DISCUSSION AND ANALYSIS BY ONCOSEC MEDICAL INC. MANAGEMENT OF THE FINANCIAL CONDITION AND OPERATING RESULTS. (form 10-Q)

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Unless the context indicates otherwise, all references to "OncoSec," "our
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" 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 "OncoSec Medical System ("OMS") Electroporation Device" or
"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 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 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 goal is to continue 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.



Our operational and financial performance have already been affected by the
impact of 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.



Operating results for the three months ended October 31, 2021 Compared to the three months ended October 31, 2020



The unaudited financial data for the three months ended October 31, 2021 and
2020 is presented in the following table and the results of these two periods
are included in the discussion thereafter.



                                      October 31,       October 31,           $                %
                                          2021             2020             Change          Change
Revenue                               $          -     $           -     $          -               -
Expenses
Research and development                 6,645,771         9,799,361       (3,153,590 )           (32 )
General and administrative               3,269,723         3,240,732           28,991               1
Loss from operations                    (9,915,494 )     (13,040,093 )      3,124,599             (24 )
Other expense, net                          (2,010 )            (623 )         (1,387 )           223
Interest expense                            (8,045 )          (6,134 )         (1,911 )            31
Foreign currency exchange gain
(loss), net                                116,924          (176,917 )        293,841            (166 )
Loss before income taxes                (9,808,625 )     (13,223,767 )      3,415,142             (26 )
Income tax expense                               -             1,500           (1,500 )          (100 )
Net loss                              $ (9,808,625 )   $ (13,225,267 )   $  3,416,642             (26 )




Revenue


We have not generated any income since our inception and we do not expect to generate any significant income in the near term.

Research and development costs



Our research and development expenses decreased by approximately $3.2 million,
from $9.8 million during the three months ended October 31, 2020 to $6.6 million
during the three months ended October 31, 2021. This decrease was primarily due
to $3.1 million decrease in clinical trial-related costs to support our various
clinical studies and costs for discovery research and product development.

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General and Administrative



Our general and administrative expenses increased by less than $0.1 million,
from $3.2 million during the three months ended October 31, 2020, to $3.3
million during the three months ended October 31, 2021. This increase was
largely due to the following approximate increases: (i) $0.4 million in payroll
costs related to the severance to the former interim CEO (ii) $0.2 million in
insurance costs related to the increased D&O insurance premium and (iii) $0.1
million in consulting costs, primarily related to executive search. These
increases were partially offset by a $0.7 million decrease in stock-based
compensation to employees and consultants.



Other Expense, Net


Other expense, net, increased by approximately $1,000, from $1,000 for the three
months ended October 31, 2020 to $2,000 for the three months ended October 31,
2021. This increase was primarily due to reduced interest income as a result of
a lower return on our investments during the current period.



Foreign exchange gain (loss), net



Foreign currency exchange gain (loss), net, increased by approximately $294,000
from a $177,000 loss during the three months ended October 31, 2020 to a
$117,000 gain for the three months ended October 31, 2021. This increase was
primarily due to unrealized foreign currency transaction gains recognized in
connection with the Australian subsidiary's intercompany loan.



Liquidity and capital resources


Working Capital


The following table and the subsequent discussion summarize our working capital for each of the periods presented:


                              At                   At
                       October 31, 2021       July 31, 2021
Current assets        $       38,690,482     $    49,179,424
Current liabilities            6,869,950           7,961,916
Working capital       $       31,820,532     $    41,217,508




Current Assets



Current assets as of October 31, 2021 decreased by $10.5 million to $38.7
million, from $49.2 million as of July 31, 2021. This decrease was primarily due
to cash used to support our operations during the three months ended October 31,
2021.



Current Liabilities



Current liabilities as of October 31, 2021 decreased by $1.1 million to $6.9
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 three months ended October 31,
2021 was $9.9 million, as compared to $9.7 million for the three months ended
October 31, 2020. The $0.2 million increase in cash used in operating activities
was primarily attributable to an increase in cash used to support our operating
activities, including but not limited to, our clinical trials, R&D activities
and general working capital requirements.



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Cash (used) provided by fundraising activities

Net cash used in financing activities was $0.4 million for the three months
ended October 31, 2021, as compared to $13.4 million cash provided by financing
activities for the three months ended October 31, 2020. Net cash used in
financing activities during the three months ended October 31, 2021 was
primarily attributable to payments on a note payable. Net proceeds during the
three months ended October 31, 2020 was primarily attributable to the $13.5
million net proceeds received from the August 2020 registered direct offering.



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 have also used 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.



Business continuity and management plans

The Company has sustained losses in all reporting periods since inception, with
an accumulated deficit of approximately $262 million as of October 31, 2021.
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.



From December 13, 2021, the Company had cash and cash equivalents of $ 30.2 million. Since its inception, cash flow from financing activities has been the Company’s primary source of liquidity. Based on its current cash levels, the Company estimates that its cash resources are insufficient to meet the anticipated needs of the Company for the 12 months following the publication date of the condensed consolidated financial statements.


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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. 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 meaningful 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.



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 going concern, 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 costs



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.



Accrued expenses 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 Search 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 agreement is an early lease. The Right to Use Operating Lease (“ROU”) assets represent the Company’s right to use an underlying asset during the term of the lease, and operating lease payables represent the obligation of the Company to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating leases and long-term operating leases 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 positions

Information concerning recent accounting pronouncements is contained in note 2 of our condensed consolidated financial statements included in this report.

Off-balance sheet provisions

We are not party to any off-balance sheet transaction. We have no warranties or obligations other than those arising from normal business operations.

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