been below $1.00 per share for 30 consecutive business days as of the date of the Notice. The Notice has no immediate effect on the listing of the Company’s common stock, which will continue to trade at this time on the Nasdaq Capital Market under the symbol “ONCS.”
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until August 8, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period. In the event the Company does not regain compliance by August 8, 2022, the Company may be eligible for an additional 180 calendar day grace period if it meets the continued listing requirement for market value of publicly held shares ($1 million) and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price, and provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not regain compliance within the allotted compliance period(s), Nasdaq will provide notice that the Company’s common stock will be subject to delisting from the Nasdaq Capital Market. In that event, the Company may appeal such delisting determination to a hearings panel.
On November 29, 2021, the Company notified Nasdaq that Robert E. Ward had resigned as a member of the Board of Directors and the Company’s Audit Committee, as disclosed on the Company’s Current Report filed on Form 8-K on November 30, 2021. After giving effect to Mr. Ward’s resignation, the Company’s Audit Committee no longer consists of three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A).
On December 8, 2021, the Company received a letter from Nasdaq noting that the Company no longer complied with the requirement of Listing Rule 5605. The letter also acknowledged that the Listing Rules provide a cure period in order for the Company to regain compliance until the earlier of the Company’s next annual meeting of stockholders or November 23, 2022.
We are currently evaluating our alternatives to resolve these listing deficiencies. To the extent that we are unable to resolve these listing deficiencies, there is a risk that our common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our common stock.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Unless the context indicates otherwise, all references to “OncoSec,” “the Company,” “we,” “us” and “our” in this report refer to OncoSec Medical Incorporated and its consolidated subsidiary. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in this report.
This discussion and analysis of our financial condition and results of operations is not a complete description of our business or the risks associated with an investment in our common stock. As a result, this discussion and analysis should be read together with our condensed consolidated financial statements and related notes included in this report, as well as the other disclosures in this report and in the other documents we file from time to time with the Securities and Exchange Commission, or SEC, including our Annual Report on Form 10-K for our fiscal year ended July 31, 2021 filed with the SEC on October 29, 2021 (the “Annual Report”). Pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K promulgated by the SEC, in preparing this discussion and analysis, we have presumed that readers have access to and have read the discussion and analysis of our financial condition and results of operations included in the Annual Report.
This discussion and analysis and the other disclosures in this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements relate to future events or circumstances or our future performance and are based on our current assumptions, expectations and beliefs about future developments and their potential effect on our business. All statements in this report that are not statements of historical fact could be forward-looking statements. The forward-looking statements in this discussion and analysis include statements about, among other things, the status, progress and results of our clinical programs and our expectations regarding our liquidity and performance, including our expense levels, and the potential impact of the COVID-19 pandemic. Forward-looking statements are only predictions and are not guarantees of future performance, and they are subject to known and unknown risks, uncertainties and other factors, including the risks described under the heading “Risk Factors” herein and in Part I, Item IA of the Company’s most recent Annual Report on Form 10-K and similar discussions contained in the other documents we file from time to time with the SEC. In light of these risks, uncertainties and other factors, the forward-looking events and circumstances described in this report may not occur and our results, levels of activity, performance or achievements could differ materially from those expressed in or implied by any forward-looking statements we make. As a result, you should not place undue reliance on any of our forward-looking statements. Forward-looking statements speak only as of the date they are made, and unless required to by law, we undertake no obligation to update or revise any forward-looking statement for any reason, including to reflect new information, future developments, actual results or changes in our expectations.
Overview
We are a late-stage immuno-oncology company focused on designing, developing and commercializing innovative, proprietary, intra-tumoral DNA-based therapeutics to stimulate and to augment anti-tumor immune responses for the treatment of cancers. Our core technology platform ImmunoPulse® is a drug-device therapeutic modality platform comprised of proprietary intratumoral electroporation (“EP”) delivery devices (the “OMS EP Device”) and a proprietary DNA plasmid that triggers transient expression of target protein in cells. The OMS EP Device is designed to deliver plasmid DNA-encoded drugs directly into a solid tumor and promote an immunological response against the cancer. The OMS EP Device can be adapted to treat different tumor types, and consists of an electrical pulse generator, a reusable handle and disposable applicators. Our lead product candidate is a DNA-encoded interleukin-12 (“IL-12”) called tavokinogene telseplasmid (“TAVO™”). The OMS EP Device is used to deliver TAVO™ intratumorally, with the aim of reversing the immunosuppressive microenvironment in the treated tumor. The activation of the appropriate inflammatory response can drive a systemic anti-tumor response against untreated tumors in other parts of the body. In 2017, we received Fast Track Designation and Orphan Drug Designation from the U.S. Food and Drug Administration (“FDA”) for TAVO™ in metastatic melanoma, which could qualify TAVO™ for expedited FDA review, a rolling Biologics License Application review and certain other benefits.
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Our current focus is to pursue our study of TAVO™ in combination with KEYTRUDA® (pembrolizumab) in melanoma and triple negative breast cancer.
Performance Outlook
We expect to use our available working capital in the near term primarily for the advancement of our existing and planned clinical programs, including performance of the KEYNOTE-695 and KEYNOTE-890 studies and, to a lesser extent, the continuation of our other clinical trials and studies. We anticipate our spending on clinical programs and the development of our next-generation OMS EP Device will continue throughout our current fiscal year, primarily in support of the KEYNOTE-695 and KEYNOTE-890 studies, while our spending on research and development programs will be prioritized, based on our focus on the KEYNOTE-695 and KEYNOTE-890 studies. We expect our cash-based general and administrative expenses to remain relatively flat in the near term, as we seek to continue to leverage internal resources and automate processes to decrease our outside services expenses. See “Results of Operations” below for more information.
COVID-19
Our operational and financial performance have been affected by the COVID-19 pandemic. Our clinical trials have experienced delays in patient enrollment, potentially due to prioritization of hospital resources toward the COVID-19 pandemic or concerns among patients about participating in clinical trials during a public health emergency. The COVID-19 pandemic is also affecting the operations of government entities, such as the FDA, as well as contract research organizations, third-party manufacturers, and other third-parties upon whom we rely. The extent of the impact on our operations cannot be ascertained at this time.
Results of Operations for the Three Months Ended January 31, 2022 Compared to the Three Months Ended January 31, 2021
The unaudited financial data for the three months ended January 31, 2022 and 2021 is presented in the following table and the results of these two periods are included in the discussion thereafter.
January 31, 2022 | January 31, 2021 | $ Change | % Change | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Expenses | ||||||||||||||||
| Research and development | 6,825,540 | 8,915,381 | (2,089,841 | ) | (23 | ) | ||||||||||
| General and administrative | 2,590,893 | 2,110,696 | 480,197 | 23 | ||||||||||||
| Loss from operations | (9,416,433 | ) | (11,026,077 | ) | 1,609,644 | (15 | ) | |||||||||
| Other expense, net | (2,583 | ) | (440 | ) | (2,143 | ) | 487 | |||||||||
| Interest expense | (5,382 | ) | (4,722 | ) | (660 | ) | 14 | |||||||||
| Foreign currency exchange gain (loss), net | (480,072 | ) | 328,592 | (808,664 | ) | (246 | ) | |||||||||
| Loss before income taxes | (9,904,470 | ) | (10,702,647 | ) | 798,177 | (7 | ) | |||||||||
| Income tax expense | 2,950 | 1,450 | 1,500 | 103 | ||||||||||||
| Net loss | $ | (9,907,420 | ) | $ | (10,704,097 | ) | $ | 796,677 | (7 | ) | ||||||
Revenue
We have not generated any revenue since our inception, and we do not anticipate generating revenue in the near term.
Research and Development Expenses
Our research and development expenses decreased by approximately $2.1 million, from $8.9 million during the three months ended January 31, 2021 to $6.8 million during the three months ended January 31, 2022. This decrease was primarily due to: (i) a $1.1 million decrease in clinical trial related costs to support our various clinical studies and costs for discovery research and product development and (ii) a $0.9 million decrease in payroll and related benefit expenses, primarily due to bonuses awarded during the three months ended January 31, 2021, while no bonuses were awarded during the three months ended January 31, 2022.
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General and Administrative
Our general and administrative expenses increased by $0.5 million, from $2.1 million during the three months ended January 31, 2021, to $2.6 million during the three months ended January 31, 2022. This increase was largely due to the following: (i) a $0.8 million increase in legal expenses, primarily related to the $1 million in insurance recoveries received in connection with prior litigation with Alpha Holdings, Inc. during the prior period, (ii) a $0.2 million increase in insurance costs related to increased D&O insurance premiums, and (iii) a $0.2 million increase in director fees paid to the members of the Leadership Committee of the Company’s Board of Directors. These increases were partially offset by a $0.5 million decrease in payroll expenses and a $0.2 million decrease in stock-based compensation to employees and consultants.
Other Expense, Net
Other expense, net, increased by approximately $2,000, from less than $1,000 for the three months ended January 31, 2021 to $3,000 for the three months ended January 31, 2022. This increase was primarily due to increased tax expense related to the increased interest income from an intercompany loan during the current period.
Foreign Currency Exchange Gain (Loss), Net
Foreign currency exchange gain (loss), net, decreased by approximately $0.8 million from a $0.3 million gain during the three months ended January 31, 2021 to a $0.5 million loss for the three months ended January 31, 2022. This decrease was primarily due to unrealized foreign currency transaction loss recognized in connection with the Australian subsidiary’s intercompany loan.
Results of Operations for the Six Months Ended January 31, 2022 Compared to the Six Months Ended January 31, 2021
The unaudited financial data for the six months ended January 31, 2022 and January 31, 2021 is presented in the following table and the results of these two periods are included in the discussion thereafter.
January 31, 2022 | January 31, 2021 | $ Change | % Change | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Expenses | ||||||||||||||||
| Research and development | 13,471,311 | 18,714,740 | (5,243,429 | ) | (28 | ) | ||||||||||
| General and administrative | 5,860,616 | 5,351,429 | 509,187 | 10 | ||||||||||||
| Loss from operations | (19,331,927 | ) | (24,066,169 | ) | 4,734,242 | (20 | ) | |||||||||
| Other expense, net | (4,594 | ) | (1,063 | ) | (3,531 | ) | 332 | |||||||||
| Interest expense | (13,427 | ) | (10,856 | ) | (2,571 | ) | 24 | |||||||||
| Foreign currency exchange gain (loss), net | (363,147 | ) | 151,674 | (514,821 | ) | (339 | ) | |||||||||
| Loss before income taxes | (19,713,095 | ) | (23,926,414 | ) | 4,213,319 | (18 | ) | |||||||||
| Income tax expense | 2,950 | 2,950 | - | - | ||||||||||||
| Net loss | $ | (19,716,045 | ) | $ | (23,929,364 | ) | $ | 4,213,319 | (18 | ) | ||||||
Revenue
We have not generated any revenue since our inception, and we do not anticipate generating revenue in the near term.
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Research and Development Expenses
Our research and development expenses decreased by approximately $5.2 million, from $18.7 million during the six months ended January 31, 2021 to $13.5 million during the six months ended January 31, 2022. This decrease was primarily due to the following: (i) a $4.2 million decrease in clinical trial-related costs to support our various clinical studies and costs for discovery research and product development, (ii) a $0.4 million decrease in payroll and related benefit expenses, primarily due to bonuses awarded during the six months ended January 31, 2021, while no bonuses were awarded during the six months ended January 31, 2022, partially offset by payroll and related benefit expenses incurred in connection with the Company’s increased headcount during the six months ended January 31, 2022, and (iii) a $0.7 million decrease in stock-based compensation expense to employees and consultants, as there was an accelerated vesting of options during the six months ended January 31, 2021 that was not repeated during the six months ended January 31, 2022.
General and Administrative
Our general and administrative expenses increased by approximately $0.5 million, from $5.4 million during the six months ended January 31, 2021, to $5.9 million during the six months ended January 31, 2022. This increase was largely due to the following: (i) a $0.7 million increase in legal costs, primarily related to $1 million in insurance recoveries received in connection with prior litigation with Alpha Holdings, Inc. in the prior period, (ii) a $0.4 million increase in insurance costs related to increased D&O insurance premiums, and (iii) a $0.2 million increase in director fees paid to the members of the Leadership Committee of the Company’s Board of Directors. These increases were partially offset by a $0.9 million decrease in stock-based compensation expense to employees and consultants, as there was an accelerated vesting of options during the six months ended January 31, 2021 that was not repeated during the six months ended January 31, 2022.
Other Expense, Net
Other expense, net, increased by approximately $4,000 from $1,000 for the six months ended January 31, 2021 to $5,000 for the six months ended January 31, 2022. This increase was primarily due to increased tax expense related to the increased interest income from an intercompany loan and the reduced interest income as a result of a lower return on our investments during the current period.
Foreign Currency Exchange Gain (Loss), Net
Foreign currency exchange gain (loss), net, decreased by approximately $0.5 million from a $0.2 million gain during the six months ended January 31, 2021 to a $0.4 million loss for the six months ended January 31, 2022. This increase was primarily due to unrealized foreign currency transaction loss recognized in connection with the Australian subsidiary’s intercompany loan.
Liquidity and Capital Resources
Working Capital
The following table and subsequent discussion summarize our working capital as of each of the periods presented:
At January 31, 2022 | At July 31, 2021 | |||||||
| Current assets | $ | 27,927,892 | $ | 49,179,424 | ||||
| Current liabilities | 5,571,526 | 7,961,916 | ||||||
| Working capital | $ | 22,356,366 | $ | 41,217,508 | ||||
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Current Assets
Current assets as of January 31, 2022 decreased by $21.3 million to $27.9 million, from $49.2 million as of July 31, 2021. This decrease was primarily due to cash used to support our operations during the six months ended January 31, 2022.
Current Liabilities
Current liabilities as of January 31, 2022 decreased by $2.4 million to $5.6 million, from $8.0 million as of July 31, 2021. This decrease was primarily due to a decrease in accounts payable and accrued expenses pertaining to our manufacturing and clinical research activities.
Cash Flow
Cash Used in Operating Activities
Net cash used in operating activities for the six months ended January 31, 2022 was $19.9 million, as compared to $20.6 million for the six months ended January 31, 2021. The $0.7 million decrease in cash used in operating activities was primarily attributable to a decrease in cash used to support our operating activities, including but not limited to, our clinical trials, research and development activities and general working capital requirements.
Cash Used in Investing Activities
Net cash used in investing activities for the six months ended January 31, 2022 was $0.2 million, as compared to $0.3 million for the six months ended January 31, 2021. During the six months ended January 31, 2022, the Company purchased fixed assets for use in its clinical trials. During the six months ended January 31, 2021, the Company licensed generator technology for use in its clinical trials and other research and development efforts.
Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $0.5 million for the six months ended January 31, 2022, as compared to $60.8 million cash provided by financing activities for the six months ended January 31, 2021. Net cash used in financing activities during the six months ended January 31, 2022 was primarily attributable to payments on a note payable. Net proceeds during the six months ended January 31, 2021 was primarily attributable to the $52.6 million net proceeds received from the August 2020 and January 2021 securities offerings, $5 million received from the co-promotion agreement with Sirtex, and $3.3 million received from warrant and option exercises.
Uses of Cash and Cash Requirements
Our primary uses of cash have been to finance clinical and research and development activities focused on the identification and discovery of new potential product candidates, the development of innovative and proprietary medical approaches for the treatment of cancer, and the design and advancement of pre-clinical and clinical trials and studies related to our pipeline of product candidates. We also use our capital resources on general and administrative activities and building and strengthening our corporate infrastructure, programs and procedures to enable compliance with applicable federal, state and local laws and regulations.
Our primary objectives for the next 12 months are to continue the advancement of our KEYNOTE-695 and KEYNOTE-890 studies and, to a lesser extent, our other ongoing clinical trials and studies, and to continue our research and development activities for our next-generation EP device and drug discovery efforts. In addition, we expect to pursue capital-raising transactions, which could include equity or debt financings, in the near term to fund our existing and planned operations and acquire and develop additional assets and technology consistent with our business objectives as opportunities arise.
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Going Concern and Management’s Plans
The Company has sustained losses in all reporting periods since inception, with an accumulated deficit of approximately $271 million as of January 31, 2022. These losses are expected to continue for an extended period of time. Further, the Company has never generated any cash from its operations and does not expect to generate such cash in the near term. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the condensed consolidated financial statements. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.
As of March 2, 2022, the Company had cash and cash equivalents of $22.1 million. Since inception, cash flows from financing activities has been the primary source of the Company’s liquidity. Based on its current cash levels, the Company believes its cash resources are insufficient to meet the Company’s anticipated needs for the 12 months following the date the condensed consolidated financial statements are issued.
The Company recognizes it will need to raise additional capital to continue operating its business and fund its planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of its product candidates. In addition, the Company will require additional financing if it desires to in-license or acquire new assets, research and develop new compounds or new technologies and pursue related patent protection, or obtain any other intellectual property rights or other assets. There is no assurance that additional financing will be available to the Company when needed, that management will be able to obtain financing on terms acceptable to the Company, or whether the Company will become profitable and generate positive operating cash flow. The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development programs. Similarly, if our common stock is delisted from the Nasdaq Capital Market, it may limit our ability to raise additional funds. See “Nasdaq Deficiency Notices” below. The ongoing COVID-19 pandemic has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all. If the Company is unable to raise sufficient additional funds when needed, on favorable terms or at all, the Company will not be able to continue the development of its product candidates as currently planned or at all, will need to reevaluate its planned operations and may need to delay, scale back or eliminate some or all of its development programs, reduce expenses or cease operations, any of which would have a significant negative impact on its prospects and financial condition.
Sources of Capital
We have not generated any revenue since our inception, and we do not anticipate generating revenue in the near term. Historically, we have raised the majority of the funding for our business through offerings of our common stock and warrants to purchase our common stock. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders would experience further dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur debt, our fixed payment obligations, liabilities and leverage relative to our equity capitalization would increase, which could increase the cost of future capital. Further, the terms of any debt securities we issue or borrowings we incur, if available, could impose significant restrictions on our operations, such as limitations on our ability to incur additional debt or issue additional equity or other operating restrictions that could adversely affect our ability to conduct our business, and any such debt could be secured by any or all of our assets pledged as collateral. Additionally, we may incur substantial costs in pursuing future capital, including investment banking, legal and accounting fees, printing and distribution expenses and other costs.
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Nasdaq Deficiency Notices
As previously disclosed, on February 9, 2022, the Company received notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) that the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of the Company’s common stock had been below $1.00 per share for 30 consecutive business days as of the date of the Notice. The Notice has no immediate effect on the listing of the Company’s common stock, which will continue to trade at this time on the Nasdaq Capital Market under the symbol “ONCS.”
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until August 8, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period. In the event the Company does not regain compliance by August 8, 2022, the Company may be eligible for an additional 180 calendar day grace period if it meets the continued listing requirement for market value of publicly held shares ($1 million) and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price, and provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not regain compliance within the allotted compliance period(s), Nasdaq will provide notice that the Company’s common stock will be subject to delisting from the Nasdaq Capital Market. In that event, the Company may appeal such delisting determination to a hearings panel.
On November 29, 2021, the Company notified Nasdaq that Robert E. Ward had resigned as a member of the Board of Directors and the Company’s Audit Committee, as disclosed on the Company’s Current Report filed on Form 8-K on November 30, 2021. After giving effect to Mr. Ward’s resignation, the Company’s Audit Committee no longer consists of three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A).
On December 8, 2021, the Company received a letter from Nasdaq noting that the Company no longer complied with the requirement of Listing Rule 5605. The letter also acknowledged that the Listing Rules provide a cure period in order for the Company to regain compliance until the earlier of the Company’s next annual meeting of stockholders or November 23, 2022.
We are currently evaluating our alternatives to resolve these listing deficiencies. To the extent that we are unable to resolve these listing deficiencies, there is a risk that our common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our common stock.
Critical Accounting Policies
Use of Estimates
The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Such estimates include the Company’s ability to continue as a going concern and certain calculations related to that determination, stock-based compensation, the accrual of research, product development and clinical obligations, impairment of long-lived assets, determining the Incremental Borrowing Rate for calculating Right-Of-Use (“ROU”) assets and lease liabilities and accounting for income taxes, including the related valuation allowance on the deferred tax asset and uncertain tax positions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, the Company reviews its estimates to ensure that they appropriately reflect changes in the business or as new information becomes available. Actual results may differ from these estimates.
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Impairment of Long-Lived Assets
The Company periodically assesses the carrying value of intangible and other long-lived assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The assets are considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment, which includes consideration of the following events or changes in circumstances:
| ● | the asset’s ability to continue to generate income from operations and positive cash flow in future periods; | |
| ● | loss of legal ownership or title to the asset(s); | |
| ● | significant changes in the Company’s strategic business objectives and utilization of the asset(s); and | |
| ● | the impact of significant negative industry or economic trends. |
If the assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by the application of discounted cash flow models to project cash flows from the assets. In addition, the Company bases estimates of the useful lives and related amortization or depreciation expense on its subjective estimate of the period the assets will generate revenue or otherwise be used by it. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less selling costs. The Company also periodically reviews the lives assigned to long-lived assets to ensure that the initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from its assets.
Research and Development Expenses
Research and development expenses consist of costs incurred for internal projects, as well as partner-funded collaborative research and development activities. These costs include direct and research-related overhead expenses, which include salaries, stock-based compensation and other personnel-related expenses, facility costs, supplies, depreciation of facilities and laboratory equipment, as well as research consultants and the cost of funding research at universities and other research institutions, and are expensed as incurred. Costs to acquire technologies that are utilized in research and development that have no alternative future use, are expensed when incurred. In accordance with ASC 730-20, the Company accounts for upfront, non-refundable research and development payments received from a related party as a long-term liability as there has not been a substantive and genuine transfer of risk and there is a presumption that the Company is obligated to repay the related party.
Accruals for Research and Development Expenses and Clinical Trials
The Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company accounts for these expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company determines accrual estimates through financial models and takes into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates.
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Equity-Based Awards
The Company grants equity-based awards (typically stock options or restricted stock units) under our stock-based compensation plan and outside of our stock-based compensation plan, with terms generally similar to the terms under our stock-based compensation plan. The Company estimates the fair value of stock option awards using the Black-Scholes option valuation model. For employees, directors and consultants, the fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. The Company estimates the fair value of restricted stock unit awards based on the closing price of the Company’s common stock on the date of issuance.
Australia Research and Development Tax Credit
Our Australian, wholly-owned, subsidiary incurs research and development expenses, primarily in the course of conducting clinical trials. The Australian research and development activities qualify for the Australian government’s tax credit program, which provides a 43.5% credit for qualifying research and development expenses. The tax credit does not depend on our generation of future taxable income or ongoing tax status or position. Accordingly, the credit is not considered an element of income tax accounting under ASC 740 and is recorded against qualifying research and development expenses in the Company’s condensed consolidated statements of operations.
Leases
The Company determines if an arrangement is a lease at inception. Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets.
Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using our incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the condensed consolidated balance sheet. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease and non-lease components as a single lease component for all its leases.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is contained in Note 2 to our condensed consolidated financial statements included in this report.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, or Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, or the SEC, and that such information is accumulated and communicated to our management, including our Interim Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures reflects the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our Interim Principal Executive Officer and our Principal Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of January 31, 2022. Based on such evaluation, our Interim Principal Executive Officer and Principal Financial Officer concluded that, as of January 31, 2022, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during our fiscal quarter ended January 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we are involved in legal proceedings in the ordinary course of our business. Refer to Note 8: Commitments and Contingencies for more information on legal proceedings.
ITEM 1A. RISK FACTORS.
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, except as noted below. The risk factors disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, in addition to the other information set forth in this report, could materially affect our business, financial condition, or results of operations.
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If our stock price continues to remain below $1.00, our common stock may be subject to delisting from The Nasdaq Stock Market, which would materially reduce the liquidity of our common stock and have an adverse effect on our market price.
On February 9, 2022, the Company received Notice (the “Notice”) from Nasdaq that the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of the Company’s common stock has been below $1.00 per share for 30 consecutive business days. The Notice has no immediate effect on the listing of the Company’s common stock, which will continue to trade at this time on the Nasdaq Capital Market under the symbol “ONCS.”
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until August 8, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period. In the event the Company does not regain compliance by August 8, 2022, the Company may be eligible for an additional 180 calendar day grace period if it meets the continued listing requirement for market value of publicly held shares ($1 million) and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price, and provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not regain compliance within the allotted compliance period(s), Nasdaq will provide notice that the Company’s common stock will be subject to delisting from the Nasdaq Capital Market. In that event, the Company may appeal such delisting determination to a hearings panel.
We are currently evaluating our alternatives to resolve the listing deficiency. To the extent that we are unable to resolve the listing deficiency, there is a risk that our common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock, potentially result in even lower bid prices for our common stock, and make it more difficult for us to obtain financing through the sale of our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are either filed or furnished with this report:
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ONCOSEC MEDICAL INCORPORATED | ||
| By: | /s/ Kevin Smith | |
| Kevin Smith | ||
| Interim President and Chief Executive Officer | ||
| (Interim Principal Executive Officer) | ||
| Dated: March 15, 2022 | ||
| By: | /s/ George Chi | |
| George Chi | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| Dated: March 15, 2022 | ||
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Exhibit 10.1
ONCOSEC MEDICAL INCORPORATED 2015 EMPLOYEE STOCK PURCHASE PLAN
(as adopted by the Board of Directors on October 14, 2015 and proposed to be adopted by the Shareholders on December 4, 2015)
| 1. | ESTABLISHMENT, PURPOSE, AND TIME OF PLAN. |
| 1.1. | Establishment. The OncoSec Medical Incorporated 2015 Employee Stock Purchase Plan (the “Plan”) is hereby established effective as of the date of its approval by the shareholders of the Company (the “Effective Date”). | |
| 1.2. | Purpose. The purpose of the Plan is to advance the interests of the Company and its shareholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments or replacements of such section), and the Plan shall be so construed. | |
| 1.3. | Term of Plan. The Plan shall continue in effect until its termination by the Committee. |
| 2. | DEFINITIONS AND CONSTRUCTION. |
| 2.1. | Definitions. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Whenever used herein, the following terms shall have their respective meanings set forth below: |
| a. | “Board” means the Board of Directors of the Company. | ||
| b. | “Change in Control” means the occurrence of any one or a combination of the following: |
| i. | any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or | |
| ii. | an Ownership Change Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1.p(iii), the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or |
| iii. | approval by the shareholders of a plan of complete liquidation or dissolution of the Company; provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections i. or ii. of this Section 2.1.b in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors. |
For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple acquisitions of the voting securities of the Company and/or multiple Ownership Change Events are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
| c. | “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. | |
| d. | “Committee” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers. | |
| e. | “Company” means OncoSec Medical Incorporated, a Nevada corporation, or any successor corporation thereto. | |
| f. | “Compensation” means, with respect to any Offering Period, regular base wages or salary, overtime payments, shift premiums and payments for paid time off, calculated before deduction of (i) any income or employment tax withholdings or (ii) any amounts deferred pursuant to Section 401(k) or Section 125 of the Code. Compensation shall be limited to such amounts actually payable in cash or deferred during the Offering Period. Compensation shall not include (i) sign-on bonuses, annual or other incentive bonuses, commissions, profit-sharing distributions or other incentive-type payments, (ii) any contributions made by a Participating Company on the Participant’s behalf to any employee benefit or welfare plan now or hereafter established (other than amounts deferred pursuant to Section 401(k) or Section 125 of the Code), (iii) payments in lieu of notice, payments pursuant to a severance agreement, termination pay, moving allowances, relocation payments, or (iv) any amounts directly or indirectly paid pursuant to the Plan or any other stock purchase, stock option or other stock-based compensation plan, or any other compensation not expressly included by this Section. | |
| g. | “Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan. | |
| h. | “Employee” means a person treated as an employee of a Participating Company for purposes of Section 423 of the Code. A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company. For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while on any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. If an individual’s leave of absence exceeds ninety (90) days, the individual shall be deemed to have ceased to be an Employee on the ninety-first (91st) day of such leave unless the individual’s right to reemployment with the Participating Company Group is guaranteed either by statute or by contract. |
| i. | “Fair Market Value” means, as of any date: |
| i. | If, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported on the web site of such exchange or quotation system or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value is established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as determined by the Committee, in its discretion. | |
| ii. | If, on the relevant date, the Stock is not then listed on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined in good faith by the Committee. |
| j. | “Incumbent Director” means a director who either (i) is a member of the Board as of the Effective Date, or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company). | |
| k. | “Non-United States Offering” means a separate Offering covering Eligible Employees of one or more Participating Companies whose Eligible Employees are subject to a prohibition under applicable law on payroll deductions, as described in Section 11.1.b. | |
| l. | “Offering” means an offering of Stock pursuant to the Plan, as provided in Section 6. | |
| m. | “Offering Date” means, for any Offering Period, the first day of such Offering Period. | |
| n. | “Offering Period” means a period, established by the Committee in accordance with Section 6, during which an Offering is outstanding. | |
| o. | “Officer” means any person designated by the Board as an officer of the Company. | |
| p. | “Ownership Change Event” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company). | |
| q. | “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code. | |
| r. | “Participant” means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan. | |
| s. | “Participating Company” means the Company and any Parent Corporation or Subsidiary Corporation designated by the Committee as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Committee shall have the discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies. | |
| t. | “Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies. | |
| u. | “Purchase Date” means, for any Offering Period, the last day of such Offering Period, or, if so determined by the Committee, the last day of each Purchase Period occurring within such Offering Period. |
| v. | “Purchase Period” means a period, established by the Committee in accordance with Section 6, included within an Offering Period and on the final date of which outstanding Purchase Rights are exercised. | |
| w. | “Purchase Price” means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9. | |
| x. | “Purchase Right” means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any payroll deductions or other funds accumulated on behalf of the Participant and not previously applied to the purchase of Stock under the Plan, and to terminate participation in the Plan at any time during an Offering Period. | |
| y. | “Securities Act” means the Securities Act of 1933, as amended. | |
| z. | “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2. | |
| aa. | “Subscription Agreement” means a written or electronic agreement, in such form as is specified by the Company, stating an Employee’s election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee’s Compensation or other method of payment authorized by the Committee pursuant to Section 11.1.b. | |
| bb. | “Subscription Date” means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish. | |
| cc. | “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code. |
| 2.2. | Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. |
| 3. | ADMINISTRATION. |
| 3.1. | Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or the Purchase Right, unless fraudulent or made in bad faith. Subject to the provisions of the Plan, the Committee shall determine all of the relevant terms and conditions of Purchase Rights; provided, however, that all Participants granted Purchase Rights pursuant to an Offering shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or any agreement thereunder (other than determining questions of interpretation pursuant to the second sentence of this Section 3.1) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in the administration of the Plan shall be paid by the Company. | |
| 3.2. | Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election. |
| 3.3. | Power to Adopt Sub-Plans or Varying Terms with Respect to Non-U.S. Employees. The Committee shall have the power, in its discretion, to adopt one or more sub-plans of the Plan as the Committee deems necessary or desirable to comply with the laws or regulations, tax policy, accounting principles or custom of foreign jurisdictions applicable to employees of a subsidiary business entity of the Company, provided that any such sub-plan shall not be within the scope of an “employee stock purchase plan” within the meaning of Section 423 of the Code. Any of the provisions of any such sub-plan may supersede the provisions of this Plan, other than Section 4. Except as superseded by the provisions of a sub-plan, the provisions of this Plan shall govern such sub-plan. Alternatively and in order to comply with the laws of a foreign jurisdiction, the Committee shall have the power, in its discretion, to grant Purchase Rights in an Offering to citizens or residents of a non-U.S. jurisdiction (without regard to whether they are also citizens of the United States or resident aliens) that provide terms which are less favorable than the terms of Purchase Rights granted under the same Offering to Employees resident in the United States. | |
| 3.4. | Power to Establish Separate Offerings with Varying Terms. The Committee shall have the power, in its discretion, to establish separate, simultaneous or overlapping Offerings having different terms and conditions and to designate the Participating Company or Companies that may participate in a particular Offering, provided that each Offering shall individually comply with the terms of the Plan and the requirements of Section 423(b)(5) of the Code that all Participants granted Purchase Rights pursuant to such Offering shall have the same rights and privileges within the meaning of such section. | |
| 3.5. | Policies and Procedures Established by the Company. Without regard to whether any Participant’s Purchase Right may be considered adversely affected, the Company may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an | |
| Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld or paid in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan. All such actions by the Company shall be taken consistent with the requirements under Section 423(b)(5) of the Code that all Participants granted Purchase Rights pursuant to an Offering shall have the same rights and privileges within the meaning of such section, except as otherwise permitted by Section 3.3 and the regulations under Section 423 of the Code. | ||
| 3.6. | Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. |
| 4. | SHARES SUBJECT TO PLAN. |
| 4.1. | Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be five hundred thousand (500,000) shares and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of that Purchase Right shall again be available for issuance under the Plan. | |
| 4.2. | Adjustments for Changes in Capital Structure. Subject to any required action by the shareholders of the Company and the requirements of Section 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the shareholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan, the Annual Increase, the limit on the shares which may be purchased by any Participant during an Offering (as described in Sections 8.1 and 8.2) and each Purchase Right, and in the Purchase Price in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right. The adjustments determined by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive. |
| 5. | ELIGIBILITY. |
| 5.1. | Employees Eligible to Participate. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the Committee may, prior to the commencement of any Offering Period, elect to exclude the following Employees from such Offering Period (and subsequent Offering Periods): |
| a. | Any Employee who is customarily employed by the Participating Company Group for twenty (20) hours or less per week; or | |
| b. | Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year. |
| 5.2. | Exclusion of Certain Shareholders. Notwithstanding any provision of the Plan to the contrary, no Employee shall be treated as an Eligible Employee and granted a Purchase Right under the Plan if, immediately after such grant, the Employee would own, or hold options to purchase, stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee. | |
| 5.3. | Determination by Company. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee or an Eligible Employee and the effective date of such individual’s attainment or termination of such status, as the case may be. For purposes of an individual’s participation in or other rights, if any, under the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee. |
| 6. | OFFERINGS. |
The Plan shall be implemented by sequential Offerings of approximately six (6) months duration or such other period as the Committee shall determine. Offering Periods shall commence in such months as determined by the Committee in its discretion, beginning on or about the first trading day for such six (6) month period and ending on or about the last trading day in such six (6) month period. Thereafter, unless otherwise established by the Committee, a new Offering Period of six (6) months duration shall commence on the next trading day and shall last for another period of six (6) months, ending on or about the last trading day at the end of such six month period. Notwithstanding the foregoing, the Committee may establish additional or alternative concurrent, sequential or overlapping Offering Periods, a different duration for one or more Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the Committee shall so determine in its discretion, each Offering Period may consist of two (2) or more consecutive Purchase Periods having such duration as the Committee shall specify, and the last day of each such Purchase Period shall be a Purchase Date. If the first or last day of an Offering Period or a Purchase Period is not a day on which the principal stock exchange or quotation system on which the Stock is then listed is open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Offering Period or Purchase Period.
| 7. | PARTICIPATION IN THE PLAN. |
| 7.1. | Initial Participation. An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed written or electronic Subscription Agreement to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) not later than the close of business on the Subscription Date established by the Company for that Offering Period. An Eligible Employee who does not deliver a properly completed Subscription Agreement in the manner permitted or required on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless the Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate Company office or representative on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period shall not be eligible to participate in that Offering Period but may participate in any subsequent Offering Period provided the Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period. |
| 7.2. | Continued Participation. A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that the Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1, or (b) terminated employment or otherwise ceased to be an Eligible Employee as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the procedures set forth in Section 7.1 if the Participant desires to change any of the elections contained in the Participant’s then effective Subscription Agreement. |
| 8. | RIGHT TO PURCHASE SHARES. |
| 8.1. | Grant of Purchase Right. Except as otherwise provided below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of Stock determined by dividing the Dollar Limit (determined as provided below) by the Fair Market Value of a share of Stock on such Offering Date or (b) the Share Limit (determined as provided below). The Committee may, in its discretion and prior to the Offering Date of any Offering Period, (i) change the method of, or any of the foregoing factors in, determining the number of shares of Stock subject to Purchase Rights to be granted on such Offering Date, or (ii) specify a maximum aggregate number of shares that may be purchased by all Participants in an Offering or on any Purchase Date within an Offering Period. No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee. For the purposes of this Section, the “Dollar Limit” shall be determined by multiplying $2,083.33 by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole dollar, and the “Share Limit” shall be determined by multiplying five hundred (500) shares by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole share. | |
| 8.2. | Calendar Year Purchase Limitation. Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant’s rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds twenty-five thousand dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section shall be applied in conformance with Section 423(b)(8) of the Code and the regulations thereunder. |
| 9. | PURCHASE PRICE. |
The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Committee; provided, however, that the Purchase Price on each Purchase Date shall not be less than eighty five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date.
| 10. | ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. |
Except as provided in Section 11.1.b with respect to a Non-United States Offering, shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following:
| 10.1. | Amount of Payroll Deductions. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant’s Compensation on each pay day during an Offering Period shall be determined by the Participant’s Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant’s Compensation to be deducted on each pay day during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions effective following the first pay day during an Offering) or more than ten percent (10%) . The Committee may change the foregoing limits on payroll deductions effective as of any Offering Date. | |
| 10.2. | Commencement of Payroll Deductions. Payroll deductions shall commence on the first pay day following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein. |
| 10.3. | Election to Decrease or Stop Payroll Deductions. During an Offering Period, a Participant may elect to decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) an amended Subscription Agreement authorizing such change on or before the “Change Notice Date.” The “Change Notice Date” shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants. A Participant who elects, effective following the first pay day of an Offering Period, to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in such Offering Period unless the Participant withdraws from the Plan as provided in Section 12.1. | |
| 10.4. | Administrative Suspension of Payroll Deductions. The Company may, in its discretion, suspend a Participant’s payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could reasonably be anticipated to purchase the maximum number of shares of Stock permitted (a) under the Participant’s Purchase Right, or (b) during a calendar year under the limit set forth in Section 8.2. Unless the Participant has either withdrawn from the Plan as provided in Section 12.1 or has ceased to be an Eligible Employee, suspended payroll deductions shall be resumed at the rate specified in the Participant’s then effective Subscription Agreement either (i) at the beginning of the next Offering Period if the reason for suspension was clause (a) in the preceding sentence, or (ii) at the beginning of the next Offering Period having a first Purchase Date that falls within the subsequent calendar year if the reason for suspension was clause (b) in the preceding sentence. | |
| 10.5. | Participant Accounts. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant’s Compensation (and other amounts received from a non-United States Participant pursuant to Section 11.1.b shall be credited to such Participant’s Plan account and shall be deposited with the general funds of the Company. All such amounts received or held by the Company may be used by the Company for any corporate purpose. | |
| 10.6. | No Interest Paid. Interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan or otherwise credited to the Participant’s Plan account. |
| 11. | PURCHASE OF SHARES. |
| 11.1. | Exercise of Purchase Right. |
| a. | Generally. Except as provided in Section 11.1.b, on each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right. No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date. | |
| b. | Purchase by Non-United States Participants for Whom Payroll Deductions Are Prohibited by Applicable Law. Notwithstanding Section 11.1.a, where payroll deductions on behalf of Participants who are citizens or residents of countries other than the United States (without regard to whether they are also citizens of the United States or resident aliens) are prohibited by applicable law, the Committee may establish a separate Offering (a “Non-United States Offering”) covering all Eligible Employees of one or more Participating Companies subject to such prohibition on payroll deductions. The Non-United States Offering shall provide another method for payment of the Purchase Price with such terms and conditions as shall be administratively convenient and comply with applicable law. On each Purchase Date of the Offering Period applicable to a Non-United States Offering, each Participant who has not withdrawn from the Plan and whose participation in such Offering Period has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right a number of whole shares of Stock determined in accordance with | |
| Section 11.1.a to the extent of the total amount of the Participant’s Plan account balance accumulated during the Offering Period in accordance with the method established by the Committee and not previously applied toward the purchase of Stock. However, in no event shall the number of shares purchased by a Participant during such Offering Period exceed the number of shares subject to the Participant’s Purchase Right. The Company shall refund to a Participant in a Non-United States Offering in accordance with Section 11.4 any excess Purchase Price payment received from such Participant. |
| 11.2. | Pro Rata Allocation of Shares. If the number of shares of Stock which might be purchased by all Participants on a Purchase Date exceeds the number of shares of Stock available for issuance under the Plan or the maximum aggregate number of shares of Stock that may be purchased on such Purchase Date pursuant to a limit established by the Committee pursuant to Section 8.1, the Company shall make a pro rata allocation of the shares available in as uniform a manner as practicable and as the Company determines to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded. | |
| 11.3. | Delivery of Title to Shares. Subject to any governing rules or regulations, as soon as practicable after each Purchase Date, the Company shall issue or cause to be issued to or for the benefit of each Participant the shares of Stock acquired by the Participant on such Purchase Date by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form. | |
| 11.4. | Return of Plan Account Balance. Any cash balance remaining in a Participant’s Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash balance to be returned to a Participant pursuant to the preceding sentence is less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain the cash balance in the Participant’s Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period, at the option of the Participant. | |
| 11.5. | Tax Withholding. At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the federal, state, local and foreign taxes (including social insurance), if any, required to be withheld by any Participating Company upon exercise of the Purchase Right or upon such disposition of shares, respectively. A Participating Company may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to meet such withholding obligations. | |
| 11.6. | Expiration of Purchase Right. Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period. | |
| 11.7. | Provision of Reports and Shareholder Information to Participants. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant’s Plan account setting forth the total amount credited to his or her Plan account prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant’s Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine. In addition, each Participant shall be provided information concerning the Company equivalent to that information provided generally to the Company’s common shareholders. |
| 12. | WITHDRAWAL FROM PLAN. |
| 12.1. | Voluntary Withdrawal from the Plan. A Participant may withdraw from the Plan by signing and delivering to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) a written or electronic notice of withdrawal on a form provided by the Company for this purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, that if a Participant withdraws from the Plan after a Purchase Date, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew and in the Offering immediately following the offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose, from time to time, a requirement that the notice of withdrawal from the Plan be on file with the Company office or representative designated by the Company for a reasonable period prior to the effectiveness of the Participant’s withdrawal. | |
| 12.2. | Return of Plan Account Balance. Upon a Participant’s voluntary withdrawal from the Plan pursuant to Section 12.1, the Participant’s accumulated Plan account balance which has not been applied toward the purchase of shares of Stock shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant’s interest in the Plan and the Offering shall terminate. Such amounts to be refunded in accordance with this Section may not be applied to any other Offering under the Plan. |
| 13. | TERMINATION OF EMPLOYMENT OR ELIGIBILITY. |
Upon a Participant’s ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or upon the failure of a Participant to remain an Eligible Employee, the Participant’s participation in the Plan shall terminate immediately. In such event, the Participant’s Plan account balance which has not been applied toward the purchase of shares of Stock shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s beneficiary designated in accordance with Section 20, if any, or legal representative, and all of the Participant’s rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13. A Participant whose participation has been so terminated may again become eligible to participate in the Plan by satisfying the requirements of Sections 5 and 7.1.
| 14. | EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. |
In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent thereof, as the case may be (the “Acquiring Corporation”), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under outstanding Purchase Rights or substitute substantially equivalent purchase rights for the Acquiring Corporation’s stock. If the Acquiring Corporation elects not to assume, continue or substitute for the outstanding Purchase Rights, the Purchase Date of the then current Offering Period shall be accelerated to a date before the date of the Change in Control specified by the Committee, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed or continued by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control.
| 15. | NONTRANSFERABILITY OF PURCHASE RIGHTS. |
Neither payroll deductions or other amounts credited to a Participant’s Plan account nor a Participant’s Purchase Right may be assigned, transferred, pledged or otherwise disposed of in any manner other than as provided by the Plan or by will or the laws of descent and distribution. (A beneficiary designation pursuant to Section 20 shall not be treated as a disposition for this purpose.) Any such attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from the Plan as provided in Section 12.1. A Purchase Right shall be exercisable during the lifetime of the Participant only by the Participant.
| 16. | COMPLIANCE WITH SECURITIES LAW. |
The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any securities exchange or market system upon which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company.
| 17. | RIGHTS AS A SHAREHOLDER AND EMPLOYEE. |
A Participant shall have no rights as a shareholder by virtue of the Participant’s participation in the Plan until the date of the issuance of the shares of Stock purchased pursuant to the exercise of the Participant’s Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.2. Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.
| 18. | NOTIFICATION OF DISPOSITION OF SHARES. |
The Company may require the Participant to give the Company prompt notice of any disposition of shares of Stock acquired by exercise of a Purchase Right. The Company may require that until such time as a Participant disposes of shares of Stock acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name until the later of two years after the date of grant of such Purchase Right or one year after the date of exercise of such Purchase Right. The Company may direct that the certificates evidencing shares of Stock acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition.
| 19. | LEGENDS. |
The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE).”
| 20. | DESIGNATION OF BENEFICIARY. |
| 20.1. | Designation Procedure. Subject to local laws and procedures, a Participant may file a written designation of a beneficiary who is to receive (a) shares and cash, if any, from the Participant’s Plan account if the Participant dies subsequent to a Purchase Date but prior to delivery to the Participant of such shares and cash, or (b) cash, if any, from the Participant’s Plan account if the Participant dies prior to the exercise of the Participant’s Purchase Right. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. A Participant may change his or her beneficiary designation at any time by written notice to the Company. | |
| 20.2. | Absence of Beneficiary Designation. If a Participant dies without an effective designation pursuant to Section 20.1 of a beneficiary who is living at the time of the Participant’s death, the Company shall deliver any shares or cash credited to the Participant’s Plan account to the Participant’s legal representative or as otherwise required by applicable law. |
| 21. | NOTICES. |
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
| 22. | AMENDMENT OR TERMINATION OF THE PLAN. |
The Committee may at any time amend, suspend or terminate the Plan, except that (a) no such amendment, suspension or termination shall affect Purchase Rights previously granted under the Plan unless expressly provided by the Committee, and (b) no such amendment, suspension or termination may adversely affect a Purchase Right previously granted under the Plan without the consent of the Participant, except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to comply with any applicable law, regulation or rule. In addition, an amendment to the Plan must be approved by the shareholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are then authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Committee as Participating Companies. Notwithstanding the foregoing, in the event that the Committee determines that continuation of the Plan or an Offering would result in unfavorable financial accounting consequences to the Company, the Committee may, in its discretion and without the consent of any Participant, including with respect to an Offering Period then in progress: (i) terminate the Plan or any Offering Period, (ii) accelerate the Purchase Date of any Offering Period, (iii) reduce the discount or the method of determining the Purchase Price in any Offering Period (e.g., by determining the Purchase Price solely on the basis of the Fair Market Value on the Purchase Date), (iv) reduce the maximum number of shares of Stock that may be purchased in any Offering Period, or (v) take any combination of the foregoing actions.
Exhibit 31.1
CERTIFICATIONS
I, Kevin Smith, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of OncoSec Medical Incorporated; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
March 15, 2022
| /s/ Kevin Smith | |
| Kevin Smith | |
| Interim Chief Executive Officer | |
| (Interim Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, George Chi, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of OncoSec Medical Incorporated; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
March 15, 2022
| /s/ George Chi | |
| George Chi | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Kevin Smith, Interim Principal Executive Officer and Director of OncoSec Medical Incorporated (the “Company”), hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q of the Company for the period ended January 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: March 15, 2022 | By: | /s/ Kevin Smith |
| Kevin Smith | ||
| Interim Chief Executive Officer | ||
| (Interim Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, George Chi, Chief Financial Officer (Principal Financial Officer) of OncoSec Medical Incorporated (the “Company”), hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q of the Company for the period ended January 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: March 15, 2022 | By: | /s/ George Chi |
| George Chi | ||
Chief Financial Officer (Principal Financial Officer) |