ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel products for patients with cancer. We have proprietary targeted anti-cancer agents designed to disrupt specific cellular pathways that are important for cancer cell proliferation. We believe that the product candidates in our pipeline have the potential to be efficacious in a variety of cancers with unmet medical need. We have the following two clinical-stage programs: 1. ON 123300, multi-kinase inhibitor in solid tumors; and 2. oral rigosertib alone or in combination with PD-1 inhibitors for treatment of KRAS-mutated solid tumors.

We were incorporated in Delaware in December 1998 and commenced operations in January 1999. Our operations to date have included our organization and staffing, business planning, raising capital, in-licensing technology from research institutions, identifying potential product candidates, developing product candidates and building strategic alliances, as well as undertaking preclinical studies and clinical trials of our product candidates.

Since commencing operations, we have dedicated a significant portion of our resources to the development of our clinical-stage product candidates, particularly rigosertib. We incurred research and development expenses of $16.9 million and $15.5 million during the years ended December 31, 2020 and

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2019, respectively. We anticipate that a significant portion of our operating expenses will continue to be related to research and development as we continue to advance ON 123300 and our other programs.

In September 2019 we closed on an offering of common stock to certain investors. We issued 2,198,938 shares of common stock and amended warrants for the purchase of 2,198,938 shares of common stock. The investors, who were also holders of our preferred stock warrants issued in February 2018 and/or May 2018, received a warrant amendment under which a certain number of such investors’ preferred stock warrants received a reduction in exercise price and an extension of term. Net proceeds from the sale of common stock and the amendment of preferred stock warrants were approximately $3.3 million. In November 2019, we closed on an offering of units of common stock and warrants. We issued 30,250,000 shares of common stock, pre-funded warrants to purchase 24,750,000 shares of common stock, and common stock warrants to purchase 55,000,000 shares of common stock. Net proceeds were approximately $9.7 million. On December 10, 2019, we closed on an offering of units of common stock and warrants. We issued 14,326,648 shares of common stock and common stock warrants to purchase 7,163,324 shares of common stock. Net proceeds were approximately $4.4 million. On December 19, 2019, we closed on an offering of units of common stock and warrants. We issued 13,878,864 shares of common stock and common stock warrants to purchase 6,939,432 shares of common stock. Net proceeds were approximately $4.4 million. During 2019, pre-funded warrants were exercised for 23,720,784 shares of common stock and net proceeds were $35,000. Also during 2019, common warrants were exercised for 21,014,378 shares of common stock and net proceeds were approximately $4.9 million.

In January 2020, we closed on an offering of common stock. We issued 27,662,518 shares of common stock and net proceeds were approximately $9.0 million. Also during 2020, common warrants were exercised for 45,863,397 shares of common stock and net proceeds were approximately $10.3 million.

In January 2021, we closed on an offering of common stock. We issued 19,551,124 shares of common stock and net proceeds were approximately $8.5 million. In February 2021, we closed on an offering of common stock. We issued 28,750,000 shares of common stock and net proceeds were approximately $26.7 million. In addition, since December 31, 2020 common warrants were exercised for 2,325,000 shares of common stock and net proceeds were approximately $0.5 million. As a result of these transactions, as of February 28, 2021, we have 236,612,391 common shares outstanding.

Our net losses were $25.2million and $21.5 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $428.6 million. We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek regulatory approval for, our product candidates, even if milestones under our license and collaboration agreements may be met.

As of December 31, 2020 we had $19.0 million in cash and cash equivalents. As of February 28, 2021, we had $49.5 million in cash and cash equivalents.

In December 2017, we entered into a license and collaboration agreement with HanX Biopharmaceuticals, Inc. (“HanX”), a company focused on development of novel oncology products, for the further development, registration and commercialization in Greater China of ON 123300. We believe ON 123300 has the potential to overcome limitations of current generation CDK 4/6 inhibitors. Under the terms of the agreement, we received an upfront payment, and will receive regulatory and commercial milestone payments, as well as royalties on Chinese sales. The key feature of the collaboration is that HanX provides all funding required for Chinese IND enabling studies performed for Chinese health authority IND approval. The Chinese IND was approved in January 2020. We and HanX also intended for these studies to comply with the FDA standards. Accordingly, such studies were used by us for an IND filing with the FDA in November 2020. The FDA Study May Proceed letter was received in December 2020 and first patient in the study is anticipated in the first half of 2021. Drug product for the US study was manufactured in North America and stability data was submitted as part of the IND.

In March 2018, we entered into a license agreement with Pint granting an exclusive, royalty-bearing license for the development and commercialization of rigosertib in South and Central America. Pint made an upfront equity investment of $1,250,000 in our common stock. In addition, we could receive a subsequent equity investment and additional regulatory, development and sales-based milestone payments as well as

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tiered, double digit royalties based on net aggregate net sales in the Territory. Pint also has agreed to purchase rigosertib and the Product exclusively from us in accordance with a supply and quality agreement between the parties. Pint may terminate the License Agreement in whole (but not in part) at any time upon 45 days’ prior written notice. The License Agreement also contains customary provisions for termination by either party in the event of breach of the License Agreement by the other party, subject to a cure period, or bankruptcy of the other party.

In May 2019, we and HanX entered into the HanX License Agreement. Under the terms of the HanX License Agreement, we granted HanX an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how to develop and commercialize any pharmaceutical product containing rigosertib in all uses of rigosertib or the Product in humans therapeutics uses in the People’s Republic of China, Hong Kong, Macau and Taiwan (the “Territory”). In connection with the HanX License Agreement, we also entered into the HanX Securities Purchase Agreement with each of HanX and its affiliate Abundant. HanX did not fulfill its obligations under the HanX License Agreement and effective January 16, 2020, in accordance with the terms of the HanX License Agreement, the HanX License Agreement was deemed to be void ab initio. Upon this termination, the rights to HanX Licensed Product in the HanX Territory reverted to us in accordance with the terms of the HanX License Agreement. In addition, the HanX Securities Purchase Agreements terminated automatically effective January 16, 2020 upon the termination of the License Agreement in accordance with the HanX Securities Purchase Agreements.

In November 2019, we and Knight entered into the Knight License Agreement. Under the terms of the Knight License Agreement, we granted Knight (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how to develop and manufacture any product containing rigosertib for Canada (and Israel should Knight exercise its option) and in human uses , and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how to commercialize the Knight Licensed Product in the Knight Territory and in the Knight Licensed Field. Knight made an upfront payment of $100,000 and we are eligible to receive clinical, regulatory and sale-based milestone payments.We are also eligible to receive tiered double-digit royalties based on net sales in the Territory. The Knight License Agreement also contains customary provisions for termination by either party in the event of breach of the Knight License Agreement by the other party, subject to a cure period, or bankruptcy of the other party.

In December 2019, we and STA entered into the STA License Agreement. Under the terms of the STA License Agreement, we granted STA (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how to develop and manufacture any product containing rigosertib for Australia and New Zealand and in human uses, and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how to commercialize the STA Licensed Product in the STA Territory and in the STA Licensed Field. STA made an upfront payment of $50,000 and we may be entitled to receive clinical, regulatory and sale-based milestone payments. We may also be entitled to receive tiered double-digit royalties based on net sales in the STA Licensed Territory. The STA License Agreement also contains customary provisions for termination by either party in the event of breach of the STA License Agreement by the other party, subject to a cure period, or bankruptcy of the other party.

Financial Overview

Revenue

During the years ended December 31, 2020 and 2019, our revenues were derived exclusively from activities conducted in accordance with our collaboration arrangements with SymBio, HanX, Knight and STA. The following table sets forth a summary of revenue recognized during the years ended December 31, 2020 and 2019:

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Year ended December 31,

HanX — 1,751,000

Knight — 100,000

STA — 50,000

We have not generated any revenue from commercial product sales. In the future, if any of our product candidates currently under development are approved for commercial sale in the United States or other territories where we have retained commercialization rights, we may generate revenue from product sales, or alternatively, we may choose to select a collaborator to commercialize our product candidates in these markets.

The SymBio collaboration agreement is considered to be a multiple-element arrangement for accounting purposes. We determined that there were three deliverables under the SymBio collaboration agreement; specifically, the license to rigosertib for Japan and Korea, our obligation to perform research and development services necessary for SymBio to seek approval in its territory and our obligation to participate on a joint steering committee. We concluded that these deliverables should be accounted for as a single unit of accounting. We determined that the $7.5 million upfront payment received in 2011 should be deferred and recognized as revenue on a straight-line basis through December 2037, reflecting our estimate of when we will complete our obligations under the agreement. For the years ended December 31, 2020 and 2019, we recognized revenues of $226,000 and $227,000, respectively, under the SymBio collaboration agreement. In addition, we recognized revenues of $5,000 and $55,000 for the years ended December 31, 2020 and 2019, respectively, related to the supply agreement.

The HanX rigosertib license agreement and two securities purchase agreements were signed in May 2019. We determined that the license was distinct and that control of the license had been transferred during the second quarter of 2019. As such, we recognized the $1.7 million net upfront fee and $300,000 premium, related to the securities purchase agreements, allocated to the license in the quarter ended June 30, 2019. In December 2019, we reversed $200,000 of the revenue related to the securities purchase premium after reassessing the likelihood of receiving payment. The HanX rigosertib license agreement was terminated on January 16, 2020.

The Knight license agreement was signed in November, 2019. We determined that the license was distinct and that control of the license had been transferred during the fourth quarter of 2019. As such, we recognized the $100,000 upfront payment allocated to the license in the quarter ended December 31, 2019.

The STA license agreement was signed in December, 2019. We determined that the license was distinct and that control of the license had been transferred during the fourth quarter of 2019. As such, we recognized the $50,000 upfront payment allocated to the license in the quarter ended December 31, 2019.

Operating Expenses

The following table summarizes our operating expenses for the years ended December 31, 2020 and 2019:

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for executive and other administrative personnel, including stock-based compensation and travel expenses. Other general and

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administrative expenses include facility-related costs, communication expenses, insurance, board of directors expenses and professional fees for legal, patent review, consulting and accounting services.

We anticipate that our general and administrative expenses will remain consistent in the short-term, but would increase in the future with the continued research and development and potential commercialization of our product candidates. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants among other expenses. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

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employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;

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expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials and preclinical studies;

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the cost of acquiring, developing and manufacturing clinical trial materials;

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direct expenses for maintenance of research equipment, clinical trial insurance and other supplies; and

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costs associated with preclinical activities and regulatory operations.

Research and development costs are expensed as incurred. License fees and milestone payments we make related to in-licensed products and technology are expensed if it is determined that they have no alternative future use. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

To date, our research and development expenses have related primarily to the development of rigosertib and the related INSPIRE trial in HR-MDS patients. The INSPIRE trial failed to meet its primary endpoint and was discontinued in August 2020. In the future, research and development expenses will be related to ON 123300, other candidates in our pipeline, and potentially in-licensed products. We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we are organized and record expense by functional department and our employees may allocate time to more than one development project. Accordingly, we do not allocate expenses to individual projects or product candidates, although we do allocate some portion of our research and development expenses by functional area and by compound.

The following table summarizes our research and development expenses by functional area for the years ended December 31, 2020 and 2019:

Year ended December 31,

Pre-clinical & clinical development $ 7,948,000 $ 8,703,000

Manufacturing, formulation & development 1,411,000 526,000

Stock-based compensation 209,000 327,000

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It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rate and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, an assessment of each product candidate’s commercial potential and our available funds.

Interest Expense and Other Income, Net

Other income, net consists principally of interest income earned on cash and cash equivalent balances and foreign exchange gains and losses.

Critical Accounting Policies and Significant Judgments and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, revenue recognition, deferred revenue and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that we believe to be 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. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), which we adopted effective January 1, 2018 using the modified retrospective method. There was no material impact to our financial position and results of operations as a result of the adoption. We apply ASC 606 to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. In accordance with ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods and services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract that falls under the scope of ASC 606, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

We derive revenue from collaboration and licensing agreements and from the sale of products associated with material transfer, collaboration and supply agreements.

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License, Collaboration and Other Revenues

We enter into licensing and collaboration agreements, under which we license certain of our product candidates’ rights to third parties. We recognize revenue related to these agreements in accordance with ASC 606. The terms of these arrangements typically include payment from third parties of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of the licensed product.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligation under each of our agreements, we perform the five steps described above. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement of personnel costs, discount rates and probabilities of technical and regulatory success.

Licensing of Intellectual Property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other performance obligations, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees. We evaluate the measure of progress each reporting period, and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments: At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal will not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensees, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in their period of adjustment.

Manufacturing supply services. Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered as options. We assess if these options provide material rights to the licensee and if so, they are accounted for as separate performance obligations. If we are entitled to additional payments when the customer exercises these options, any additional payments are recorded when the customer obtains control of the goods, which is upon shipment.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some of all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue from our license agreements.

Research and Development Expenses

Research and development costs are charged to expense as incurred and include, but are not limited to, license fees related to the acquisition of in-licensed products, employee-related expenses, including salaries, benefits and travel, expenses incurred under agreements with CROs and investigative sites that conduct clinical trials and preclinical studies, the cost of acquiring, developing and manufacturing clinical trial materials, facilities, depreciation and other expenses, which include direct and allocated expenses for rent and

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maintenance of facilities, insurance and other supplies and costs associated with preclinical activities and regulatory operations.

We record costs for certain development activities, such as clinical trials, based on our evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development expense, as the case may be.

Income Taxes

We recorded deferred tax assets of $168 million as of December 31, 2020, which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily composed of federal and state tax net operating loss (“NOL”), carry forwards and research and development tax credit carry forwards. As of December 31, 2020, we had federal NOL carry forwards of $277 million, state NOL carry forwards of $234 million, and research and development tax credit carry forwards of $87 million available to reduce future taxable income, if any. These federal NOL carry forwards will begin to expire at various dates starting in 2022. The state NOL carry forwards will begin to expire at various dates starting in 2025. In general, if we experience a greater than 50 percentage point aggregate change in ownership of specified significant stockholders over a three-year period, utilization of our pre-change US NOL, tax credit and other tax attribute carry forwards may be subject to an annual limitations under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and similar state laws. Such limitations may result in expiration of a portion of the NOL carry forwards before utilization and may be substantial. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company believes such a change occurred and may impact available net operating losses and carry over research credits generated. The Company has not performed any detailed analysis as it expects these to expire before utilization and has provided for a full valuation allowance but will perform a Section 382 and 383 study if any tax attributes are to be utilized in a given year.

Stock-Based Compensation

We account for stock-based payments to employees and directors using an option pricing model for estimating fair value. Accordingly, stock-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services, using the straight-line single option method. In accordance with authoritative guidance, the fair value of non-employee stock based awards is re-measured as the awards vest, and the resulting increase in fair value, if any, is recognized as expense in the period the related services are rendered.

We record stock-based compensation expense as a component of research and development expenses or general and administrative expenses, depending on the function performed by the optionee. For the years ended December 31, 2020 and 2019, we allocated stock-based compensation as follows:

Year ended December 31,

General and administrative $ 160,000 $ 721,000

Research and development 209,000 327,000

Fair Value Estimates

Since April 23, 2013, we estimate the fair value of share-based awards to employees and directors using the Black-Scholes option pricing model. The Black-Scholes model requires the input of highly complex and subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of the expected

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term of the award, (c) the risk free interest rate and (d) expected dividends. Expected volatility is based on the historical volatility of the Company’s common stock since its IPO in July 2013. We estimate the expected life of our employee stock options using the “simplified” method, whereby, the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have never paid, and do not expect to pay dividends in the foreseeable future.

Warrants

Common stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. Some of our warrants are classified as liabilities because in certain circumstances they could require cash settlement. We estimate the fair value of warrants accounted for as liabilities using market quotes from an active and orderly market when available or the Black-Scholes pricing model when quotes are not available.

Warrants outstanding and warrant activity for the year ended December 31, 2020 is as follows:

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for one-fifteenth of one share of common stock at an exercise price of $4.92 per warrant. The table above shows the number of shares of common stock which could be obtained by the exercise of all of the outstanding warrants, 212,801; and shows the exercise price for fifteen of the warrants, $73.80.

The following table presents a reconciliation of the fair value of our warrant liability for the years ended December 31, 2020 and 2019:

Warrant Liability

Change in fair value upon re-measurement (63,000)

Change in fair value upon re-measurement 208,000

Clinical Trial Expense

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants and CROs and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our objective is to reflect the appropriate clinical trial expenses in our consolidated financial statements by matching the appropriate expenses with the period in which services are provided and efforts are expended. We account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through financial models that take into account discussion with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on the facts and circumstances known to us at that time. Our clinical trial accrual and prepaid assets are dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party vendors. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

Year ended December 31,

Operating expenses:

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Revenues

Revenues decreased by $2.0 million for the year ended December 31, 2020 when compared to the same period in 2019 primarily as a result the recognition of revenue from license agreements for rigosertib with HanX and Knight during the 2019 period, as well as higher clinical supply revenue from SymBio in 2019.

General and administrative expenses

General and administrative expenses decreased by $19,000 or 0.2%, to $8.3 million for the year ended December 31, 2020 from $8.3 million for the year ended December 31, 2019. This decrease was cause by a decrease of $1.7 million of personnel and stock compensation expense costs related to severance due to headcount reductions in 2019 period. This decrease was partially offset by increases of $0.5 million of investor relations fees and costs related to our annual general meeting of stockholders and our reconvened annual general meeting of stockholders, $0.9 million of commercialization preparations expenses, and $0.3 million higher insurance expenses.

Research and development expenses

Research and development expenses increased by $1.4 million, or 8.8%, to $16.9 million for the year ended December 31, 2020 from $15.5 million for the year ended December 31, 2019. This increase was caused primarily by $1.4 million higher regulatory consulting expenses related to our new drug application (“NDA”) preparations, and by $0.9 million higher manufacturing costs related to our clinical supply for INSPIRE and for our ON123300 pre-IND product candidate. These increases were partially offset by a decrease of $0.8 million in clinical development expenses, including $0.2 million lower expenses on INSPIRE and $0.6 million lower expenses in the 09-08 combination expansion study, and $0.1 million lower stock compensation expense in the 2020 period.

Change in fair value of warrant liability

The fair value of the warrant liability increased $208,000 for the year ended December 31, 2020, compared to an decrease of $63,000 for the year ended December 31, 2019. This change was caused by the increase, during the 2020 period, in the fair market value of the warrants issued in our rights offering in 2016.

Other income, net

Other income, net, decreased by $0.1 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 due primarily to $44,000 higher foreign exchange expense and $49,000 lower interest income in the 2020 period.

Liquidity and Capital Resources

Since our inception, we have incurred net losses and experienced negative cash flows from our operations. We incurred net losses of $25.2 million and $21.5 million for the year ended December 31, 2020 and 2019, respectively. Our operating activities used $23.1 million and $20.8 million of net cash during the year ended December 31, 2020 and 2019, respectively. At December 31, 2020, we had an accumulated deficit of $428.6 million, working capital of $9.8 million, and cash and cash equivalents of $19.0 million. Subsequent to December 31, 2020, we received $35.2 million net proceeds from the sale of common stock and $0.5 million from warrant exercises. Cash and cash equivalents at February 28, 2021 were $49.5 million. We believe that our cash and cash equivalents will be sufficient to fund our ongoing trials and business operations for more than eighteen months.

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Cash Flows

The following table summarizes our cash flows for the year ended December 31, 2020 and 2019:

Year Ended December 31,

Net cash (used in) provided by:

Investing activities (15,000) (55,000)

Effect of foreign currency translation 32,000 (6,000)

Net cash used in operating activities

Net cash used in operating activities was $23.1 million for the year ended December 31, 2020 and consisted primarily of a net loss of $25.2 million, including an unfavorable change in fair value of warrant liability of $0.2 million and $0.4 million of noncash stock-based compensation and depreciation expense. Changes in operating assets and liabilities resulted in a net increase in cash of $1.5 million. Significant changes in operating assets and liabilities included an increase in accounts payable and accrued liabilities of $1.7 million as a result of the timing of clinical trial and other accruals, and receipt and payment of vendor invoices. Deferred revenue decreased $0.2 million due to recognition of the unamortized portion of the upfront payment under our collaboration agreement with SymBio.

Net cash used in operating activities was $20.8 million for the year ended December 31, 2019 and consisted primarily of a net loss of $21.5 million, including a favorable change in fair value of warrant liability of $0.1 million, partially offset by $1.1 million of noncash stock-based compensation and depreciation expense. Changes in operating assets and liabilities resulted in a net decrease in cash of $0.3 million. Significant changes in operating assets and liabilities included a net decrease in accounts payable and accrued liabilities of $0.1 million as a result of the timing of receipt and payment of vendor invoices. Deferred revenue decreased $0.2 million due to recognition of the unamortized portion of the upfront payment under our collaboration agreement with SymBio.

Net cash used in investing activities

Net cash used in investing activities was $15,000 in the 2020 period and related to additional information technology assets. Net cash used in investing activities was $55,000 in the 2019 period related to our purchase of information technology assets during the 2019 period.

Net cash provided by financing activities

Net cash provided by financing activities for the year ended December 31, 2020 was $19.4 million, which resulted from the proceeds received from the sale of common stock in January 2020 and the exercise of warrants. Net cash provided by financing activities for the year ended December 31, 2019 was $26.6 million, which resulted from the proceeds received from the sale of common stock in September, November, and December of 2019, and the subsequent exercise of common stock warrants.

Operating and Capital Expenditure Requirements

We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2021 to be lower than 2020. We expect clinical trial costs to decrease following the completion of our INSPIRE trial and as we focus on our earlier clinical stage compound, ON123300. We expect this reduction in clinical trial expenses will be offset by an increase in costs for potential in-licensing and the clinical cost of ON123300. The timing of some expenses will be determined by the timing of any potential in-licensing. We believe that our cash and cash equivalents will be sufficient to fund our ongoing trials and operations for more than eighteen months.

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We are exploring various sources of funding for continued development ON123300 and any potential in-licensed compounds as well as our ongoing operations. We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek regulatory approval for, our product candidates, even if milestones under our license and collaboration agreements may be met. If we obtain regulatory approval for any of our product candidates, we expect to incur significant NDA preparation and commercialization expenses. We do not currently have an organization for the sales, marketing and distribution of pharmaceutical products. We may rely on licensing and co-promotion agreements with strategic or collaborative partners for the commercialization of our products in the United States and other territories. If we choose to build a commercial infrastructure to support marketing in the United States for any of our product candidates that achieve regulatory approval, such commercial infrastructure could be expected to include a targeted, oncology sales force supported by sales management, internal sales support, an internal marketing group and distribution support. To develop the appropriate commercial infrastructure internally, we would have to invest financial and management resources, some of which would have to be deployed prior to having any certainty about marketing approval. Furthermore, we have and expect to continue to incur additional costs associated with operating as a public company.

Please see “Risk Factors” for additional risks associated with our substantial capital requirements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by applicable SEC regulations.

Segment Reporting

We view our operations and manage our business in one segment, which is the identification and development of oncology therapeutics.

Recent Accounting Pronouncements

In November 2018, the FASB issued guidance, which clarifies the interaction between ASC Topic 808, Collaborative Arrangements, and ASC Topic 606, Revenue from Contracts with Customers. The guidance, among other items, clarifies that certain transactions between collaborative participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The guidance was effective for fiscal years beginning after December 15, 2019. We adopted this guidance effective January 1, 2020. There was no impact to our financial position or results of operations as a result of the adoption.

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurement. The guidance amends the disclosure requirements in ASC Topic 820 by adding, changing, or removing certain disclosures. The guidance was effective for fiscal years beginning after December 15, 2019. We adopted this guidance effective January 1, 2020. There was no impact to our financial position, results of operations or financial statement disclosures as a result of the adoption.

In June 2016, the FASB issued new guidance on the accounting for credit losses on financial instruments. The guidance was amended in November 2019. The new guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those years, for companies deemed to be smaller reporting companies as of November 15, 2019, with early adoption permitted. We are evaluating the impact of the adoption of the standard on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Company is not required to provide the information otherwise required by this Item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this item are listed in Item 15 — “Exhibits and Financial Statement Schedules” of this Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020. Based upon this evaluation, our principal executive officer and principal financial officer concluded that, as of such date, disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework issued in 2013. Based upon the assessments, management has concluded that as of December 31, 2020 our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to exemptions provided to issuers that are non-accelerated filers or qualify as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, or the Securities Act, as modified by the JOBS Act.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the fiscal quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On March 18, 2021, the Company and Steven M. Fruchtman, M.D., the Company’s President and Chief Executive Officer, entered into an Amendment (the “Amendment”) to the Amended and Restated Employment Agreement dated June 19, 2018, by and between the Company and Dr. Fruchtman (the “Original Agreement” and, as amended by the Amendment, the “Agreement”).

The Amendment removed Section 4(d) of the Original Agreement, under which if Dr. Fruchtman would voluntarily resign from employment within three months following the Company’s appointment of a new Chief Executive Officer (other than Dr. Fruchtman) and upon not less than 30 days’ notice, Dr. Fruchtman would be entitled to receive seven months of his current base salary, and any outstanding unvested options to purchase shares of Company common stock would become fully vested as of the date of termination.

In addition, under the Amendment, if Dr. Fruchtman’s employment is terminated by the Company without “cause” or by Dr. Fruchtman for “good reason,” other than during the 12-month period following a change in control of the Company, Dr. Fruchtman will be entitled to receive twelve months of his current

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base salary and target bonus. If the termination is during the 12-month period following a change in control of the Company, Dr. Fruchtman will be entitled to receive the sum of one and one-half times of (i) his current base salary and (ii) target bonus. The Company will also reimburse Dr. Fruchtman for the employer’s portion of his medical insurance costs under COBRA for twelve months if Dr. Fruchtman’s termination occurs other than during the 12-month period following a change in control of the Company or for 18 months if Dr. Fruchtman’s termination occurs during the 12 month-period following a change in control of the Company. In addition, all of Dr. Fruchtman’s stock options that are unvested as of the date of such termination will fully vest as of the date of termination. Under the Amendment, in order to receive the forgoing severance benefits, Dr. Fruchtman must sign a release and waiver of claims and such release becomes effective and irrevocable within 60 days of Dr. Fruchtman’s cessation of employment and Dr. Fruchtman’s continued compliance with the certain restrictive covenants in the Agreement. To the extent any of the above severance payments are subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and Dr. Fruchtman is classified as a “specified employee”, as defined in Section 409A, any such payments will not be paid during the six-month period immediately following such termination.

The Amendment also includes a provision on whistleblower protection and trade secrets.

The foregoing description of terms and conditions of the Amendment does not purport to be complete and is qualified in its entirety by the full text of the Amendment, which is attached hereto as Exhibit 10.15.2 and is incorporated herein by reference.

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PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information with respect to this item will be set forth in the Proxy Statement for the 2021 Annual Meeting of Stockholders (the “Proxy Statement”) under the headings “Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Ethics” and “Corporate Governance” and is incorporated herein by reference.

ITEM 11.

EXECUTIVE COMPENSATION

Information with respect to this item will be set forth in the Proxy Statement under the headings “Executive Compensation” and “Director Compensation,” and is incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information with respect to this item will be set forth in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation,” and is incorporated herein by reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information with respect to this item will be set forth in the Proxy Statement under the headings “Certain Relationships and Related Party Transactions” and “Corporate Governance” and is incorporated herein by reference.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Information with respect to this item will be set forth in the Proxy Statement under the heading “Ratification of the Selection of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

(1) Financial Statements: See Index to Consolidated Financial Statements on page F-1.

(3)

Exhibits: See Exhibits Index on pages 60 to 64