Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.8.0.1
Stock-Based Compensation
9 Months Ended
Apr. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

Note 7—Stock-Based Compensation

 

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 stock options and restricted stock units, to employees, directors and consultants. The 2011 Plan authorizes a total of 7,500,000 for issuance thereunder, and includes an automatic increase of the number of shares of common stock reserved thereunder on the first business day of each calendar year by the lesser of: (i) 3% of the shares of the Company’s common stock outstanding as of the last day of the immediately preceding calendar year; (ii) 1,000,000 shares; or (iii) such lesser number of shares as determined by the Company’s Board of Directors. As of April 30, 2018, there were an aggregate of 8,500,000 shares of the Company’s common stock authorized for issuance pursuant to awards granted under the 2011 Plan. The 2011 Plan allows for an annual fiscal year per individual grant of up to 500,000 shares of its common stock. Under the 2011 Plan, incentive stock options are to be granted at a price that is no less than 100% 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 10 years after the date of grant. 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 110% of the fair value of the Company’s common stock on the date of grant.

 

Stock Options

 

During the three months ended January 31, 2018, the Company granted its President and Chief Executive Officer, Mr. Daniel J. O’Connor, options to purchase 2,500,000 shares of the Company’s common stock outside of the 2011 Plan. This grant was approved by stockholders at the Company’s annual meeting on January 12, 2018. Of the total grant, options on 1,000,000 shares vested upon stockholder approval and options on 1,000,000 shares will vest over a two-year period from the date of grant. Mr. O’Connor also received a performance stock option award to purchase up to 500,000 shares of the Company’s common stock, which is subject to vesting as to options on 250,000 shares on the date of the Company’s achievement of 100% enrollment in the first cohort of its PISCES/KEYNOTE-695 study and as to the remaining options on 250,000 shares in one installment on the one-year anniversary of the date of achievement of such enrollment.

 

Stock-based compensation expense recognized in the accompanying condensed consolidated statements of operations is based on awards ultimately expected to vest, reduced for estimated forfeitures. 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. Stock-based compensation expense related to stock options granted to consultants in which the options are not entirely vested at the grant date are generally re-measured each month. During the nine months ended April 30, 2018, the Company granted 5,614,000 options to employees, directors and consultants. The fair values of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

 

Expected term (years)     5.00 – 6.50  
Risk-free interest rate     1.66 – 2.81 %
Volatility     73.3 – 92.0 %
Dividend yield     0 %

 

The Company’s expected volatility is derived from the historical daily change in the market price of its common stock since its stock became available for trading, as well as the historical daily changes in the market price of its peer group, based on weighting, as determined by the Company. The Company uses the simplified method to calculate the expected term of options issued to employees and directors, and the Company’s estimation of the expected term for stock options granted to parties other than employees or directors is the contractual term of the option award. 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.

 

The following is a summary of the 2011 Plan and non-Plan option activity:

 

          Weighted  
          Average  
          Exercise  
    Options     Price  
Outstanding - July 31, 2017     3,639,613     $ 1.94  
Exercisable - July 31, 2017     1,990,521     $ 2.29  
Granted     5,614,000     $ 1.37  
Exercised     (180,393 )   $ 1.25  
Forfeited/Cancelled     (584,650 )   $ 3.00  
Outstanding – April 30, 2018     8,488,570     $ 1.50  
Exercisable – April 30, 2018     4,161,589     $ 1.59  

 

As of April 30, 2018, the total intrinsic value of options outstanding and exercisable was $1.4 million and $0.7 million, respectively. As of April 30, 2018, the Company has approximately $4.4 million in unrecognized stock-based compensation expense attributable to the outstanding options, which will be amortized over a period of 1.84 years.

 

Stock-based compensation expense recorded in the Company’s condensed consolidated statement of operations for the three and nine-month periods ended April 30, 2018 resulting from stock options awarded to the Company’s employees, directors and consultants was approximately $1.9 million and $4.5 million, respectively. Of this balance, $0.4 million and $0.7 million, respectively, was recorded to research and development and $1.5 million and $3.8 million, respectively, was recorded in general and administrative in the Company’s condensed consolidated statement of operations for the three and nine-month periods ended April 30, 2018.

 

Stock-based compensation expense recorded in the Company’s condensed consolidated statement of operations for the three and nine-month periods ended April 30, 2017 resulting from stock options awarded to the Company’s employees, directors and consultants was approximately $0.6 million and $3.1 million, respectively. Of this balance, $0.2 million and $1.0 million, respectively, was recorded to research and development and $0.4 million and $2.2 million, respectively, was recorded in general and administrative in the Company’s condensed consolidated statement of operations for the three and nine-month periods ended April 30, 2017.

 

The weighted-average grant date fair value of stock options granted during the three and nine-month periods ended April 30, 2018 was $1.10 and $1.24, respectively. The weighted-average grant date fair value of stock options granted during the three and nine-month periods ended April 30, 2017 was $1.08 and $1.13, respectively.

 

Restricted Stock Units

 

On February 8, 2018, the Company’s Board of Directors approved the accelerated vesting of outstanding restricted stock units (RSUs) held by certain executives and board members. The RSUs, the majority of which vested on the third anniversary of the grant date, were accelerated to vest on June 15, 2018, resulting in stock compensation expense of $1.1 million for the three months ended April 30, 2018.

 

For the three and nine-months ended April 30, 2018, the Company recorded $1.1 million and $1.4 million, respectively, in stock-based compensation related to RSUs, which is reflected in the condensed consolidated statements of operations.

 

For the three and nine-months ended April 30, 2017, the Company recorded $0.1 million and $0.4 million, respectively, in stock-based compensation related to restricted stock units, which is reflected in the condensed consolidated statements of operations

 

As of April 30, 2018, 1,412,000 RSUs were outstanding.