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, 2022 filed with the SEC on October 31, 2022 (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 and elsewhere in this report 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. Unless otherwise stated herein, all share and per share numbers relating to the Company's common stock prior to the effectiveness of the Reverse Stock Split have been adjusted to give effect to the Reverse Stock Split.





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 delivery and application method that triggers transient expression of target protein in cells. The OMS EP Device is designed to promote cellular uptake of 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 paired with 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.

Our current focus is to pursue our study of TAVO™-EP in combination with KEYTRUDA® (pembrolizumab) in melanoma.





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Performance Outlook

As a result of recent cash runway and working capital limitations, we expect to use our available working capital in the near term primarily for the advancement of our existing and planned clinical melanoma programs, including delivery of the KEYNOTE-695 trial results. In order to preserve our existing working capital, we have decreased clinical work on our other clinical trials and studies, including those involving triple negative breast cancer. We anticipate our spending on clinical programs and the development of our next-generation OMS EP Device will continue throughout our current fiscal year. Our spending on research and development programs will be prioritized to support development of TAVO™-EP in melanoma, based on our current focus on the KEYNOTE-695 trial. Due to ongoing restructuring efforts, 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.





Restructuring Plan

On October 2, 2022, our Board of Directors authorized a restructuring plan (the "Restructuring Plan") that is designed to prioritize clinical activities in melanoma to reduce operating expenses while advancing our lead product candidate, TAVO™ EP, toward near-term data milestones in connection with the KEYNOTE-695 clinical trial. As part of the Restructuring Plan, we restructured our internal operations and reduced our workforce by approximately 45%, or 17 employees.

We currently estimate that we will incur charges of approximately $750,000 to $800,000 in connection with the Restructuring Plan, consisting primarily of cash expenditures for employee transition, notice period and severance payments, retention bonus payments, and related costs. We expect that the majority of the restructuring charges will be incurred in the fourth calendar quarter of 2022 and first calendar quarter of 2023, and that the execution of the Restructuring Plan will be substantially complete by the second calendar quarter of 2023.

The charges that we expect to incur in connection with the Restructuring Plan are estimates and subject to a number of assumptions, and actual results may differ materially. The foregoing estimated amounts do not include any non-cash charges associated with stock-based compensation. We expect to operationalize additional cost reduction actions that will include other incremental cost reduction actions unrelated to workforce reductions.





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.





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Results of Operations for the Three Months Ended October 31, 2022 Compared to the Three Months Ended October 31, 2021

The unaudited financial data for the three months ended October 31, 2022 and 2021 is presented in the following table and the results of these two periods are included in the discussion thereafter.





                               October 31,      October 31,           $                %
                                   2022             2021            Change          Change
Revenue                        $          -     $          -     $          -               -
Expenses
Research and development          4,768,372        6,645,771       (1,877,399 )           (28 )
General and administrative        2,538,497        3,269,723         (731,226 )           (22 )
Loss from operations             (7,306,869 )     (9,915,494 )      2,608,625             (26 )
Other income (expense), net          38,098           (2,010 )         40,108           (1995 )
Interest expense                    (11,081 )         (8,045 )         (3,036 )            38
Foreign currency exchange
gain (loss), net                   (781,546 )        116,924         (898,470 )          (768 )
Loss before income taxes         (8,061,398 )     (9,808,625 )      1,747,227             (18 )
Income tax (benefit) expense              -                -                -               -
Net loss                       $ (8,061,398 )   $ (9,808,625 )   $  1,747,227             (18 )




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 $1.8 million, from $6.6 million during the three months ended October 31, 2021 to $4.8 million during the three months ended October 31, 2022. This decrease was primarily due to: (i) a $1.3 million decrease in clinical trial related costs to support our various clinical trials and costs for discovery research and product development, (ii) a $0.2 million decrease in stock-based compensation to employees and consultants and (iii) a $0.3 million decrease in payroll and related benefit expenses primarily related to a $0.6 million decrease due to decreased headcount offset by a $0.3 million increase due to severance cost and retention bonuses.





General and Administrative

Our general and administrative expenses decreased by $0.8 million, from $3.3 million during the three months ended October 31, 2021, to $2.5 million during the three months ended October 31, 2022. This decrease was primarily due to the following: (i) a $0.3 million decrease in consulting expenses, (ii) a $0.2 million decrease in payroll and related benefit expenses primarily due to a $0.4 million decrease in severance cost offset by a $0.2 million increase in salary and related benefits as executive positions were filled during the second half of fiscal year 2022, (iii) a $0.1 million decrease in legal expenses, and (iv) a $0.1 million decrease in stock-based compensation to employees and consultants.

Foreign Currency Exchange Gain (Loss), Net

Foreign currency exchange gain (loss), net, decreased by approximately $0.9 million from a $0.1 million gain during the three months ended October 31, 2021 to a $0.8 million loss for the three months ended October 31, 2022. This decrease was primarily due to unrealized foreign currency transaction loss recognized in connection with our Australian subsidiary's intercompany loan.





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Liquidity and Capital Resources





Working Capital

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





                              At                   At
                       October 31, 2022       July 31, 2022

Current assets        $        8,633,159     $    15,232,471
Current liabilities            6,909,514           6,633,328
Working capital       $        1,723,645     $     8,599,143




Current Assets

Current assets as of October 31, 2022 decreased by $6.6 million to $8.6 million, from $15.2 million as of July 31, 2022. This decrease was primarily related to the decrease of cash and cash equivalents in the amount of $6.6 million. The decrease in cash was due to cash used to support our operations during the three months ended October 31, 2022.





Current Liabilities

Current liabilities as of October 31, 2022 increased by $0.3 million to $6.9 million, from $6.6 million as of July 31, 2022. This increase was primarily attributable to our negative cash flow from operations.





Cash Flow

Cash Used in Operating Activities

Net cash used in operating activities for the three months ended October 31, 2022 was $6.1 million, as compared to $9.9 million for the three months ended October 31, 2021. The $3.7 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 Financing Activities

Net cash used in financing activities was $0.3 million for the three months ended October 31, 2022, as compared to $0.4 million cash used in financing activities for the three months ended October 31, 2021. Net cash used in financing activities during the three months ended October 31, 2022 was primarily attributable to payments on a note payable and payments on offering costs. Net cash used in financing activities during the three months ended October 31, 2021 was primarily attributable to payments on a note payable.

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 trial and to continue our research and development activities for our next-generation EP device. 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

We have sustained losses in all reporting periods since inception, with an accumulated deficit of approximately $294 million as of October 31, 2022. These losses are expected to continue for an extended period of time. Further, we have never generated any cash from our operations and do not expect to generate such cash in the near term. The aforementioned factors raise substantial doubt about our ability to continue as a going concern within one year from the issuance date of the consolidated financial statements. The accompanying 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 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 we be unable to continue as a going concern within one year after the date the consolidated financial statements are issued.

As of December 1, 2022, we had cash and cash equivalents of $8.1 million. Since inception, cash flows from financing activities have been the primary source of our liquidity. Based on our current cash levels, we believe our cash resources are insufficient to meet our anticipated needs for the 12 months following the date the consolidated financial statements are issued.

We will need to raise additional capital to continue operating our business and fund our planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of its product candidates. In addition, we will require additional financing if we desire 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 us when needed, that Management will be able to obtain financing on terms acceptable to us, or whether we 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 Notice" 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 we are unable to raise sufficient additional funds when needed, on favorable terms or at all, we will not be able to continue the development of our product candidates as currently planned or at all, will need to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our development programs, reduce expenses or cease operations, any of which would have a significant negative impact on our 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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Reverse Stock Split

Our Board of Directors approved a reverse stock split of the Company's authorized, issued and outstanding shares of common stock at a ratio of 1-for-22 (the "Reverse Stock Split"). The Reverse Stock Split became effective on November 9, 2022 (the "Effective Date"). All share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted, on a retrospective basis, to reflect the Reverse Stock Split, unless otherwise stated. The number of authorized shares were also proportionately adjusted and the par value remained unaffected. We will issue one whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. As a result, no fractional shares will be issued in connection with the Reverse Stock Split and no cash or other consideration will be paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split.

Convertible Promissory Note - Related Party

On November 25, 2022 (the "Funding Date"), we entered into a Convertible Promissory Note and Security agreement with Grand Decade Developments Limited ("GDDL"), a British Virgin Islands limited company and a wholly owned subsidiary of Grand Pharmaceutical Group Limited, pursuant to which we issued a Secured Convertible Promissory Note (the "Note") to GDDL. The Note has a principal amount of $2,000,000, bears interest at a rate of 5% per annum until November 25, 2023 and 10% per annum thereafter (the "Interest Rate") and matures on November 25, 2024 (the "Maturity Date"), on which date the principal balance and all accrued interest under the Note shall be due and payable. The Interest Rate will be 10% per annum upon occurrence of an event of default, including, but not limited to, the failure by us to make payment of principal or interest due under the Note on the Maturity Date, and any commencement by us of a case under any applicable bankruptcy or insolvency laws. The principal and interest accrued on the Note may be prepaid without any further agreement of the parties to the Note, or converted (as described below) upon the agreement of the parties to the Note, at any time without penalty to us.

Subject to the consent of GDDL, the Note is convertible into such number of fully paid and non-assessable shares of the Company's common stock, par value $0.0001 per share (the "Common Stock") as determined by dividing (i) any portion of the unpaid principal and accrued interest of the Note then outstanding by (ii) the greater of (a) the last closing bid price of a share of Common Stock as reported on the Nasdaq Capital Market ("Nasdaq") on the date the Company and GDDL agree to such conversion and (b) the average closing bid price of a share of Common Stock as reported on Nasdaq for the thirty trading days immediately preceding such date, subject to a share cap of 360,769 shares of Common Stock (the "Share Cap"), representing 19.99% of the total issued and outstanding shares of Common Stock as of November 25, 2022.

Additionally, if at any time after the Funding Date the last closing bid price of a share of Common Stock as reported on the Nasdaq for ten consecutive trading days or the average closing bid price of a share Common Stock as reported on Nasdaq for the thirty trading days immediately preceding such date is equal to or exceeds $44.00 (subject to any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other substantially similar transaction), GDDL may require that the Company prepay the Note through conversion of the then outstanding principal and/or any accrued interest thereon into shares of Common Stock, in whole or in part.

The unpaid principal of and any accrued interest on the Note constitute unsubordinated obligations of the Company and are senior and preferred in right of payment to all equity securities of the Company outstanding as of the Funding Date, which are secured by all of the Company's right, title and interest, in and to certain of the Company's intellectual property rights in Hong Kong, Taiwan, China and South Korea, as specified in the Note; provided, however, that the Company may incur or guarantee additional indebtedness after the Funding Date, whether such indebtedness are senior, pari passu or junior to the obligations under the Note.





31







December 2022 Offering

On November 30, 2022, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain investors (the "Investors") that closed on December 1, 2022, pursuant to which the Company sold, issued, and delivered, in a registered public offering (the "Offering") (i) 1,166,667 shares of the Company's common stock (the "Common Stock"), par value $0.0001 per share (each a "Share" and collectively the "Shares"); (ii) pre-funded warrants in lieu of shares of Common Stock (the "Pre-Funded Warrants") to purchase shares of Common Stock and (iii) 1,166,667 Common Warrants (the "Common Warrants" and collectively with the Pre-Funded Warrants, the "Warrants") to purchase shares of Common Stock, to the Investors. Under the terms of the Purchase Agreement, the Company agreed to sell one share of its Common Stock or a Pre-Funded Warrant and one Common Warrant for each share of Common Stock or Pre-Funded Warrant sold at a price of $3.00. For each Pre-Funded Warrant sold in the Offering, the number of shares of Common Stock offered was decreased on a one-for-one basis. The Pre-Funded Warrants are exercisable immediately upon the date of issuance, may be exercised at any time until all of the Pre-Funded Warrants are exercised in full and have a nominal exercise price of $0.0001 per share. The Common Warrants are exercisable immediately upon the date of issuance and have an exercise price of $3.00 per share, subject to adjustment. The Common Warrants will expire five (5) years from the date of issuance.

The Offering closed on December 1, 2022. The Company received gross proceeds of $3,500,001 in connection with the Offering before deducting placement agent fees and other offering expenses.





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Nasdaq Deficiency Notice

On June 2, 2022, we 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 our common stock had been below $1.00 per share for 30 consecutive business days as of the date of the Notice. The Notice had no immediate effect on the listing of our common stock, which continues to trade at this time on the Nasdaq Capital Market under the symbol "ONCS."

On November 25, 2022, we received a letter from Nasdaq confirming that the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) that requires companies listed on Nasdaq to maintain a minimum bid price of at least $1.00 per share to ensure continued listing (the "Listing Requirement"). The Company completed a 1-for-22 reverse stock split of its authorized, issued and outstanding shares of Common Stock on November 9, 2022. The Company regained compliance with the Listing Requirement after the closing bid price for its common stock listed on Nasdaq equaled or exceeded $1.00 per share for 10 consecutive business days.

Critical Accounting Policies





Use of Estimates

The accompanying 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. Significant accounting estimates related to our ability to continue as a going concern and certain calculations related to that determination. We base our estimates on historical experience and on various other assumptions that we believe 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, we review our estimates to ensure that they appropriately reflect changes in the business or as new information becomes available. Actual results may differ from these estimates.

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, we account 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 we are obligated to repay the related party.





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Equity-Based Awards

We grant equity-based awards (typically stock options or restricted stock units) under our stock-based compensation plan and occasionally outside of our stock-based compensation plan, with terms generally similar to the terms under our stock-based compensation plan. We estimate 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. We estimate the fair value of restricted stock unit awards based on the closing price of the Company's common stock on the date of grant.





Leases

We determine if an arrangement is a lease at inception. Operating lease right of use ("ROU") assets represent our right to use an underlying asset during the lease term, and operating lease liabilities represent our 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 our 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. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. Our 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. We account 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 consolidated financial statements included in this report.

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