UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
(Mark
One)
x
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the Fiscal Year Ended August 31, 2008
o TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from _________ to __________
Commission
file number: 000-50298
ORAMED
PHARMACEUTICALS, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
98-0376008
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer Identification
No.)
|
Hi-Tech
Park 2/5
Givat-Ram
PO
Box 39098
Jerusalem
91390 Israel
(Address
of principal executive offices)
972
2 566 0001
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Exchange Act: None
Securities
registered pursuant to Section 12(g) of the Exchange
Act:
Common
Stock, $0.001 par value
Check
whether the issuer: (1) filed all reports required to be filed by Section 13
or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90
days. Yes x No o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o
Indicate
by check mark whether the registrant is
a
shell company (as defined in Rule 12b-2 of the
Exchange
Act) Yes o No x
State
issuer’s revenues for its most recent fiscal year $0.00
State
the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of November 24, 2008: $16,905,964
(37,568,808 shares
at
$0.45 per share).
State
the
number of shares outstanding of each of the registrant's classes of common
equity, as of the latest practicable date: 56,456,710 shares issued and
outstanding as of November 24, 2008.
ORAMED
PHARMACEUTICALS, INC.
FORM
10-KSB
TABLE
OF CONTENTS
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1
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ITEM 1 -
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BUSINESS
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1
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ITEM 1A –
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RISK
FACTORS
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15
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ITEM 2 -
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PROPERTIES
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28
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ITEM 3 -
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LEGAL
PROCEEDINGS
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28
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ITEM 4 -
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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28
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PART II
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29
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ITEM 5 -
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER
PURCHASES OF EQUITY SECURITIES
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29
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ITEM 6 -
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MANAGEMENT'S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
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32
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ITEM 7 -
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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40
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ITEM 8 -
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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68
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ITEM 8A –
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CONTROLS
AND PROCEDURES
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68
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ITEM 8B –
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OTHER
INFORMATION
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69
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PART III
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70
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ITEM 9 -
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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70
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ITEM 10 -
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EXECUTIVE
COMPENSATION
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73
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ITEM 11-
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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78
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ITEM 12 -
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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80
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ITEM 13 –
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81
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ITEM 14 -
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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83
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PART
I
ITEM
1 - BUSINESS
This
Annual Report on Form 10-KSB (including the section regarding Management's
Discussion and Analysis of Financial Condition and Results of Operations)
contains forward-looking statements regarding our business, financial condition,
results of operations and prospects. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or
variations of such words are intended to identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Annual Report on Form 10-KSB.
Additionally, statements concerning future matters are forward-looking
statements.
Although
forward-looking statements in this Annual Report on Form 10-KSB reflect the
good
faith judgment of our management, such statements can only be based on facts
and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the heading “Risks
Related to Our Business”
below,
as well as those discussed elsewhere in this Annual Report on Form 10-KSB.
Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Annual Report on Form
10-KSB. We file reports with the Securities and Exchange Commission (the
“Commission”).
We
make available on our website under "Investor Information/SEC Filings,” free of
charge, our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after we electronically file such materials with or
furnish them to the SEC. Our website address is www.oramed.com. You can also
read and copy any materials we file with the SEC at the SEC's Public Reference
Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional
information about the operation of the Public Reference Room by calling the
SEC
at 1-800-SEC-0330. In addition, the SEC maintains an internet site (www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including
us.
We
undertake no obligation to revise or update any forward-looking statements
in
order to reflect any event or circumstance that may arise after the date of
this
Annual Report on Form 10-KSB. Readers are urged to carefully review and consider
the various disclosures made throughout the entirety of this Annual Report,
which attempt to advise interested parties of the risks and factors that may
affect our business, financial condition, results of operations and
prospects.
As
used
in this Annual Report, the terms “we”,
“us”,
“our”,
the
“Company”,
and
“Oramed”
mean
Oramed Pharmaceuticals Inc., unless otherwise indicated.
DESCRIPTION
OF BUSINESS
General
We
are a
pharmaceutical company engaged in the research and development of innovative
pharmaceutical solutions, including an orally ingestible insulin pill to be
used
for the treatment of individuals with diabetes, rectal application of insulin,
use of oral ingestible pills for delivery other polypeptides and use of rectal
application for delivery of other polypeptides.
Oral
Insulin:
Oramed
is
seeking to revolutionize the treatment of diabetes through its proprietary
flagship product, an orally ingestible insulin capsule (ORMD-0801) currently
in
phase 2 clinical trials. The Company’s technology allows insulin to travel from
the gastrointestinal tract via the portal vein to the bloodstream,
revolutionizing the manner in which insulin is delivered. It enables its passage
in a more physiological manner than by current delivery methods of
insulin.
Through
our research and development efforts, we are developing an oral dosage form
that
will withstand the harsh chemical environment of the stomach or intestines
and
will be effective in delivering active insulin for the treatment of diabetes.
The enzymes and vehicles that are added to the insulin in the formulation
process must not modify chemically or biologically the insulin and the dosage
form must be safe to ingest.
The
Company’s research and development team has performed numerous animal studies to
optimize the composition and functionality of their oral insulin (ORMD- 0801)
modality and to demonstrate its safety and efficacy. The Company’s studies have
confirmed the feasibility of lowering blood glucose levels within an orally
administered form of insulin that is both safe and effective.
The
Company's technology is a platform that has the potential to deliver medications
and vaccines orally that today can only be delivered via injection.
Diabetes:
Diabetes
is a disease in which the body does not produce or properly use insulin. Insulin
is a hormone that is needed to convert sugar, starches and other food into
energy needed for daily life. The cause of diabetes continues to be a mystery,
although both genetics and environmental factors such as obesity and lack of
exercise appear to play roles.
An
estimated 177 million people are suffering from diabetes worldwide. According
to
the American Diabetes Association, there are 23.6 million children and adults
in
the United States, or 7.8% of the population, who have diabetes. While an
estimated 17.9 million have been diagnosed with diabetes, unfortunately, 5.7
million people (or nearly one quarter) are unaware that they have the
disease.
Intellectual
Property:
The
Company owns a portfolio of patents and patent applications covering its
technologies and is aggressively protecting these technology developments on
a
worldwide basis.
Management:
We are
led by a highly-experienced management team knowledgeable in the treatment
of
diabetes. The Company’s Chief Medical and Technology Officer, Miriam Kidron,
PhD, is a world-recognized pharmacologist and a biochemist and the innovator
primarily responsible for our Oral Insulin technology development and
know-how.
Scientific
Advisory Board:
Our
management team has access to our internationally recognized Scientific Advisory
Board whose members are thought-leaders in their respective areas. The Advisory
Board comprises of Professor Avram Hershko, Dr. Harold Jacob, Dr. Nir Barzilai,
Prof. Ele Ferrannini, Dr. Derek LeRoith and Dr. John Ziemniak.
Corporate
History
Oramed
was incorporated on April 12, 2002, in the State of Nevada under the name
“Iguana Ventures Ltd”. Following the incorporation, the Company was an
exploration stage company engaged in the acquisition and exploration of mineral
properties. The Company was unsuccessful in implementing its business plan
as a
mineral exploration company. Accordingly, the Company decided to change the
focus of its business by completing a share exchange with the shareholders
of
Integrated Security Technologies, Inc., a New Jersey private corporation
(“ISTI”). On June 4, 2004, the Company changed its name to Integrated Security
Technologies by filing a Certificate of Amendment with the Nevada Secretary
of
State. Effective June 14, 2004 the Company effected a 3.3:1 forward stock split,
increasing the amount of authorized capital to 200,000,000 shares of common
stock with the par value of $.001 per share. However, due to disappointing
results, on May 31, 2005, effective as of May 27, 2004 the Company terminated
the share exchange agreement with the shareholders of ISTI.
On
March
8, 2006, the Company executed an agreement with Hadasit Medical
Services and Development Ltd. to
acquire provisional patent application No. 60/718716
and
related intellectual property. The provisional patent application No.
60/718716 relates to a
method
of preparing insulin so that it may be taken orally to be used in the treatment
for the treatment of individuals with diabetes. Effective
April 10, 2006, the Company changed its name from “Integrated Security
Technologies, Inc.” to “Oramed Pharmaceuticals Inc.”. Based on provisional
patent application No. 60/718716, the Company filed a patent application under
the Patent Cooperation Treaty at the Israel Patent Office for “Methods and
Compositions for Oral Administration of Proteins” on August 31,
2006.
Strategy
We
plan
to continue to conduct clinical trials to show the effectiveness of our
technology. We intend to conduct the clinical trials necessary to file an
Investigational New Drug Application (“IND”) with the U.S. Food and Drug
Administration (“FDA”). Additional clinical trials are planned in other
countries such as Israel, India and South Africa, in order to substantiate
our
results as well as for purposes of future filings for drug approval in these
countries. We also plan to conduct further research and development by deploying
our proprietary drug delivery technology for the delivery of other polypeptides
in addition to insulin, and to develop other innovative pharmaceutical products,
including an insulin suppository, flu vaccines, and use of rectal application
for delivery of other polypeptides.
If
our
oral insulin capsule or other drug delivery solutions show significant promise
in clinical trials, we plan to ultimately seek a strategic commercial partner,
or partners, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs.
We
anticipate such partner or partners would be responsible for, or substantially
support, late stage clinical trials (Phase III) to ensure regulatory approvals
and registrations in the appropriate markets in a timely manner. We further
anticipate that such partner, or partners, would also be responsible for sales
and marketing of our oral insulin capsule in these markets. Such planned
strategic partnership, or partnerships, may provide a marketing and sales
infrastructure for our products as well as financial and operational support
for
global clinical trials, post marketing studies, label expansions and other
regulatory requirements concerning future clinical development in the United
States and elsewhere. Any future strategic partner, or partners, may also
provide capital and expertise that would enable the partnership to develop
new
oral dosage form for other polypeptides. Under certain circumstances, we may
determine to develop one or more of our oral dosage form on our own, either
world-wide or in select territories.
In
addition to developing our own oral dosage form drug portfolio, we are, on
an
on-going basis, considering in-licensing and other means of obtaining additional
technologies to complement and/or expand our current product portfolio. Our
goal
is to create a well-balanced product portfolio that will enhance and compliment
our existing drug portfolio.
Product
Development
Orally
Ingestible Insulin:
During
fiscal year 2007 we conducted several clinical studies of our orally ingestible
insulin. The studies were intended to assess both the safety/tolerability and
absorption properties of our proprietary oral insulin. Based on the
pharmacokinetic and pharmacologic outcomes of these trials, we decided to
continue the development of our oral insulin product.
On
November 15, 2007, we successfully completed animal studies in preparation
for
the Phase 1B clinical trial of our oral insulin capsule (ORMD 0801). On January
22, 2008 we commenced the non FDA approved Phase 1B clinical trials with our
oral insulin capsule, in healthy human volunteers with the intent of dose
optimization. On March 11, 2008, we successfully completed our Phase 1B clinical
trials.
On
April
13, 2008, we commenced a non FDA approved Phase 2A study to evaluate the safety
and efficacy of our oral insulin capsule (ORMD 0801) in Type II diabetic
volunteers at Hadassah Medical Center in Jerusalem. On August 6, 2008, we
announced the successful results of this trial.
On
April
21, 2008, we entered into a service agreement with Encorium Group, Inc.
(“Encorium”) pursuant to which Encorium will provide services for the purpose of
filing an IND for a Phase 2 study as required by the FDA. The FDA approval
process and, if approved, registration for commercial use as an oral drug can
take several years.
During
July 2008 we were granted approval by the Institutional Review Board Committee
of Hadassah Medical Center in Jerusalem to conduct a non FDA approved Phase
2A
study to evaluate the safety and efficacy of our oral insulin capsule (ORMD
0801) on Type I diabetic volunteers. On September 24, 2008, we announced the
beginning of this trail.
We
plan
on conducing two additional non FDA approved Phase 2B study to evaluate the
safety and efficacy of our oral insulin capsule (ORMD 0801) on Type II diabetic
volunteers, in South Africa and India. The trials are scheduled to commence
by
the end of 2008 or the beginning of 2009.
Rectal
Application of Insulin and Other Polypeptides:
We
filed
two additional provisional patents for a suppository application to our
technology portfolio. The first patent focuses on a rectal application for
insulin. The second patent focuses on the usage of this rectal application
to
other polypeptides that at present are only available in injection.
On
January 30, 2008, we entered into a master service agreement with OnQ
Consulting; a clinical research organization located in Johannesburg, South
Africa, to conduct non FDA approved clinical trials for the rectal application
of insulin. The trials are expected to begin during the coming
months.
On
October 23, 2008 we commenced a non FDA approved Phase 1A study to evaluate the
safety and efficacy of our insulin suppository (ORMD 0802) on healthy
volunteers, in South Africa.
GLP1
Analog:
On
September 16, 2008 we announced the launch of pre-clinical trials of ORMD 0901,
a GLP1-analog, the pre-clinical trials includes a animal studies which suggests
that the GLP-1analog exenatide -4 when combined with Oramed’s absorption
promoters is absorbed through the gastrointestinal tract and retains its
biological activity.
Glucagon-like
peptide-1 (GLP-1) is an incretin hormone - a type of gastrointestinal hormone
that stimulates the secretion of insulin from the pancreas. The incretin concept
was hypothesized when it was noted surprisingly that glucose ingested by mouth
(oral) stimulated two to three times more insulin release than the same amount
of glucose administered intravenously. GLP-1 was found in addition to stimulates
insulin release, to suppress glucagon release (hormone involved in regulation
of
glucose) from the pancreas, it slows gastric emptying to reduce the rate of
absorption of nutrients into the blood stream, and it increases satiety. Other
important beneficial attributes of GLP-1 are its effects of increasing the
number of beta cells (cells that manufacture and release insulin) in the
pancreas and possibly to be hormone that protects the heart.
Raw
Materials: Our
oral
insulin capsule is currently manufactured by Swiss Caps SA, under a Clinical
Trail Manufacturing Agreement. The raw materials required for the manufacturing
of the capsule are being purchased from third parties, under separate
agreements. We generally depend upon a limited number of suppliers for the
raw
materials. Although alternative sources of supply for these materials are
generally available, we could incur significant costs and disruptions in
changing suppliers. The termination of our relationship with our suppliers
or
the failure of these suppliers to meet our requirements for raw materials on
a
timely and cost-effective basis could materially adversely affect our business,
prospects, financial condition and results of operations.
Patents
and Licenses
The
following patent applications and provisional patent application are
pending:
|
· |
PCT/IL2006/001019,
“Methods and Compositions for Oral Administration of
Proteins”.
The patent application was filed on August 31,
2006.
|
|
· |
11/513,343,
“Methods and Compositions for Oral Administration of
Proteins”.
The patent application was filed on August 31,
2006.
|
|
· |
60/064,779,“Methods
and Compositions for Oral Administration of Proteins”.
The patent application was filed on March 26,
2008.
|
|
· |
PCT/IL2008/000546,“Methods
and Compositions for Rectal Application for Insulin”.
The patent application was filed on April 27,
2008.
|
|
· |
PCT/IL2008/000547,“Methods
and Compositions for Rectal Application for Insulin”.
The patent application was filed on April 27,
2008.
|
|
· |
61/071,538,“Methods
and Compositions for Oral Administration of Exenatide”.
The patent application was filed on May 5,
2008.
|
|
· |
61/089,812,
“Methods
and Compositions for Oral Administration of Proteins”.
The patent application was filed on August 18,
2008.
|
Consistent
with a strategy to seek protection in key markets worldwide, we have been and
will continue to prosecute the patent applications and corresponding foreign
counterparts of such applications. . We believe that our success will depend
on
our ability to obtain patent protection for our intellectual
property.
Our
patent strategy is as follows:
|
· |
Aggressively protect
all current and future technological developments to assure strong
and
broad protection by filing patents and/or continuations in part as
appropriate;
|
|
· |
Protect technological
developments at various levels, in a complementary manner,
including the base technology, as well as specific applications of
the
technology; and
|
|
· |
Establish comprehensive
coverage in the U.S. and in all relevant foreign markets in anticipation
of future commercialization
opportunities.
|
The
validity, enforceability, written supports, and breadth of claims in our patent
applications involve complex legal and factual questions and, therefore, may
be
highly uncertain. No assurance can be given that any patents based on pending
patent applications or any future patent applications filed by us will be
issued, that the scope of any patent protection will exclude competitors or
provide competitive advantages to us, that any of the patents that have been
or
may be issued to us will be held valid or enforceable if subsequently
challenged, or that others will not claim rights in or ownership of the patents
and other proprietary rights held or licensed by us. Furthermore, there can
be
no assurance that others have not developed or will not develop similar
products, duplicate any of our technology or design around any patents that
have
been or may be issued to us. Since patent applications in the United States
are
maintained in secrecy for the initial period of time following filing, we also
cannot be certain that others did not first file applications for inventions
covered by our pending patent applications, nor can we be certain that we will
not infringe any patents that may be issued to others on such applications.
We
also
rely on trade secrets and unpatentable know-how that we seek to protect, in
part, by confidentiality agreements. Our policy is to require our employees,
consultants, contractors, manufacturers, outside scientific collaborators and
sponsored researchers, board of directors, technical review board and other
advisors to execute confidentiality agreements upon the commencement of
employment or consulting relationships with us. These agreements provide that
all confidential information developed or made known to the individual during
the course of the individual's relationship with us is to be kept confidential
and not disclosed to third parties except in specific limited circumstances.
We
also require signed confidentiality or material transfer agreements from any
company that is to receive our confidential information. In the case of
employees, consultants and contractors, the agreements provide that all
inventions conceived by the individual while rendering services to us shall
be
assigned to us as the exclusive property of our company. There can be no
assurance, however, that all persons who we desire to sign such agreements
will
sign, or if they do, that these agreements will not be breached, that we would
have adequate remedies for any breach, or that our trade secrets or unpatentable
know-how will not otherwise become known or be independently developed by
competitors.
Our
success will also depend in part on our ability to commercialize our technology
without infringing the proprietary rights of others. No assurance can be given
that patents do not exist or could not be filed which would have an adverse
affect on our ability to market our technology or maintain our competitive
position with respect to our technology. If our technology components, products,
processes or other subject matter are claimed under other existing United States
or foreign patents or are otherwise protected by third party proprietary rights,
we may be subject to infringement actions. In such event, we may challenge
the
validity of such patents or other proprietary rights or we may be required
to
obtain licenses from such companies in order to develop, manufacture or market
our technology. There can be no assurances that we would be able to obtain
such
licenses or that such licenses, if available, could be obtained on commercially
reasonable terms. Furthermore, the failure to either develop a commercially
viable alternative or obtain such licenses could result in delays in marketing
our proposed technology or the inability to proceed with the development,
manufacture or sale of products requiring such licenses, which could have a
material adverse affect on our business, financial condition and results of
operations. If we are required to defend ourselves against charges of patent
infringement or to protect our proprietary rights against third parties,
substantial costs will be incurred regardless of whether we are successful.
Such
proceedings are typically protracted with no certainty of success. An adverse
outcome could subject us to significant liabilities to third parties and force
us to curtail or cease our development and commercialization of our technology.
Partnerships
and Collaborative Arrangements
We
believe that working together with strategic partners will expedite product
formulation, production and approval .
On
October 30, 2006, we entered into a Clinical Trial Manufacturing Agreement
with
Swiss Caps AG (“Swiss”), pursuant to which Swiss will manufacture and deliver
the oral insulin capsule developed by the Company.
During
January and April, 2008, we entered into agreements with OnQ consulting, a
clinical research organization (CRO) located in Johannesburg, South Africa,
to
conduct Phase 1B and 2B clinical trials on our oral insulin capsules and
suppository.
On
April
21, 2008, we entered into a five year service agreement with Encorium Group,
Inc. (“Encorium”) pursuant to which Encorium will provide services for the
purpose of filing an Investigational New Drug Application (IND) for a Phase
2
study as required by the US Food and Drug Administration (FDA).
During
April 2008, we entered into a five year master services agreement with
SAFC,
an
operating division of Sigma-Aldrich, Inc., pursuant to which SAFC will provide
services for individual projects, which may include strategic planning, expert
consultation, clinical trial services, statistical programming and analysis,
data processing, data management, regulatory, clerical, project management,
central laboratory services, pre-clinical services, pharmaceutical sciences
services, and other research and development services.
On
September 8, 2008, we entered into Clinical Research Agreement with ETI Karle
Clinical Pvt. Ltd. (“ETI”), pursuant to which ETI will be conducting Phase 2A
and 2B clinical trials of our oral insulin capsule in India.
We
are
also currently negotiating a clinical trial agreement with Hadasit to facilitate
additional clinical trials to be performed at Hadassah Medical Center in
Jerusalem.
Government
Regulation
The
Drug Development Process
Regulatory
requirements for the approval of new drugs vary from one country to another.
In
order to obtain approval to market our drug portfolio, we need to go through
a
different regulatory process in each country in which we apply for such
approval. In some cases information gathered during the approval process in
one
country can be used as supporting information for the approval process in
another country. The U.S. FDA compliance requirements are considered to be
one
of the most stringent worldwide following is a description of the FDA’s
requirements.
The
FDA
requires that pharmaceutical and certain other therapeutic products undergo
significant clinical experimentation and clinical testing prior to their
marketing or introduction to the general public. Clinical testing, known as
clinical
trials
or
clinical
studies,
is
either conducted internally by life science, pharmaceutical, or biotechnology
companies or is conducted on behalf of these companies by contract research
organizations.
The
process of conducting clinical studies is highly regulated by the FDA, as well
as by other governmental and professional bodies. Below we describe the
principal framework in which clinical studies are conducted, as well as describe
a number of the parties involved in these studies.
Protocols.
Before
commencing human clinical studies, the sponsor of a new drug or therapeutic
product must submit an investigational new drug application, or IND, to the
FDA.
The application contains what is known in the industry as a protocol.
A
protocol is the blueprint for each drug study. The protocol sets forth, among
other things, the following:
|
· |
who
must be recruited as qualified
participants;
|
|
· |
how
often to administer the drug or
product;
|
|
· |
what
tests to perform on the participants;
and
|
|
· |
what
dosage of the drug or amount of the product to give to the
participants.
|
Institutional
Review Board.
An
institutional review board is an independent committee of professionals and
lay
persons which reviews clinical research studies involving human beings and
is
required to adhere to guidelines issued by the FDA. The institutional review
board does not report to the FDA, but its records are audited by the FDA. Its
members are not appointed by the FDA. All clinical studies must be approved
by
an institutional review board. The institutional review board’s role is to
protect the rights of the participants in the clinical studies. It approves
the
protocols to be used, the advertisements which the company or contract research
organization conducting the study proposes to use to recruit participants,
and
the form of consent which the participants will be required to sign prior to
their participation in the clinical studies.
Clinical
Trials.
Human
clinical studies or testing of a potential product are generally done in three
stages known as Phase I through Phase III testing. The names of the phases
are
derived from the regulations of the FDA. Generally, there are multiple studies
conducted in each phase.
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Phase
I.
Phase I studies involve testing a drug or product on a limited number
of
healthy participants, typically 24 to 100 people at a time. Phase
I
studies determine a product’s basic safety and how the product is absorbed
by, and eliminated from, the body. This phase lasts an average of
six
months to a year.
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Phase
II.
Phase II trials involve testing up to 200 participants at a time
who may
suffer from the targeted disease or condition. Phase II testing typically
lasts an average of one to two years. In Phase II, the drug is tested
to
determine its safety and effectiveness for treating a specific illness
or
condition. Phase II testing also involves determining acceptable
dosage
levels of the drug. If Phase II studies show that a new drug has
an
acceptable range of safety risks and probable effectiveness, a company
will continue to review the substance in Phase III
studies.
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Phase
III.
Phase III studies involve testing large numbers of participants,
typically
several hundred to several thousand persons. The purpose is to verify
effectiveness and long-term safety on a large scale. These studies
generally last two to three years. Phase III studies are conducted
at
multiple locations or sites. Like the other phases, Phase III requires
the
site to keep detailed records of data collected and procedures
performed.
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New
Drug Approval. The
results of the clinical trials are submitted to the FDA as part of a new drug
application (“NDA”). Following
the completion of Phase III studies, assuming the sponsor of a potential product
in the United States believes it has sufficient information to support the
safety and effectiveness of its product, it submits an NDA to the FDA requesting
that the product be approved for marketing. The application is a comprehensive,
multi-volume filing that includes the results of all clinical studies,
information about the drug’s composition, and the sponsor’s plans for producing,
packaging and labeling the product. The FDA’s review of an application can take
a few months to many years, with the average review lasting 18 months. Once
approved, drugs and other products may be marketed in the United States, subject
to any conditions imposed by the FDA.
Phase
IV.
The FDA
may require that the sponsor conduct additional clinical trials following new
drug approval. The purpose of these trials, known as Phase IV studies, is to
monitor long-term risks and benefits, study different dosage levels or evaluate
safety and effectiveness. In recent years, the FDA has increased its reliance
on
these trials. Phase IV studies usually involve thousands of participants. Phase
IV studies also may be initiated by the company sponsoring the new drug to
gain
broader market value for an approved drug. For example, large-scale trials
may
also be used to prove effectiveness and safety of new forms of drug delivery
for
approved drugs. Examples may be using an inhalation spray versus taking tablets
or a sustained-release form of medication versus capsules taken multiple times
per day.
The
drug
approval process is time-consuming, involves substantial expenditures of
resources, and depends upon a number of factors, including the severity of
the
illness in question, the availability of alternative treatments, and the risks
and benefits demonstrated in the clinical trials.
Orphan
Drug Act.
The
Orphan Drug Act provides incentives to develop and market drugs (“Orphan
Drugs”)
for
rare disease conditions in the United States. A drug that receives Orphan Drug
designation and is the first product to receive FDA marketing approval for
its
product claim is entitled to a seven-year exclusive marketing period in the
United States for that product claim. A drug which is considered by the FDA
to
be different than such FDA-approved Orphan Drug is not barred from sale in
the
United States during such exclusive marketing period even if it receives
approval for the same claim. We can provide no assurance that the Orphan Drug
Act’s provisions will be the same at the time of the approval, if any, of our
products.
Other
Regulations
Various
Federal and state laws, regulations, and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals,
and
the purchase, storage, movement, import, export, use, and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with our research are applicable
to our activities. They include, among others, the United States Atomic Energy
Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health
Act, the National Environmental Policy Act, the Toxic Substances Control Act,
and Resources Conservation and Recovery Act, national restrictions on technology
transfer, import, export, and customs regulations, and other present and
possible future local, state, or federal regulation. The extent of governmental
regulation which might result from future legislation or administrative action
cannot be accurately predicted.
Competition
Competition
in General
Competition
in the area of biomedical and pharmaceutical research and development is intense
and significantly depends on scientific and technological factors. These factors
include the availability of patent and other protection for technology and
products, the ability to commercialize technological developments and the
ability to obtain governmental approval for testing, manufacturing and
marketing. Our competitors include major pharmaceutical, medical products,
chemical and specialized biotechnology companies, many of which have financial,
technical and marketing resources significantly greater than ours. In addition,
many biotechnology companies have formed collaborations with large, established
companies to support research, development and commercialization of products
that may be competitive with ours. Academic institutions, governmental agencies
and other public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on
their
own or through joint ventures. We are aware of certain other products
manufactured or under development by competitors that are used for the treatment
of the diseases and health conditions that we have targeted for product
development. We can provide no assurance that developments by others will not
render our technology obsolete or noncompetitive, that we will be able to keep
pace with new technological developments or that our technology will be able
to
supplant established products and methodologies in the therapeutic areas that
are targeted by us. The foregoing factors could have a material adverse affect
on our business, prospects, financial condition and results of operations.
These
companies, as well as academic institutions, governmental agencies and private
research organizations, also compete with us in recruiting and retaining highly
qualified scientific personnel and consultants.
Competition
within our sector is increasing, so we will encounter competition from existing
firms that offer competitive solutions in diabetes treatment solutions. These
competitive companies could develop products that are superior to, or have
greater market acceptance, than the products being developed by us. We will
have
to compete against other biotechnology and pharmaceutical companies with greater
market recognition and greater financial, marketing and other resources.
Our
competition will be determined in part by the potential indications for which
our technology is developed and ultimately approved by regulatory authorities.
In addition, the first product to reach the market in a therapeutic or
preventive area is often at a significant competitive advantage relative to
later entrants to the market. Accordingly, the relative speed with which we,
or
our potential corporate partners, can develop products, complete the clinical
trials and approval processes and supply commercial quantities of the products
to the market are expected to be important competitive factors. Our competitive
position will also depend on our ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products, develop
and implement production and marketing plans, obtain and maintain patent
protection and secure adequate capital resources. We expect our technology,
if
approved for sale, to compete primarily on the basis of product efficacy,
safety, patient convenience, reliability, value and patent
position.
Competition
for our Oral Insulin Capsule
We
anticipate the oral insulin capsule to be a competitive diabetes drug because
of
its anticipated efficacy and safety profile. Following are treatment options
for
type I and II diabetic patients:
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a
combination of diet, exercise and oral medication which improve the
body's
response to insulin or cause the body to produce more insulin, and;
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Several
entities who are developing oral insulin capsule and other alternative oral
insulin as well as the development stage are thought to be:
Diabetology (UK, Phase 2), Emisphere Technologies (US, Phase 2), Biocon (India),
Apollo Life Sciences (Australia, Phase 1), Generex (Canada, Phase 3) – Buccal
delivery, Biodel (US, Phase 3) – Sublingual delivery and MannKind (US) -Inhaled
delivery
Scientific
Advisory Board
We
maintain a scientific advisory board consisting of internationally recognized
scientists who advise us on scientific and technical aspects of our business.
The scientific advisory board meets periodically to review specific projects
and
to assess the value of new technologies and developments to us. In addition,
individual members of the scientific advisory board meet with us periodically
to
provide advice in particular areas of expertise. The scientific advisory board
consists of the following members, information with respect to whom is set
forth
below: Professor Avram Hershko, Dr. Harold Jacob, Dr. Nir Barzilai, Prof. Ele
Ferrannini, Dr. Derek LeRoith and Dr. John Ziemniak.
Professor
Avram Hershko, MD PhD
joined
the Oramed Scientific Advisory Board in July 2008. He gained his MD (1965)
and
PhD (1969) from the Hebrew University- Hadassah Medical School of Jerusalem,
a
period which included service as a physician in the Israel Defense Forces
(1965-67). After a post-doctoral fellowship with Gordon Tomkins at the
University of San Francisco (1969-72), he joined the faculty of the Haifa
Technion becoming professor in 1980. He is now Distinguished Professor in the
Unit of Biochemistry in the B. Rappaport Faculty of Medicine of the Technion.
Prof. Hershko’s main research interests concern the mechanisms by which cellular
proteins are degraded, a formerly neglected field of study. Hershko and his
colleagues showed that cellular proteins are degraded by a highly selective
proteolytic system. This system tags proteins for destruction by linkage a
protein called ubiquitin, which had previously been identified in many tissues,
as the name suggests, but whose function was previously unknown. Subsequent
work
in Hershko's and many other laboratories has shown that the ubiquitin system
has
a vital role in controlling a wide range of cellular processes, such as the
regulation of cell division, signal transduction and DNA repair. Abnormalities
in the ubiquitin system result in diseases such as certain types of cancer.
The
full range of functions of the ubiquitin system in health and disease has still
to be elucidated. Prof. Hershko was awarded the Nobel Prize in Chemistry (2004)
jointly with his former PhD student Aaron Ciechanover and their colleague Irwin
Rose. His many honors include the Israel Prize for Biochemistry (1994), the
Gardner Award (1999), the Lasker Prize for Basic Medical Research (2000), the
Wolf Prize for Medicine (2001) and the Louisa Gross Horwitz Award (2001).
Hershko is a member of the Israel Academy of Sciences (2000) and a Foreign
Associate of the US Academy of Sciences (2003).
Derek
LeRoith MD PhD
is
currently the Chief of the Division of Endocrinology, Diabetes and Bone Diseases
at Mt. Sinai School of Medicine, NY. Dr. LeRoith has worked at the NIH since
1979 in the field of Endocrinology and Diabetes and rose to be Diabetes Branch
at the National Institutes of Health in Bethesda MD, a position he held until
2005. His main interests have focused on the role of insulin and the
insulin-like growth factors in normal physiology and disease states. In these
areas he has published over 500 peer-reviewed articles and reviews in high
profile journals. He is also the senior editor of a textbook on diabetes, now
in
its third edition and has edited books on the insulin-like growth factors.
Dr.
LeRoith has made major contributions in our understanding of the basic
pathophysiology of type 2 diabetes and also the role of the IGFs in various
disorders especially in cancer, and is considered a world expert on these
topics. In recognition of his contributions he has received many lectureships
worldwide and has been the plenary speaker at numerous national and
international symposia. He is the editor of a number of diabetes- and growth
factor-related journals, has been on the advisory boards of a number of
companies and co-chairs two national committees that deal with the education
of
endocrinologist and primary care physicians.
Dr.
Nir Barzilai
is the
Director of the Institute for Aging Research at the Albert Einstein College
of
Medicine. He is currently an Associate Professor in the Department of Medicine,
Molecular genetics and the Diabetes Research Center and is a member of the
Divisions of Endocrinology and Geriatrics. He is also the Director of the
Montefiore Hospital Diabetes Clinic. He has spent over 20 years in assisting
patients internationally and training in vast fields from Medicine, Geriatrics,
Endocrinology and Molecular Genetics. Dr. Barzilai has had a strong career
in
diabetes studies between Israel, London and the United States. He has worked
for
such esteemed institutions as Hadassah Research Hospital, NIH (National
Institute of Health), and many esteemed US based university hospitals including
Cornell and Yale.
Prof.
Ele Ferrannini
has
published over 350 original papers and 50 book chapters, and he is amongst
the
"highly cited scientists." (ISIhighlycited.com). One of many great honors
achieved for Prof. Ferrannini includes being elected a past President to the
EASD, European Association for the Study of Diabetes. The Association is based
on individual membership and embraces scientists, physicians, laboratory
workers, nurses and students from all over the world who are interested in
diabetes and related subjects for Europe, such that the ADA, American Diabetes
Association does in America. Prof. Ferrannini has worked with various
institutions including the Department of Internal Medicine, University of Pisa
School of Medicine, and CNR (National Research Council) Institute of Clinical
Physiology, Pisa, Italy; Diabetes Division, Department of Medicine, University
of Texas Health Science Center at San Antonio, Texas, USA. He has also had
extensive training focused on microbiology, immunology, endocrinology, and
specializing in diabetes studies. Prof. Ferrannini has received a Certificate
of
the Educational Council for Foreign Medical Graduates from the University of
Bologna, and with cum laude honors completed a subspecialty in Diabetes and
Metabolic Diseases from the University of Torino.
Dr.
Harold Jacob
has a
strong background, both in medical sciences as well as biotechnology and medical
devices. He practiced clinical gastroenterology in New York and served as Chief
of Gastroenterology at St. Johns Episcopal Hospital and South Nassau Communities
Hospital in the years 1986-1995, and was a Clinical Assistant Professor of
Medicine at SUNY during the years 1983-1990. Dr. Jacob founded and served as
Editor in Chief of Endoscopy Review and has authored numerous publications
in
the field of gastroenterology. Since 1998, Dr. Jacob is president of Medical
Instrument, a company which provides a range of support and consulting services
to start-up and early stage companies as well as patenting it's own proprietary
medical devices. Dr. Jacob has advised a spectrum of companies in the past
and
he served as a consultant and then as the Director of Medical Affairs at Given
Imaging Ltd., during the years 1997 to 2003, a company that developed the first
swallowable wireless pill camera for inspection of the intestine. He has
licensed patents to a number of companies including Kimberly Clark Ballard.
Since 2003, Dr. Jacob is CEO of NanoVibronix, a medical device company using
surface acoustics to prevent catheter acquired infection as well as other
applications. Dr. Jacob is a member of the Board of Directors of the
Company.
Dr.
John A, Ziemniak
is
currently the director of drugs and biologics product development at Encorium
Group Inc. and the co-founder/partner of Gwynedd Pharmaceuticals. Dr. Ziemniak
has over 20 years experience in the pharmaceutical industry. He has worked
extensively in drug development having been involved in the conception, filing,
and approval of over 13 NDAs and greater then 20 INDs covering a wide variety
of
drugs and indications. Dr. Ziemniak is the co-founder and partner of Gwynedd
Pharmaceutical Consultants, a contract organization providing consulting
services to the pharmaceutical, medical and dental industries in the area of
drug and product development. Dr Ziemniak’s areas of specialty include drug
delivery, project management, pharmacokinetics, clinical pharmacology and drug
development. Dr. Ziemniak has approximately 50 scientific publications and
numerous patents on a variety of drug development topics and
products.
Employees
We
have
been successful in retaining the experienced personnel involved in our research
and development program. In addition, we believe we have successfully recruited
clinical/regulatory, quality assurance and other personnel needed to advance
through clinical studies or have engaged the services of experts in the field
for these requirements. As of August 31, 2008, we contracted seven individuals
through employment or consulting agreements. Of our staff, two are senior
management, two are engaged in research and development work, and the remaining
in administration work.
Facilities
Our
principal executive offices are located in approximately 117 square meters
of
office space in Givat Ram, Jerusalem, Israel. The lease commenced on October
1,
2007 and is for a period of 51 months. The aggregate annual base rental for
this
space is $8,004. We believe that our existing facilities are suitable and
adequate to meet our current business requirements. In the event that we should
require additional or alternative facilities, we believe that such facilities
can be obtained on short notice at competitive rates.
ITEM
1A – RISK FACTORS
An
investment in our common stock involves a high degree of risk. You should
consider carefully the following information about these risks, together with
the other information contained in this annual report before buying shares
of
our common stock. Our business, prospects, financial condition, and results
of
operations may be materially and adversely affected as a result of any of the
following risks. The trading of our common stock could decline as a result
of
any of these risks. You could lose all or part of your investment in our common
stock. Some of the statements in “Risk Factors” are forward looking statements.
See “Special Note Regarding Forward Looking Statements”.
Risks
Related to Our Business
There
is substantial doubt as to our ability to continue as a going
concern.
Our
financial statements were prepared on the assumption that we will continue
as a
going concern. We estimate that our cash reserves will not be sufficient to
permit us to continue at our anticipated level of operations for our fiscal
year
ended August 31, 2009 . During 2009, we plan to increase research and
development, product development, and administrative expenses relating to our
business, including expenses related to research and development related to
our
oral delivery platform. We intend to use our cash reserves, as well as other
funds in the event that they shall become available on commercially reasonable
terms, to finance these activities and other activities described herein,
although we can provide no assurance that these additional funds will be
available in the amounts or at the times we may require. If sufficient capital
is not available, we would likely be required to scale back or terminate our
research and development efforts. See “Risk
Factors — We will need additional capital in order to satisfy our business
objectives”.
We
will need substantial additional capital in order to satisfy our business
objectives.
To
date,
we have financed our operations principally through offerings of securities
exempt from the registration requirements of the Securities Act. We believe
that
our available resources and cash flow will be sufficient to meet our anticipated
working capital needs for a minimum of 7 months from the date of this Annual
Report. We estimate that we will require substantial additional financing at
various intervals in order to continue our research and development programs,
including significant requirements for operating expenses including intellectual
property protection and enforcement, for pursuit of regulatory approvals, and
for commercialization of our products. We can provide no assurance that
additional funding will be available on a timely basis, on terms acceptable
to
us, or at all. In the event that we are unable to obtain such financing, we
will
not be able to fully develop and commercialize our technology. Our future
capital requirements will depend upon many factors, including:
· continued
scientific progress in our research and development programs;
· costs
and
timing of conducting clinical trials and seeking regulatory approvals and patent
prosecutions;
· competing
technological and market developments;
· our
ability to establish additional collaborative relationships; and
· effects
of commercialization activities and facility expansions if and as
required.
If
we
cannot secure adequate financing when needed, we may be required to delay,
scale
back or eliminate one or more of our research and development programs or to
enter into license or other arrangements with third parties to commercialize
products or technologies that we would otherwise seek to develop ourselves
and
commercialize ourselves. In such event, our business, prospects, financial
condition, and results of operations may be adversely affected as we may be
required to scale-back, eliminate, or delay development efforts or product
introductions or enter into royalty, sales or other agreements with third
parties in order to commercialize our products.
We
are a development stage company with a history of losses and can provide no
assurance
as to our future operating results.
We
are a
development stage company with no revenues from our contemplated principal
business activity. Consequently, we have incurred net losses and negative cash
flows since inception. We currently have no product revenues, and may not
succeed in developing or commercializing any products which will generate
product or licensing revenues. We do not expect to have any products on the
market for several years. In addition, development of our product candidates
requires a process of pre-clinical and clinical testing, during which our
products could fail. We may not be able to enter into agreements with one or
more companies experienced in the manufacturing and marketing of therapeutic
drugs and, to the extent that we are unable to do so, we will not be able to
market our product candidates. Eventual profitability will depend on our success
in developing, manufacturing, and marketing our product candidates. As of August
31, 2008 and 2007, we had working capital of $4,483,940 and $505,951,
respectively, and stockholders’ equity of $4,593,060 and $513,131, respectively.
We generated no revenues to date. For the period from our inception on April
12,
2002 through August 31, 2008, the years ended August 31, 2008 and 2007, we
incurred net losses of $(7,248,204), $(2,769,271), and $(3,236,009),
respectively We may never achieve profitability and expect to incur net losses
in the foreseeable future. See “Management's
Discussion and Analysis of Financial Condition and Results of
Operations”.
We
rely upon patents to protect our technology. We may be unable to protect our
intellectual
property rights and we may be liable for infringing the intellectual
property
rights of others.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies. We currently hold several pending patent
applications in the United States and corresponding patent applications filed
in
certain other countries covering our technology. Further, we intend to rely
on a
combination of trade secrets and non-disclosure, and other contractual
agreements and technical measures to protect our rights in our technology.
We
intend to depend upon confidentiality agreements with our officers, directors,
employees, consultants, and subcontractors, as well as collaborative partners,
to maintain the proprietary nature of our technology. These measures may not
afford us sufficient or complete protection, and others may independently
develop technology similar to ours, otherwise avoid our confidentiality
agreements, or produce patents that would materially and adversely affect our
business, prospects, financial condition, and results of operations. We believe
that our technology is not subject to any infringement actions based upon the
patents of any third parties; however, our technology may in the future be
found
to infringe upon the rights of others. Others may assert infringement claims
against us, and if we should be found to infringe upon their patents, or
otherwise impermissibly utilize their intellectual property, our ability to
continue to use our technology or the licensed technology could be materially
restricted or prohibited. If this event occurs, we may be required to obtain
licenses from the holders of this intellectual property, enter into royalty
agreements, or redesign our products so as not to utilize this intellectual
property, each of which may prove to be uneconomical or otherwise impossible.
Licenses or royalty agreements required in order for us to use this technology
may not be available on terms acceptable to us, or at all. These claims could
result in litigation, which could materially adversely affect our business,
prospects, financial condition, and results of operations.
The
patent position of biopharmaceutical and biotechnology firms is generally
uncertain and involves complex legal and factual questions. We do not know
whether any of our current or future patent applications will result in the
issuance of any patents. Even issued patents may be challenged, invalidated
or
circumvented. Patents may not provide a competitive advantage or afford
protection against competitors with similar technology. Competitors or potential
competitors may have filed applications for, or may have received patents and
may obtain additional and proprietary rights to compounds or processes used
by
or competitive with ours. In addition, laws of certain foreign countries do
not
protect intellectual property rights to the same extent as do the laws of the
United States or Canada.
Patent
litigation is becoming widespread in the biotechnology industry and we cannot
predict how this will affect our efforts to form strategic alliances, conduct
clinical testing or manufacture and market any products under development.
If
challenged, our patents may not be held valid. We could also become involved
in
interference proceedings in connection with one or more of our patents or patent
applications to determine priority of invention. If we become involved in any
litigation, interference or other administrative proceedings, we will likely
incur substantial expenses and the efforts of our technical and management
personnel will be significantly diverted. In addition, an adverse determination
could subject us to significant liabilities or require us to seek licenses
that
may not be available on favorable terms, if at all. We may be restricted or
prevented from manufacturing and selling our products in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses.
Our
commercial success will also depend significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties.
Patent applications are, in many cases, maintained in secrecy until patents
are
issued. The publication of discoveries in the scientific or patent literature
frequently occurs substantially later than the date on which the underlying
discoveries were made and patent applications are filed. In the event of
infringement or violation of another party's patent, we may be prevented from
pursuing product development or commercialization. See “Business—Patents
and Licenses”.
At
present, our success depends solely on the successful commercialization of
the
oral insulin capsule.
The
successful commercialization of oral insulin capsule is crucial for our success.
Our proposed products and their potential applications are in an early stage
of
clinical and manufacturing/process development and face a variety of risks
and
uncertainties. Principally, these risks include the following:
· future
clinical trial results may show that the oral insulin capsule is not well
tolerated by recipients at its effective doses or is not efficacious as compared
to placebo;
· future
clinical trial results may be inconsistent with previous preliminary testing
results and data from our earlier studies may be inconsistent with clinical
data;
· even
if
our oral insulin capsule is shown to be safe and effective for its intended
purposes, we may face significant or unforeseen difficulties in obtaining or
manufacturing sufficient quantities or at reasonable prices;
· our
ability to complete the development and commercialization of the oral insulin
capsule for our intended use is significantly dependent upon our ability to
obtain and maintain experienced and committed partners to assist us with
obtaining clinical and regulatory approvals for, and the manufacturing,
marketing and distribution of, the oral insulin capsule on a worldwide
basis;
· even
if
our oral insulin capsule is successfully developed, commercially produced and
receive all necessary regulatory approvals, there is no guarantee that there
will be market acceptance of the products; and
· our
competitors may develop therapeutics or other treatments which are superior
or
less costly than our own with the result that our products, even if they are
successfully developed, manufactured and approved, may not generate significant
revenues.
If
we are
unsuccessful in dealing with any of these risks, or if we are unable to
successfully commercialize our oral insulin capsule for some other reason,
it
would likely seriously harm our business.
We
have no prior experience manufacturing our products.
We
currently lack the resources to manufacture any of our product candidates on
a
large scale. Our ability to conduct clinical trials and commercialize our
product candidates will depend, in part, on our ability to manufacture our
products, either directly or, as currently intended, through contract
manufacturers, at a competitive cost and in accordance with current Good
Manufacturing Practices (“cGMP”)
and
other regulatory requirements. We anticipate that we will be required to depend
on contract manufacturers or collaborative partners for the manufacturing of
our
product candidates for preclinical studies and clinical trials and intend to
use
contract manufacturers to produce any products we may eventually commercialize.
If we are not able to obtain contract manufacturing on commercially reasonable
terms, we may not be able to conduct or complete clinical trials or
commercialize our product candidates. We have identified multiple suppliers
for
most if not all of the components of our drug product candidates, although
we
can provide no assurance that these components will be available when needed
on
commercially reasonable terms.
In
order
to succeed, we ultimately will be required to either develop such manufacturing
capabilities or to outsource manufacturing on a long-term basis to third
parties. We can provide no assurance that third parties will be interested
in
manufacturing our products on a timely basis, on commercially reasonable terms,
or at all. If we are unable to establish manufacturing capabilities either
by
developing our own organization or by entering into agreements with others,
we
may be unable to commercialize our products, which would have a material adverse
effect upon our business, prospects, financial condition, and results of
operations. Further, in the event that we are required to outsource these
functions on disadvantageous terms, we may be required to pay a relatively
large
portion or our net revenue to these organizations, which would have a material
adverse effect upon our business, prospects, financial condition, and results
of
operations.
We
are dependent upon third party suppliers of our raw materials.
We
are
dependent on outside vendors for our entire supply of the oral insulin capsule.
While we believe that there are numerous sources of supply available, if the
third party suppliers were to cease production or otherwise fail to supply
us
with quality raw materials in sufficient quantities on a timely basis and we
were unable to contract on acceptable terms for these services with alternative
suppliers, our ability to produce our products and to conduct testing and
clinical trials would be materially adversely affected
We
can provide no assurance of the successful and timely development of our new
products.
Our
product candidates are at various stages of research and development. Further
development and extensive testing will be required to determine their technical
feasibility and commercial viability. Our success will depend on our ability
to
achieve scientific and technological advances and to translate such advances
into reliable, commercially competitive products on a timely basis. Products
that we have developed and may in the future develop are not likely to be
commercially available for some time, if at all. The proposed development
schedules for our products may be affected by a variety of factors, including
technological difficulties, proprietary technology of others, and changes in
governmental regulation, many of which will not be within our control. Any
delay
in the development, introduction, or marketing of our products could result
either in such products being marketed at a time when their cost and performance
characteristics would not be competitive in the marketplace or in the shortening
of their commercial lives. In light of the long-term nature of our projects,
the
nature of technology involved, and the other factors, described elsewhere in
“Risk Factors”, there can be no assurance that we will be able to complete
successfully the development or marketing of any new products.
We
have limited experience in conducting clinical trials.
Clinical
trials must meet FDA and foreign regulatory requirements. We have limited
experience in designing, conducting and managing the preclinical studies and
clinical trials necessary to obtain regulatory approval for our product
candidates in any country. We may encounter problems in clinical trials that
may
cause us or the FDA or foreign regulatory agencies to delay, suspend or
terminate our clinical trials at any phase. These problems could include the
possibility that we may not be able to conduct clinical trials at our preferred
sites, enroll a sufficient number of patients for our clinical trials at one
or
more sites or begin or successfully complete clinical trials in a timely
fashion, if at all. Furthermore, we, the FDA or foreign regulatory agencies
may
suspend clinical trials at any time if we or they believe the subjects
participating in the trials are being exposed to unacceptable health risks
or if
we or they find deficiencies in the clinical trial process or conduct of the
investigation. If clinical trials of any of the product candidates fail, we
will
not be able to market the product candidate which is the subject of the failed
clinical trials. The FDA and foreign regulatory agencies could also require
additional clinical trials, which would result in increased costs and
significant development delays. Our failure to adequately demonstrate the safety
and effectiveness of a pharmaceutical product candidate under development could
delay or prevent regulatory approval of the product candidate and could have
a
material adverse effect on our business, prospects, financial condition, and
results of operations.
We
can provide no assurance that our products will obtain regulatory approval
or
that the results of clinical studies will be favorable.
The
testing, marketing and manufacturing of any of our products will require the
approval of the FDA and/or regulatory agencies of other countries. We cannot
predict with any certainty the amount of time necessary to obtain such
regulatory approvals and whether any such approvals will ultimately be granted.
In any event, review and approval by the regulatory bodies is anticipated to
take a number of years. Preclinical and clinical trials may reveal that one
or
more of our products are ineffective or unsafe, in which event further
development of such products could be seriously delayed or terminated. Moreover,
obtaining approval for certain products may require the testing on human
subjects of substances whose effects on humans are not fully understood or
documented. Delays in obtaining necessary regulatory approvals of any proposed
product and failure to receive such approvals would have an adverse effect
on
the product’s potential commercial success and on our business, prospects,
financial condition, and results of operations. In addition, it is possible
that
a product may be found to be ineffective or unsafe due to conditions or facts
which arise after development has been completed and regulatory approvals have
been obtained. In this event we may be required to withdraw such product from
the market. See “Business
– Governmental Regulation”.
If
our products are commercialized, we may be subject to product liability
claims.
The
testing, marketing, and sale of pharmaceutical products entail inherent risks.
If we succeed in developing new pharmaceutical products, the sale of such
products may expose us to potential liability resulting from the use of such
products. Such liability might result from claims made directly by consumers
or
by pharmaceutical companies or others selling such products. While we may seek
to obtain product liability insurance, there can be no assurance that we will
be
able to obtain such insurance or, if obtained, that such insurance can be
acquired in amounts sufficient to protect us against such potential liability
or
at a reasonable cost. We do not currently maintain product liability
insurance.
As
we have no sales, marketing, and distribution capabilities, we will be required
to either develop such capabilities or to outsource these activities to third
parties.
We
currently have no sales, marketing or distribution capabilities. In order to
succeed, we ultimately will be required to either develop such capabilities
or
to outsource these activities to third parties. We can provide no assurance
that
third parties will be interested in acting as our outsourced sales, marketing,
and distribution arms on a timely basis, on commercially reasonable terms,
or at
all. If we are unable to establish sales, marketing, or distribution
capabilities either by developing our own organization or by entering into
agreements with others, we may be unable to successfully sell any products
that
we are able to begin to commercialize, which would have a material adverse
effect upon our business, prospects, financial condition, and results of
operations. Further, in the event that we are required to outsource these
functions on disadvantageous terms, we may be required to pay a relatively
large
portion or our net revenue to these organizations, which would have a material
adverse effect upon our business, prospects, financial condition, and results
of
operations.
In
the future, we may rely upon our collaborative agreements with large
pharmaceutical
companies.
In
the
future, we may rely heavily on collaborative agreements with large
pharmaceutical companies, governments, or other parties for our revenues. Our
inability to obtain any one or more of these agreements, on commercially
reasonable terms, or at all, or to circumvent the need for any such agreement,
could cause significant delays and cost increases and materially affect our
ability to develop and commercialize our product candidates. Some of our
programs may require the use of multiple proprietary technologies, especially
patented drugs. Obtaining licenses for these technologies may require us to
make
cumulative royalty payments or other payments to several third parties,
potentially reducing amounts paid to us or making the cost of our products
commercially prohibitive. Manufacturing of drug products may also require
licensing technologies and intellectual property from third
parties.
We
have
recently engaged in preliminary discussions with companies outside of the United
States to carry out clinical trials of our products. Such agreements could
involve us granting exclusive commercialization rights and profit interests
in
our products derived from certain geographic areas in exchange for payment
of
the costs of running such clinical trials now. This could have an adverse effect
on our ability to market such products to large pharmaceutical companies in
the
future. There is no guarantee that we will be able to enter into any such
agreements or that, if entered into, such agreements would be
profitable.
We
have limited senior management resources and may be required to obtain more
resources to manage our growth.
We
expect
the expansion of our business to place a significant strain on our limited
managerial, operational, and financial resources. We will be required to expand
our operational and financial systems significantly and to expand, train, and
manage our work force in order to manage the expansion of our operations. Our
failure to fully integrate our new employees into our operations could have
a
material adverse effect on our business, prospects, financial condition, and
results of operations. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition
for
these types of personnel from other technology companies and more established
organizations, many of which have significantly larger operations and greater
financial, technical, human, and other resources than we have. We may not be
successful in attracting and retaining qualified personnel on a timely basis,
on
competitive terms, or at all. If we are not successful in attracting and
retaining these personnel, our business, prospects, financial condition, and
results of operations will be materially adversely affected. See “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations”,
“Business
– Strategy”,
and
“Business—Employees”.
We
depend upon our senior management and skilled personnel and their loss or
unavailability
could put us at a competitive disadvantage.
We
currently depend upon the efforts and abilities of our senior executives, as
well as the services of several key consultants and other key personnel. The
loss or unavailability of the services of any of these individuals for any
significant period of time could have a material adverse effect on our business,
prospects, financial condition, and results of operations. In addition,
recruiting and retaining qualified scientific personnel to perform future
research and development work will be critical to our success. There is
currently a shortage of employees with expertise in our areas of research and
clinical and regulatory affairs, and this shortage is likely to continue.
Competition for skilled personnel is intense and turnover rates are high. Our
ability to attract and retain qualified personnel may be limited. Our inability
to attract and retain qualified skilled personnel would have a material adverse
effect on our business, prospects, financial condition, and results of
operations.
Fulfilling
our obligations incident to being a public company will be expensive and time
consuming.
As
a
public company, the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC, requires us to implement additional corporate governance
practices and adhere to a variety of reporting requirements and complex
accounting rules. Compliance with these public company obligations increases
our
legal and financial compliance costs and place significant additional demands
on
our finance and accounting staff and on our financial, accounting and
information systems.
Our
management is required to conduct an annual evaluation of our internal controls
over financial reporting and include a report of management on our internal
controls in this and future annual reports. In addition, we will be required
to
have our independent public accounting firm attest to and report on management’s
assessment of the effectiveness of our internal controls over financial
reporting. Under current rules, we will be subject to this requirement beginning
with our annual report on Form 10-K for our fiscal year ending August 31,
2009. If we are unable to conclude that we have effective internal controls
over
financial reporting or, if our independent auditors are unable to provide us
with an attestation and an unqualified report as to the effectiveness of our
internal controls over financial reporting, investors could lose confidence
in
the reliability of our financial statements, which could result in a decrease
in
the value of our common stock.
We
became a publicly traded company through the acquisition of a public shell
company, and we could be liable for unanticipated claims or liabilities as
a
result thereof.
The
Company was originally incorporated on April 12, 2002 as an exploration stage
company engaged in the acquisition and exploration of mineral properties. The
Company was unsuccessful in implementing its business plan as a mineral
exploration company and became a public shell company. On May 27, 2004, the
Company executed a share exchange with the shareholders of Integrated Security
Technologies, Inc., a New Jersey private corporation (“ISTI”). However, due to
disappointing results, on May 31, 2005, effective as of May 27, 2004 the Company
terminated the share exchange agreement with the shareholders of ISTI, and
the
Company again became a public shell company. The Company remained a public
shell
company until March 8, 2006, when we became a pharmaceutical company engaged
in
the development of innovative pharmacological solutions.
We
face
substantial risks associated with being a former public shell company, including
absence of accurate or adequate public information concerning the public shell
company; undisclosed liabilities; improper accounting; claims or litigation
from
former officers, directors, employees or stockholders; contractual obligations;
and regulatory requirements. Although management performed due diligence on
the
Company, there can be no assurance that such risks do not occur. The occurrence
of any such risk could materially adversely affect the Company's financial
condition.
Risks
Related to our Industry
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological
developments and a high degree of competition. We may be unable to
compete
with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. As
a
result, our actual or proposed products could become obsolete before we recoup
any portion of our related research and development and commercialization
expenses. These industries are highly competitive, and this competition comes
both from biotechnology firms and from major pharmaceutical and chemical
companies. Many of these companies have substantially greater financial,
marketing, and human resources than we do (including, in some cases,
substantially greater experience in clinical testing, manufacturing, and
marketing of pharmaceutical products). We also experience competition in the
development of our products from universities and other research institutions
and compete with others in acquiring technology from such universities and
institutions. In addition, certain of our products may be subject to competition
from products developed using other technologies. See “Business
– Competition”.
The
industry in which we operate is highly competitive.
Numerous
well-known companies, which have substantially greater capital, research and
development capabilities and experience than we have, are presently engaged
in
the research and development efforts with respect to our target indications.
By
virtue of having or introducing competitive products on the market before us,
these entities may gain a competitive advantage. Further future technological
developments may render some or all of our current or future products
noncompetitive or obsolete, and we may not be able to make the enhancements
to
our products necessary to compete successfully with newly emerging technologies.
If we are unable to successfully compete in our chosen markets, our business
prospects, financial condition, and results of operations would be materially
adversely affected. See “Business
— Competition”.
The
government regulatory approval process is time consuming and
expensive.
To
date,
we have not submitted a marketing application for any product candidate to
the
FDA or any foreign regulatory agency, and none of our product candidates have
been approved for commercialization in any country. Prior to commercialization,
each product candidate will be subject to an extensive and lengthy governmental
regulatory approval process in the United States and in other countries. We
may
not be able to obtain regulatory approval for any product candidate we develop
or, even if approval is obtained, the labeling for such products may place
restrictions on their use that could materially impact the marketability and
profitability of the product subject to such restrictions. We have limited
experience in designing, conducting and managing the clinical testing necessary
to obtain such regulatory approval. Satisfaction of these regulatory
requirements, which includes satisfying the FDA and foreign regulatory
authorities that the product is both safe and effective for its intended
therapeutic uses, typically takes several years depending upon the type,
complexity and novelty of the product and requires the expenditure of
substantial resources.
Any
manufacturer to produce our products will be required to comply with
extensive
government regulation.
Before
we
can begin to commercially manufacture any of our product candidates, we must
either secure manufacturing in an approved manufacturing facility or obtain
regulatory approval of our own manufacturing facility and processes. In
addition, the manufacturing of our product candidates must comply with cGMP
and/or other requirements of the FDA and requirements by regulatory agencies
in
other countries. These requirements govern, among other things, quality control
and documentation procedures. We or any third-party manufacturer of our product
candidates, may not be able to comply with these requirements, which would
prevent us from selling such products. Material changes to the manufacturing
processes of our products after approvals have been granted are also subject
to
review and approval by the FDA or other regulatory agencies.
The
commercial success of any newly-introduced pharmaceutical product depends
in
part upon the ability of patients to obtain adequate reimbursement.
If
we
succeed in bringing our product candidates to market, they may not be considered
cost-effective, and coverage and adequate payments may not be available or
may
not be sufficient to allow us to sell our products on a competitive basis.
In
both the United States and elsewhere, sales of medical products, diagnostics,
and therapeutics are dependent, in part, on the availability of reimbursement
from third party payors, such as health maintenance organizations and other
private insurance plans and governmental programs such as Medicare. Third party
payors are increasingly challenging the prices charged for pharmaceutical
products and services. We anticipate that our business will be affected by
the
efforts of government and third party payors to contain or reduce the cost
of
health care through various means. In the United States, there have been and
will continue to be a number of federal and state proposals to implement
government controls on pricing. Similar government pricing controls exist in
varying degrees in other countries. In addition, the emphasis on managed care
in
the United States has increased and will continue to increase the pressure
on
the pricing of pharmaceutical products. We cannot predict whether any
legislative or regulatory proposals will be adopted or the effect these
proposals or managed care efforts may have on our business.
Risks
Related to our Common Stock
As
the market price of our common stock may fluctuate significantly, this may
make
it difficult for you to sell your shares of common stock when you want or at
prices you find attractive.
The
price
of our common stock is quoted on the OTCBB and constantly changes. In recent
years, the stock market in general has experienced extreme price and volume
fluctuations. We expect that the market price of our common stock will continue
to fluctuate. These fluctuations may result from a variety of factors, many
of
which are beyond our control. These factors include:
· quarterly
variations in our operating results;
· operating
results that vary from the expectations of management, securities analysts
and
investors;
· changes
in expectations as to our business, prospects, financial condition, and results
of operations;
· announcements
by us, our partners or our competitors regarding material
developments;
· the
operating and securities price performance of other companies that investors
believe are comparable to us;
· future
sales of our equity or equity-related securities;
· changes
in general conditions in our industry and in the economy, the financial markets
and the domestic or international political situation;
· departures
of key personnel; and
· regulatory
considerations.
As
a
result of these fluctuations, you may experience difficulty selling shares
of
our common stock when desired or at acceptable prices.
Future
sales of common stock or the issuance of securities senior to our common stock
or convertible into, or exchangeable or exercisable for, our common stock could
materially adversely affect the trading price of our common stock, and our
ability to raise funds in new equity offerings.
Future
sales of substantial amounts of our common stock or other equity-related
securities in the public market or privately, or the perception that such sales
could occur, could adversely affect prevailing trading prices of our common
stock and could impair our ability to raise capital through future offerings
of
equity or other equity-related securities. We can make no prediction as to
the
effect, if any, that future sales of shares of our common stock or
equity-related securities, or the availability of shares of common stock for
future sale, will have on the trading price of our common stock.
Our
common stock is deemed to be a "penny stock," which may make it more difficult
for investors to sell their shares due to suitability
requirements.
The
SEC
has adopted regulations that generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share, subject to
specific exemptions. The market price of our common stock is currently less
than $5.00 per share and therefore is a “penny stock” according to SEC rules.
This designation requires any broker or dealer selling these securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser, furnish the customer a document describing the
risks of investing in penny stocks and send monthly account statements showing
the market value of each penny stock held in the customer’s account. These rules
may restrict the ability of brokers or dealers to sell our common stock and
may
affect the ability of investors hereunder to sell their shares.
You
should be aware that, according to the SEC, the market for penny stocks has
suffered in recent years from patterns of fraud and abuse. Such patterns
include:
· Control
of the market for the security by one or a few broker-dealers;
· “Boiler
room” practices involving high-pressure sales tactics;
· Manipulation
of prices through prearranged matching of purchases and sales;
· The
release of misleading information;
· Excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers;
and
· Dumping
of securities by broker-dealers after prices have been manipulated to a desired
level, which hurts the price of the stock and causes investors to suffer
loss.
We
are
aware of the abuses that have occurred in the penny stock market. Although
we do
not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, we will strive within the confines
of practical limitations to prevent such abuses with respect to our common
stock.
Future
sales of our common stock by our existing stockholders could adversely
affect
our stock price.
The
market price of our common stock could decline as a result of sales of a large
number of shares of our common stock in the market, or the perception that
these
sales could occur. These sales also might make it more difficult for us to
sell
equity securities in the future at a time and at a price that we deem
appropriate. Currently, we have outstanding 56,456,710 shares of common stock.
Of these shares, 21,132,995 shares, are freely tradable. Giving effect to the
exercise in full of all of our outstanding warrants and options, we would have
outstanding 73,952,407 shares of common stock.
Our
issuance of warrants and options to investors, employees and consultants and
the
registration rights for the underlying shares of common stock may have a
negative
effect on the trading prices of our common stock as well as a dilutive effect.
We
have
issued and may continue to issue warrants, options and convertible
notes at, above or below the current market price. As of August 31, 2008,
we had outstanding 16,611,697 warrants and options (12,033,677 for the year
ended August 31, 2007). In addition to the dilutive effect of a large number
of
shares and a low exercise price for the warrants and options, there is a
potential that a large number of underlying shares may be sold in the open
market at any given time, which could place downward pressure on the trading
of
our common stock.
Because
we will not pay cash dividends, investors may have to sell shares in order
to
realize
their investment.
We
have
not paid any cash dividends on our common stock and do not intend to pay cash
dividends in the foreseeable future. We intend to retain future earnings, if
any, for reinvestment in the development and expansion of our business. Any
credit agreements which we may enter into with institutional lenders or
otherwise may restrict our ability to pay dividends. Whether we pay cash
dividends in the future will be at the discretion of our board of directors
and
will be dependent upon our financial condition, results of operations, capital
requirements, and any other factors that the board of directors decides is
relevant. See “Dividend
Policy”
and
“Description
of Securities — Common Stock”.
As
we have a limited operating history, investors may not have a sufficient history
on
which to base an investment decision.
Although
we were incorporated in 2002, we commenced our research activities during
2006 and
are
still in the development stage. Accordingly, we have a limited operating history
upon which investors may evaluate our prospects for success. Investors must
consider the risks and difficulties frequently encountered by early stage
companies, particularly in rapidly evolving markets such as the life science
industry. Such risks include, without limitation, the following:
|
· |
need
for acceptance of products;
|
|
·
|
ability
to anticipate and adapt to a competitive market and rapid technological
developments;
|
|
·
|
amount
and timing of operating costs and capital expenditures relating to
expansion of our business, operations, and infrastructure;
and
|
|
· |
dependence
upon key personnel.
|
We
cannot
be certain our strategy will be successful or that we will successfully address
these risks. In the event that we do not successfully address these risks,
our
business, prospects, financial condition, and results of operations could be
materially and adversely affected. Information regarding all of our past
operations can be found in our reports and registration statements that have
been previously filed with the Securities and Exchange Commission.
Risks
Related to conducting Business in Israel
We
are affected by the political, economic, and military risks of locating our
principal
operations in Israel.
Our
operations are located in the State of Israel, and we are directly affected
by
political, economic, and military conditions in that country. Since December
1987, the State of Israel has experienced severe civil unrest primarily in
the
areas that have been under its control since 1967. No prediction can be made
as
to whether these problems will be resolved. Our business, prospects, financial
condition, and results of operations could be materially adversely affected
if
major hostilities involving Israel should occur or if trade between Israel
and
its current trading partners is interrupted or curtailed.
All
adult
male permanent residents of Israel under the age of 51, unless exempt, may
be
required to perform between 14 and 40 days of military reserve duty annually.
Additionally, all such residents are subject to being called to active duty
at
any time under emergency circumstances. Some of our officers, directors, and
employees currently are obligated to perform annual military reserve duty.
We
can provide no assurance that such requirements will not have a material adverse
effect on our business, prospects, financial condition, and results of
operations in the future, particularly if emergency circumstances
occur.
Because
all of our officers and directors are located in non-U.S. jurisdictions, you
may
have no effective recourse against the management for misconduct and may not
be
able to enforce judgment and civil liabilities against our officers, directors,
experts and agents.
All
of
our directors and officers are nationals and/or residents of countries other
than the United States, and all or a substantial portion of their assets are
located outside the United States. As a result, it may be difficult for
investors to enforce within the United States any judgments obtained against
any
of our officers or directors, including judgments predicated upon the civil
liability provisions of the securities laws of the United States or any U.S.
state.
ITEM
2 - PROPERTIES
Our
principal executive offices are located in approximately 117 square meters
of
office space in Givat Ram, Jerusalem, Israel. The lease commenced on October
1,
2007 and is for a period of 51 months. The aggregate annual base rental for
this
space is $8,004. We believe that our existing facilities are suitable and
adequate to meet our current business requirements. In the event that we should
require additional or alternative facilities, we believe that such facilities
can be obtained on short notice at competitive rates.
ITEM
3 - LEGAL PROCEEDINGS
From
time
to time we may become subject to litigation incidental to our business. We
are
not currently a party to any material legal proceedings.
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART
II
ITEM
5 - MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
Market
Price for our Common Stock
Our
common stock is quoted on the OTC Bulletin Board (the “OTCBB”)
under
the symbol “ORMP.OB”. The quarterly high and low reported bid prices for our
common stock as quoted on the OTCBB for the periods indicated are as follows:
|
|
High
|
|
Low
|
|
Year
Ended August 31, 2007
|
|
|
|
|
|
|
|
Three
Months Ended November 30, 2006
|
|
$
|
1.12
|
|
$
|
0.60
|
|
Three
Months Ended February 28, 2007
|
|
$
|
1.16
|
|
$
|
0.55
|
|
Three
Months Ended May 31, 2007
|
|
$
|
0.91
|
|
$
|
0.56
|
|
Three
Months Ended August 31, 2007
|
|
$
|
0.70
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2008
|
|
|
|
|
|
|
|
Three
Months Ended November, 2007
|
|
$
|
0.48
|
|
$
|
0.23
|
|
Three
Months Ended February, 2008
|
|
$
|
0.67
|
|
$
|
0.21
|
|
Three
Months Ended May 31, 2008
|
|
$
|
0.66
|
|
$
|
0.45
|
|
Three
Months Ended August 31, 2008
|
|
$
|
1.00
|
|
$
|
0.60
|
|
The
foregoing quotations were provided by Yahoo finance and the quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not
represent actual transactions.
The
last
reported bid price per share of common stock as quoted on the OTCBB was $0.45
on
November 24, 2008. As of such date, we had 56,456,710 shares of common stock
outstanding. Based on information available from our registrar and transfer
agent, we estimate that we had approximately 61 stockholders of record on
November 24, 2008.
Dividend
Policy
We
have
never paid any cash dividends on our capital stock and do not anticipate paying
any cash dividends on our common stock in the foreseeable future. We intend
to
retain future earnings to fund ongoing operations and future capital
requirements of our business. Any future determination to pay cash dividends
will be at the discretion of our board and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors
as
our board deems relevant.
Recent
Sales of Unregistered Securities
On
October 17, 2008, the Company issued 203,904 shares of its common stock to
Swiss
Cap AG as remuneration for the services provided in the amount of $152,928.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
We
did
not purchase any of our shares of common stock or other securities during the
year ended
August 31, 2008.
Securities
Authorized for Issuance under Equity Compensation Plans
2006
Stock Option Plan
On
October 15, 2006, the Company’s board of directors adopted the 2006 Stock Option
Plan (the “2006 Plan”) in order to attract and retain quality personnel. Under
the 2006 Plan, 3,000,000 shares have been reserved for the grant of options
by
the board. As of August 31, 2008, options with respect to 2,950,000 shares
have
been granted under the 2006 Stock Option Plan.
2008
Stock Incentive Plan
On
May 5,
2008, the Company’s board of directors adopted the 2008 Stock Incentive Plan
(the “2008 Plan”) in order to attract and retain quality personnel. Under the
2008 Stock Option Plan, 8,000,000 shares have been reserved for the grant of
options, which may be issued at the discretion of our board of directors from
time to time. As of August 31, 2008, options exercisable for an aggregate of
1,878,000 shares have been granted.
On
August
14, 2007 the Company granted options to purchase up to 3,361,360 shares at
an
exercise price of $0.001 for five years to Miriam Kidron. These options are
not
governed by any of the plans detailed above.
The
following table sets forth information with respect to the 2006 Plan and the
2008 Plan as of August 31, 2008:
PLAN CATEGORY
|
|
NUMBER OF
SECURITIES TO BE
ISSUED UPON
EXERCISE OF
OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS
|
|
WEIGHT-AVERAGE
EXERCISE PRICE OF
OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS
|
|
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION PLANS
(EXCLUDING SECURITIES
REFLECTED IN COLUMN (A))
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
|
|
|
|
|
|
|
|
EQUITY
COMPENSATION PLANS APPROVED BY SECURITY HOLDERS
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS
|
|
|
8,189,360
|
|
$
|
0.33
|
|
|
2,810,640
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
8,189,360
|
|
$
|
0.33
|
|
|
2,810,640
|
|
ITEM
6 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATION
Overview
We
are a
pharmaceutical company engaged in the research and development of innovative
pharmaceutical solutions, including an orally ingestible insulin pill to be
used
for the treatment of individuals with diabetes, rectal application of insulin,
flu vaccines, use of oral ingestible pills for delivery other polypeptides
and
use of rectal application for delivery of other polypeptides.
Oramed
was incorporated on April 12, 2002, in the State of Nevada under the name
“Iguana Ventures Ltd” as an exploration stage company engaged in the acquisition
and exploration of mineral properties. The Company was unsuccessful in
implementing its business plan as a mineral exploration company. Accordingly,
the Company decided to change the focus of its business by completing a share
exchange with the shareholders of Integrated Security Technologies, Inc., a
New
Jersey private corporation (“ISTI”) and changed its name to Integrated Security
Technologies. Effective June 14, 2004 the Company effected a 3.3:1 forward
stock
split, increasing the amount of authorized capital to 200,000,000 shares of
common stock with the par value of $.001 per share. However, due to
disappointing results, on May 31, 2005, effective as of May 27, 2004 the Company
terminated the share exchange agreement with the shareholders of
ISTI.
On
March
8, 2006, the Company executed an agreement with Hadasit Medical
Services and Development Ltd. to
acquire provisional patent application No. 60/718716
and
related intellectual property. The provisional patent application No.
60/718716 relates to a
method
of preparing insulin so that it may be taken orally to be used in the treatment
for the treatment of individuals with diabetes. Effective
April 10, 2006, the Company changed its name from “Integrated Security
Technologies, Inc.” to “Oramed Pharmaceuticals Inc.”. Based on provisional
patent application No. 60/718716, the Company filed a patent application under
the Patent Cooperation Treaty at the Israel Patent Office for “Methods and
Compositions for Oral Administration of Proteins” on August 31, 2006.
Plan
of Operation
Short
Term Business Strategy
We
plan
to conduct further research and development on the technology covered by the
patent application "Methods and Composition for Oral Administration of
Proteins", which we acquired from Hadasit Medical Services and Development
Ltd.,
as well as the other patents we have filed since. Through our research and
development efforts, we are seeking to develop an oral dosage form that will
withstand the harsh chemical environment of the stomach or intestines and will
be effective in delivering active insulin for the treatment of diabetes. The
enzymes and vehicles that are added to the insulin in the formulation process
must not modify chemically or biologically the insulin and the dosage form
must
be safe to ingest. We plan to continue to conduct clinical trials to show the
effectiveness of our technology. We intend to conduct the clinical trials
necessary to file an Investigational New Drug Application (“IND”) with the U.S.
Food and Drug Administration (“FDA”). Additional clinical trials are planned in
other countries such as Israel, India and South Africa, in order to substantiate
our results as well as for purposes of making future filings for drug approval
in these countries. We also plan to conduct further research and development
by
deploying our proprietary drug delivery technology for the delivery of other
polypeptides in addition to insulin, and to develop other innovative
pharmaceutical products, including an insulin suppository and use of rectal
application for delivery of other polypeptides.
Orally
Ingestible Insulin:
During
fiscal year 2007 we conducted several clinical studies of our orally ingestible
insulin. The studies were intended to assess both the safety/tolerability and
absorption properties of our proprietary oral insulin. Based on the
pharmacokinetic and pharmacologic outcomes of these trials, we decided to
continue the development of our oral insulin product.
On
November 15, 2007, we successfully completed animal studies in preparation
for
the Phase 1B clinical trial of our oral insulin capsule (ORMD 0801). On January
22, 2008 we commenced the non FDA approved Phase 1B clinical trials with our
oral insulin capsule, in healthy human volunteers with the intent of dose
optimization. On March 11, 2008, we successfully completed our Phase 1B clinical
trials.
On
April
13, 2008, we commenced a non FDA approved Phase 2A study to evaluate the safety
and efficacy of our oral insulin capsule (ORMD 0801) in Type II diabetic
volunteers at Hadassah Medical Center in Jerusalem. On August 6, 2008, we
announced the successful results of this trial.
On
April
21, 2008, we entered into a service agreement with Encorium Group, Inc.
(“Encorium”) pursuant to which Encorium will provide services for the purpose of
filing an IND for a Phase 2 study as required by the FDA. The FDA approval
process and, if approved, registration for commercial use as an oral drug can
take several years.
During
July 2008 we were granted approval by the Institutional Review Board Committee
of Hadassah Medical Center in Jerusalem to conduct a non FDA approved Phase
2A
study to evaluate the safety and efficacy of our oral insulin capsule (ORMD
0801) on Type I diabetic volunteers. On September 24, 2008, we announced the
beginning of this trail.
We
plan
on conducing two additional non FDA approved Phase 2B study to evaluate the
safety and efficacy of our oral insulin capsule (ORMD 0801) on Type II diabetic
volunteers, in South Africa and India. The trials are scheduled to commence
by
the end of 2008 or the beginning of 2009.
Rectal
Application of Insulin and Other Polypeptides:
We
filed
two additional provisional patents for a suppository application to our
technology portfolio. The first patent focuses on a rectal application for
insulin. The second patent focuses on the usage of this rectal application
to
other polypeptides that at present are only available in injection.
On
January 30, 2008, we entered into a master service agreement with OnQ
Consulting; a clinical research organization located in Johannesburg, South
Africa, to conduct non FDA approved clinical trials for the rectal application
of insulin. The trials are expected to begin during the coming
months.
On
October 23, 2008 we commenced a non FDA approved Phase 1A study to evaluate
the
safety and efficacy of our insulin suppository (ORMD 0802) on healthy
volunteers, in South Africa.
GLP1
Analog:
On
September 16, 2008 we announced the launch of pre-clinical trials of ORMD 0901,
a GLP1-analog, the pre-clinical trials includes a dog trial which suggests
that the GLP-1analog exenatide -4 when combined with Oramed’s absorption
promoters is absorbed through the gastrointestinal tract and retains its
biological activity.
Glucagon-like
peptide-1 (GLP-1) is an incretin hormone - a type of gastrointestinal hormone
that stimulates the secretion of insulin from the pancreas. The incretin concept
was hypothesized when it was noted surprisingly that glucose ingested by mouth
(oral) stimulated two to three times more insulin release than the same amount
of glucose administered intravenously. GLP-1 was found in addition to stimulates
insulin release, to suppress glucagon release (hormone involved in regulation
of
glucose) from the pancreas, it slows gastric emptying to reduce the rate of
absorption of nutrients into the blood stream, and it increases satiety. Other
important beneficial attributes of GLP-1 are its effects of increasing the
number of beta cells (cells that manufacture and release insulin) in the
pancreas and possibly to be hormone that protects the heart.
We
have
recently engaged in preliminary discussions with potential partners outside
of
the United States regarding their management of clinical trials of our oral
insulin capsules. Such agreements could involve us granting exclusive
commercialization rights and profit interests in our products derived from
certain geographic areas outside the United States in exchange for payment
of
the costs of running such clinical trials now. These discussions are in a very
early stage, however, and may not result in our being able to enter into any
such partnerships.
Long
Term Business Strategy
If
our
oral insulin capsule or other drug delivery solutions show significant promise
in clinical trials, we plan to ultimately seek a strategic commercial partner,
or partners, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs.
We
anticipate such partner or partners would be responsible for, or substantially
support, late stage clinical trials (Phase III) to ensure regulatory approvals
and registrations in the appropriate markets in a timely manner. We further
anticipate that such partner, or partners, would also be responsible for sales
and marketing of our oral insulin capsule in these markets. Such planned
strategic partnership, or partnerships, may provide a marketing and sales
infrastructure for our products as well as financial and operational support
for
global clinical trials, post marketing studies, label expansions and other
regulatory requirements concerning future clinical development in the United
States and elsewhere. Any future strategic partner, or partners, may also
provide capital and expertise that would enable the partnership to develop
new
oral dosage form for other polypeptides. Under certain circumstances, we may
determine to develop one or more of our oral dosage form on our own, either
world-wide or in select territories.
Other
Planned Strategic Activities
In
addition to developing our own oral dosage form drug portfolio, we are, on
an
on-going basis, considering in-licensing and other means of obtaining additional
technologies to complement and/or expand our current product portfolio. Our
goal
is to create a well-balanced product portfolio that will enhance and compliment
our existing drug portfolio.
Results
of Operations
Going
concern assumption
The
accompanying financial statements have been prepared assuming that we will
continue as a going concern. We have net losses for the period from inception
(April 12, 2002) through August 31, 2008 of $7,248,204, as well as negative
cash
flow from operating activities. Based upon our existing spending commitments,
estimated at $5,000,000 for the twelve months following September 1, 2008,
and
our cash availability, we do not have sufficient cash resources to meet our
liquidity requirements through August 31, 2009. Accordingly, these factors
raise
substantial doubt about our ability to continue as a going concern. Management
is in the process of evaluating various financing alternatives as we will need
to finance future research and development activities and general and
administrative expenses through fund raising in the public or private equity
markets. Although there is no assurance that we will be successful with those
initiatives, management believes
that it will be able to secure the
necessary financing as a result of ongoing financing discussions with third
party investors and existing shareholders.
The
financial statements do not include any adjustments that may be necessary should
we be unable to continue as a going concern. Our continuation as a going concern
is dependent on our ability to obtain additional financing as may be required
and ultimately to attain profitability.
Critical
accounting policies
Valuation
of options and warrants:
We
granted options to purchase shares of our common stock to employees and
consultants and issued warrants in connection with fund raising.
Effective
March 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-based
Payment”
(“FAS
123(R)”).
FAS
123(R) requires awards classified as equity awards be accounted for using
the
grant-date fair value method. The fair value of share-based payment transactions
is recognized as expense over the requisite service period, net of estimated
forfeitures. The Company estimated forfeitures based on historical experience
and anticipated future conditions.
In
March
2005, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 107 (“SAB
107”).
SAB
107 provides supplemental implementation guidance on FAS 123(R), including
guidance on valuation methods, inventory capitalization of share-based
compensation cost, income statement effects, disclosures and other issues.
SAB
107 requires share-based payment to be classified in the same expense line
items
as cash compensation. The
Company has applied the provisions of SAB 107 in its adoption of FAS
123(R).
The
Company elected to recognize compensation cost for an award with only service
conditions that has a graded vesting schedule using the accelerated method
based
on multiple option award approach.
The
Company elected to adopt the modified prospective application transition
method,
as permitted by FAS 123(R). Under such transition method, upon the adoption
of
FAS 123(R), the Company’s financial statements for periods prior to the
effective date of the Statement are not restated.
In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (“SAB 110”) relating to the use of a “simplified” method
in developing an estimate of the expected term of “plain vanilla” share options.
SAB 107 previously allowed the use of the simplified method until
December 31, 2007. SAB 110 allows, under certain circumstances, to continue
to accept the use of the simplified method beyond December 31, 2007. The
Company has applied the provisions of SAB 110 in its financial
statement.
The
Company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value based on an option-pricing
model or when more reliability is based on the fair value of the services
received, pursuant to the guidance in EITF 96-18 “Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or
in Conjunction with Selling Goods or Services”.
The
fair value of the options granted is revalued over the related service periods
and recognized using the accelerated method.
Taxes
on income:
Deferred taxes are determined utilizing the asset and liability method based
on
the estimated future tax effects of differences between the financial accounting
and tax bases of assets and liabilities under the applicable tax laws. Deferred
tax balances are computed using the tax rates expected to be in effect when
those differences reverse. A valuation allowance in respect of deferred tax
assets is provided if, based upon the weight of available evidence, it is
more
likely than not that some or all of the deferred tax assets will not be
realized. The Company has provided a full valuation allowance with respect
to
its deferred tax assets.
Regarding
the Subsidiary, paragraph 9(f) of FAS 109, “Accounting
for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise
from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates
or
indexing for tax purposes. Consequently, the abovementioned differences were
not
reflected in the computation of deferred tax assets and
liabilities.
As
of
September 1, 2007, the Company adopted FASB Interpretation No. 48, ‘‘Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
109’’
(‘‘FIN 48’’). FIN 48 specifies how tax benefits for uncertain tax positions are
to be recognized, measured and derecognized in financial statements; requires
certain disclosures of uncertain tax positions; specifies how reserves for
uncertain tax positions should be classified on the balance sheet; and provides
transition and interim-period guidance, among other provisions. On May 2,
2007,
the FASB issued FASB Staff Position No. FIN 48-1, ‘‘Definition of Settlement in
FASB Interpretation No. 48-1’’ (‘‘FSP FIN 48-1’’). FSP FIN 48-1 provides
guidance regarding how an entity should determine whether a tax position
is
effectively settled for the purpose of recognizing previously unrecognized
tax
benefits.
Research
and development expenses:
Research and development expenses include costs directly attributable to
the
conduct of research and development programs, including the cost of salaries,
payroll taxes, employee benefits, costs of registered patents materials,
supplies, the cost of services provided by outside contractors, including
services related to the Company’s clinical trials, clinical trial expenses, the
full cost of manufacturing drug for use in research, preclinical development.
All costs associated with research and development are expensed as
incurred.
Clinical
trial costs are a significant component of research and development expenses
and
include costs associated with third-party contractors. The Company out
sources a
substantial portion of its clinical trial activities, utilizing external
entities such as contract research organizations, independent clinical
investigators, and other third-party service providers to assist the
Company
with the execution of its clinical studies. For each clinical trial that
the
Company conducts, certain clinical trial costs are expensed immediately,
while
others are expensed over time based on the expected total number of patients
in
the trial, the rate at which patients enter the trial, and the period
over which
clinical investigators or contract research organizations are expected
to
provide services.
Clinical
activities which relate principally to clinical sites and other administrative
functions to manage the Company’s clinical trials are performed primarily by
contract research organizations (“CROs”). CROs typically perform most of the
start-up activities for the Company’s trials, including document preparation,
site identification, screening and preparation, pre-study visits, training,
and
program management.
The
following table summarizes certain statements of operations data for the
Company
for the nine months period ended May 31, 2008 and 2007:
|
|
Year ended
|
|
|
|
|
|
Operating Data:
|
|
August 31, 2008
|
|
August 31, 2007
|
|
|
|
|
|
|
|
Research
and development costs
|
|
$
|
1,175,657
|
|
$
|
2,214,429
|
|
General
and administrative expenses
|
|
|
1,504,354
|
|
|
918,477
|
|
Financial
(income) expense, net
|
|
|
(72,904
|
)
|
|
103,103
|
|
Loss
before taxes on income
|
|
|
(2,607,107
|
)
|
|
(3,236,009
|
)
|
Taxes
on income
|
|
|
162,164
|
|
|
|
|
Net
loss for the period
|
|
|
(2,769,271
|
)
|
|
(3,236,009
|
)
|
|
|
|
|
|
|
|
|
Loss
per common share – basic and diluted
|
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
Weighted
average common shares outstanding
|
|
|
48,604,889
|
|
|
42,298,080
|
|
Research
and development costs
Research
and development expenses are the costs incurred in the process of our
pre-clinical and our clinical trials. Clinical trial and pre-clinical expenses
include regulatory and scientific consultants compensation and fees, research
expenses, purchase of materials, cost of manufacturing of the oral insulin
capsules, payments for patient recruitment and treatment, costs related to
the
maintenance of our registered patents, costs related to the filings of patent
applications as well as salaries and related expenses of research and
development staff.
During
the year ended August 31, 2008 research and development expenses totaled
$1,175,657, compared to $2,214,429 for the year ended August 31, 2007. The
increase is mainly attributable to increased clinical trials activities,
materials and patent related costs. The research and development costs include
stock based compensation costs, which during the year ended August 31, 2008
totaled $285,336 as compared to $1,666,466 during the year ended August 31,
2007.
General
and administrative expenses
General
and administrative expense includes the salaries and related expenses of our
management, consulting costs, legal and professional fees, traveling, business
development costs, insurance expenses and other general costs.
For
the
year ended August 31, 2008, general and administrative expenses totaled
$1,504,354 compared to $918,477 for the year ended August 31, 2007. Costs
incurred related to general and administrative activities during the year ended
August 31, 2008 reflect an increase of professional, legal and consulting
expenses and an increase in general expenses such as office and maintenance
expenses. During the year ended August 31, 2008, as part of our general and
administrative expenses, we incurred $378,113 related to stock options granted
to employees and consultants, as compared to $479,863 during the year ended
August 31, 2007.
Financial
income/expense, net
During
the year ended August 31, 2008 we generated interest income on available cash
and cash equivalents balance which were offset by bank charges. During the
year
ended August 31, 2007, we incurred imputed interest expenses on convertible
notes issued as well as bank charges.
Liquidity
and Capital Resources
Through
August 31, 2008, we incurred losses in an aggregate amount of $7,248,204. We
have financed our operations through the private placements of equity and debt
financing. Since inception through August 31, 2008, we raised a total of
$8,308,785, net of transaction costs, through private placements of equity
and
debt financing. We anticipate that we will obtain additional financing through
similar sources. As of August 31, 2008 we had $2,267,320
of
available cash as well as $2,728,000 in short term interest bearing investments.
The Company anticipates it will require approximately $5.0 million to finance
its activities during the twelve months following September 1, 2008.
Management
is in the process of evaluating various financing alternatives as we will need
to finance future research and development activities and general and
administrative expenses through fund raising in the public or private equity
markets. Although there is no assurance that we will be successful with those
initiatives, management believes that it will be able to secure the necessary
financing as a result of ongoing financing discussions with third party
investors and existing shareholders.
Our
recent financing activities include the following:
|
·
|
On
August 3, 2007, we completed a private placement for the sale of
510,000
units at a purchase price of $0.50 per unit for a total consideration
of
$255,000. Each
unit consisted of one share
of
common stock and one share purchase warrant. Each share purchase
warrant
entitles the holder to purchase one additional share of common stock for a
period of 3 years at an exercise price of
$0.75.
|
|
·
|
On
September 7, 2007, we issued 283,025 shares of common stock valued
at
$113,210 to a third party, for services rendered in the prior
year.
|
|
·
|
On
November 8, 2007, we issued 10,000 shares as a finder’s fee to a placement
agent valued at $2,900.
|
|
·
|
On
July 14, 2008 we
completed a private placement to twenty-nine accredited investors
pursuant to which we sold to the investors an aggregate
of
8,524,669
shares
of common stock at
a purchase price of $0.60 per share.
The investors also received three year warrants to purchase an aggregate
of 4,262,337
shares
of common stock at an exercise price of $0.90 per share. The Company
paid
$85,000 to a director as a finders fee and issued an aggregate of
143,333
shares of common stock to four other individuals as finders fees
in
connection with the private
placement.
|
|
·
|
On
October 17, 2008, Oramed issued 203,904 shares of common stock valued
at
$152,928 to a third party, for services rendered in the prior
year.
|
Employee's
and Consultant’s Stock Options and Warrants
Employee
and consultant stock options grants and warrant issuance activities for the
year
ending August 31, 2008 include the following:
|
·
|
On
September 4, 2007, we granted options to purchase up to 300,000 shares
of
our common stock at an exercise price of $0.45 to two
consultants.
|
|
·
|
On
October 30, 2007, we granted options to purchase up to 100,000 shares
of
our common stock at an exercise
price of $0.76 to Dr. John Ziemniak, a new member of our Scientific
Advisory Board.
|
|
·
|
On
April 27, 2008, the Board of Directors of the Company adopted the
Oramed
Pharmaceuticals Inc. 2008 Stock Incentive Plan (the “2008 Plan”). The
Board has reserved 8,000,000 shares of the Company’s common stock for
issuance, in the aggregate, under the
Plan.
|
|
·
|
On
May 7, 2008, we granted options under the 2008 Plan to purchase up
to
864,000 shares of our common
stock at an exercise price of $0.54 to each of Nadav Kidron and Miriam
Kidron.
|
|
·
|
On
July 17, 2008, we granted options under the 2008 Plan to purchase
up to
100,000 shares of our common stock at an exercise price of $0.62
to
Professor Avram Hershko a new member of our Scientific Advisory
Board.
|
|
·
|
On
August 4, 2008, we granted options under the 2008 Plan to purchase
up to
50,000 shares of our common stock at an exercise price of $0.9 to
an
outside consultant.
|
|
·
|
On
October 12, 2008 we granted options under the 2008 Plan to purchase
up to
828,000 shares of our common stock at an exercise price of $0.47
to Chaime
Orlev our Chief Financial Officer.
|
|
·
|
On
October 12, 2008 we granted options under the 2008 Plan to purchase
up to
56,000 shares of our common stock at an exercise price of $0.47 to
an
employee of our subsidiary.
|
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements.
Planned
Expenditures
The
estimated expenses referenced herein are in accordance with our business plan.
Since our technology is still in the development stage, it can be expected
that
there will be changes in some budgetary items. Our planned expenditures for
the
twelve months beginning September 1, 2008 are as follows:
Category
|
|
Amount
|
|
|
|
|
|
Research
& Development
|
|
$
|
3,562,000
|
|
General
& Administrative Expenses
|
|
|
1,424,000
|
|
Finance
income, net
|
|
|
(55,000
|
)
|
Taxes
on income
|
|
|
30,000
|
|
Total
|
|
$
|
4,961,000
|
|
As
previously indicated we are planning to conduct further clinical studies
as well
as file an IND with the FDA for our orally ingested insulin. Our ability
to
proceed with these activities is dependent on several major factors including
the ability to attract sufficient financing on terms acceptable to
us.
Employment
and Consulting Agreements
On
May 1,
2008 we entered into an employment agreement with Chaime Orlev (the “Employment
Agreement”), pursuant to which Mr. Orlev was appointed as Chief Financial
Officer (“CFO”), Treasurer and Secretary of Oramed. Mr. Orlev’s responsibilities
include oversight of Oramed’s financial reporting and controls. The Employment
Agreement provides that for the period through July 31, 2008 (the “First Term”),
Mr. Orlev will be employed to work on a part-time basis and will be compensated
a gross monthly amount of NIS 20,000. Beginning on September 1, 2008 and
continuing until the Employment Agreement is terminated by either party pursuant
to the Employment Agreement (the “Second Term”), Mr. Orlev will serve Oramed in
a full-time capacity and will be compensated a gross monthly amount of NIS
30,000. Mr. Orlev has also agreed that during the term of his employment with
Oramed and for a 12 month period thereafter, he will not compete with Oramed
nor
solicit employees of Oramed.
On
May 1,
2008 we entered into a consulting agreement with a Dr. Ehud Arbit (“Dr. Arbit”)
which agreement was amended and restated, effective May 1, 2008. The consulting
agreement provides for a consultancy period of twelve months, pursuant to which
Dr. Arbit will assist our efforts to complete the FDA approval process for
its
oral insulin capsule. Dr. Arbit is entitled to a fixed monthly fee of $8,333
effective from May 1, 2008, and reimbursement of pre-approved out of pocket
expenses. On October 3, 2008, we amended the consulting agreement with Dr.
Arbit. Pursuant to the amendment, Dr. Arbit will perform his work under the
contract on a full time basis and his compensation will be $16,666 per month,
effective as of July 1, 2008.
On
July
1, 2008, we entered into a consulting agreement with KNRY Ltd. (“KNRY”), an
Israeli company owned by Nadav Kidron, whereby Nadav Kidron, through KNRY,
will
provide services as President and Chief Executive Officer of the Company (the
“Nadav Kidron Consulting Agreement”). Additionally, on July 1, 2008, we entered
into a consulting agreement with KNRY whereby Dr. Miriam Kidron, through KNRY,
will provide services as Chief Medical and Technology Officer of both the
Company (the “Miriam Kidron Consulting Agreement” and together with the Nadav
Kidron Consulting Agreement, the “Consulting Agreements”).
The
Consulting Agreements are both terminable by either party upon 60 days prior
written notice. The Consulting Agreements provide that KNRY (i) will be paid,
under each of the Consulting Agreements, in New Israeli Shekels (“NIS”) a gross
amount of NIS50,400 + Value-Added-Tax per month and (ii) will be reimbursed
for
reasonable expenses incurred in connection with performance of the Consulting
Agreements.
ITEM
7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE
OF
CONTENTS
|
|
Page
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Kesselman & Kesselman
|
|
F-41
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Malone & Bailey, PC
|
|
F-42
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
|
Balance
sheets
|
|
F-43
|
Statements
of operations
|
|
F-44
|
Statements
of changes in stockholders’ equity
|
|
F-45
|
Statements
of cash flows
|
|
F-46
|
Notes
to financial statements
|
|
F-47-F-67
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Shareholders of
Oramed
Pharmaceuticals Inc.
(A
Development Stage Company)
We
have
audited the accompanying consolidated balance sheets of Oramed Pharmaceuticals
Inc. (A Development Stage Company) and its subsidiary (the “Company”)
as of
August 31, 2008, and the related consolidated statements of operations, changes
in stockholders’ equity and cash flows for the year then ended and cumulatively,
for the period from September 1, 2007 to August 31, 2008 (not separately
presented herein) . These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the cumulative totals
of the Company for the period from April 12, 2002 (date of incorporation) to
August 31, 2007, which totals reflect a deficit of $4,478,933 accumulated during
the development stage. Those cumulative totals were audited by other independent
auditors, whose report, dated December 10, 2007, expressed an unqualified
opinion on the cumulative amounts but included an emphasis of a matter. Our
opinion, insofar as it relates to amounts included for that period is based
on
the report of the other independent auditors.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, based upon our audits and the report of the other independent auditors,
the consolidated financial statements referred to above present fairly, in
all
material respects, the consolidated financial position of the Company as of
August 31, 2008, and the consolidated results of their operations and their
cash
flows for the year then ended and cumulatively, for the period from September
1,
2007 to August 31, 2008 (not separately presented herein), in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1a to the financial
statements, the Company has recurring losses for the period from inception
(April 12, 2002) through August 31, 2008 and presently the Company does not
have
sufficient cash resources to meet its requirements in the following twelve
months. These reasons raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are
also described in Note 1a. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Kesselman
& Kesselman
|
|
Tel
Aviv, Israel
|
November
26, 2008
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
Oramed
Pharmaceuticals, Inc.
(a
development stage company)
Jerusalem,
Israel
We
have
audited the accompanying consolidated balance sheet of Oramed Pharmaceuticals,
Inc. as of August 31, 2007, and the related consolidated statements of expenses,
changes in stockholders’ deficit, and cash flows for the year then ended and the
period from April 12, 2002 (Inception) through August 31, 2007. These financial
statements are the responsibility of Oramed’s management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
We
conducted our audits in accordance with standards of the Public Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Oramed, as
of
August 31, 2007, and the results of its consolidated operations and its cash
flows for the periods described in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that Oramed will
continue as a going concern. As discussed in Note 1 to the financial statements,
Oramed suffered recurring losses from operations which raises substantial doubt
about its ability to continue as a going concern. Management’s plans regarding
those matters are described in Note 1. The consolidated financial statements
do
not include any adjustments that might result from the outcome of this
uncertainty.
MALONE
& BAILEY, PC
www.malone-bailey.com
Houston,
Texas
December
10, 2007
ORAMED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars
|
|
August 31
|
|
|
|
2008
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
|
$
|
2,267,320
|
|
$
|
1,918,229
|
|
Short
term investments (note
2)
|
|
|
2,728,000
|
|
|
|
|
Prepaid
expenses
|
|
|
402,574
|
|
|
11,906
|
|
Total
current assets
|
|
|
5,397,894
|
|
|
1,930,135
|
|
|
|
|
|
|
|
|
|
LONG
TERM DEPOSITS (Note 7b)
|
|
|
10,824
|
|
|
5,444
|
|
PROPERTY
AND EQUIPMENT, NET (Note 4)
|
|
|
98,296
|
|
|
1,736
|
|
Total
assets
|
|
$
|
5,507,014
|
|
$
|
1,937,315
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses (note 10)
|
|
$
|
866,702
|
|
$
|
340,872
|
|
Account
payable with former shareholder
|
|
|
47,252
|
|
|
47,252
|
|
Convertible
notes payable (Note 5)
|
|
|
|
|
|
275,000
|
|
Receipts
on account of shares issuance (Note 6)
|
|
|
|
|
|
761,060
|
|
Total
current liabilities
|
|
|
913,954
|
|
|
1,424,184
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
(Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
Common
stock, $ 0.001 par value (200,000,000 authorized shares; 56,252,806
and
45,231,779 shares issued and outstanding as of August 31, 2008 and
2007,
respectively
|
|
|
56,252
|
|
|
45,231
|
|
Additional
paid-in capital
|
|
|
11,785,012
|
|
|
4,946,833
|
|
Deficit
accumulated during the development stage
|
|
|
(7,248,204
|
)
|
|
(4,478,933
|
)
|
Total
stockholders'
equity
|
|
|
4,593,060
|
|
|
513,131
|
|
Total
liabilities and stockholders’
equity
|
|
$
|
5,507,014
|
|
$
|
1,937,315
|
|
The
accompanying notes are an integral part of the financial
statements.
ORAMED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
U.S.
dollars
|
|
|
|
Period
|
|
|
|
|
|
from April
|
|
|
|
|
|
12, 2002
|
|
|
|
|
|
(inception)
|
|
|
|
Year ended
|
|
through
|
|
|
|
August 31
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
RESEARCH
AND DEVELOPMENT EXPENSES (Note 11)
|
|
$
|
1,175,657
|
|
$
|
2,214,429
|
|
$
|
3,587,834
|
|
IMPAIRMENT
OF INVESTMENT
|
|
|
|
|
|
|
|
|
434,876
|
|
GENERAL
AND ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
(note 12)
|
|
|
1,504,354
|
|
|
918,477
|
|
|
3,030,458
|
|
OPERATING
LOSS
|
|
|
2,680,011
|
|
|
3,132,906
|
|
|
7,053,168
|
|
INTEREST
INCOME
|
|
|
(83,185
|
)
|
|
(12,321
|
)
|
|
(97,506
|
)
|
INTEREST
EXPENSE
|
|
|
10,281
|
|
|
115,424
|
|
|
130,378
|
|
LOSS
BEFORE TAXES ON INCOME
|
|
|
2,607,107
|
|
|
3,236,009
|
|
|
7,086,040
|
|
TAXES
ON INCOME (note 13)
|
|
|
162,164
|
|
|
|
|
|
162,164
|
|
NET
LOSS FOR THE PERIOD
|
|
$
|
2,769,271
|
|
$
|
3,236,009
|
|
$
|
7,248,204
|
|
BASIC
AND DILUTED LOSS PER
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARE
|
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
STOCK
USED IN COMPUTING BASIC AND
|
|
|
|
|
|
|
|
|
|
|
DILUTED
LOSS PER COMMON STOCK
|
|
|
48,604,889
|
|
|
42,298,080
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements.
ORAMED
PHARMACEUTICALS INC.
(A
development stage company)
CONSOLIDTAED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
U.S.
dollars
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
Total
|
|
|
|
|
|
|
|
Additional
|
|
during the
|
|
stockholders'
|
|
|
|
Common Stock
|
|
paid-in
|
|
development
|
|
equity
|
|
|
|
Shares
|
|
$
|
|
capital
|
|
stage
|
|
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AS OF APRIL 12, 2002 (inception)
|
|
|
34,828,200
|
|
$
|
34,828
|
|
$
|
18,872
|
|
|
|
|
$
|
53,700
|
|
CHANGES
DURING THE PERIOD FROM APRIL 12, 2002
THROUGH AUGUST 31, 2006
(audited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
CANCELLED
|
|
|
(19,800,000
|
)
|
|
(19,800
|
)
|
|
19,800
|
|
|
|
|
|
-
|
|
SHARES
ISSUED FOR INVESTMENT IN ISTI-NJ
|
|
|
1,144,410
|
|
|
1,144
|
|
|
433,732
|
|
|
|
|
|
434,876
|
|
SHARES
ISSUED FOR OFFERING COSTS
|
|
|
1,752,941
|
|
|
1,753
|
|
|
(1,753
|
)
|
|
|
|
|
-
|
|
SHARES
ISSUED FOR CASH
|
|
|
2,3531,228
|
|
|
23,531
|
|
|
274,450
|
|
|
|
|
|
297,981
|
|
CONTRIBUTIONS
TO PAID IN CAPITAL
|
|
|
|
|
|
|
|
|
18,991
|
|
|
|
|
|
18,991
|
|
COMPREHENSIVE
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
(16
|
)
|
IMPUTED
INTEREST
|
|
|
|
|
|
|
|
|
4,657
|
|
|
|
|
|
4,657
|
|
NET
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
(1,242,908
|
)
|
|
(1,242,908
|
)
|
BALANCE
AS OF AUGUST 31, 2006
|
|
|
41,456,779
|
|
|
41,456
|
|
|
768,749
|
|
|
(1,242,924
|
)
|
|
(432,719
|
)
|
SHARES
AND WARRANTS ISSUED FOR CASH
|
|
|
3,650,000
|
|
|
3,650
|
|
|
1,821,350
|
|
|
|
|
|
1,825,000
|
|
SHARES
ISSUED FOR SERVICES
|
|
|
125,000
|
|
|
125
|
|
|
98,625
|
|
|
|
|
|
98,750
|
|
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
DIRECTORS
|
|
|
|
|
|
|
|
|
1,968,547
|
|
|
|
|
|
1,968,547
|
|
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO CONSULTANTS
|
|
|
|
|
|
|
|
|
177,782
|
|
|
|
|
|
177,782
|
|
DISCOUNT
ON CONVERTIBLE NOTE RELATED TO BENEFICIAL CONVERSION
FEATURE
|
|
|
|
|
|
|
|
|
108,000
|
|
|
|
|
|
108,000
|
|
IMPUTED
INTEREST
|
|
|
|
|
|
|
|
|
3,780
|
|
|
|
|
|
3,780
|
|
NET
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
(3,236,009
|
)
|
|
(3,236,009
|
)
|
BALANCE
AS OF AUGUST 31, 2007
|
|
|
45,231,779
|
|
|
45,231
|
|
|
4,946,833
|
|
|
(4,478,933
|
)
|
|
513,131
|
|
RECEIPTS
ON ACCOUNT OF SHARES
AND
WARRANTS
|
|
|
|
|
|
|
|
|
6,061
|
|
|
|
|
|
6,061
|
|
SHARES
ISSUED FOR CONVERSION OF CONVERTIBLE NOTE
|
|
|
550,000
|
|
|
550
|
|
|
274,450
|
|
|
|
|
|
275,000
|
|
SHARES
AND WARRANTS ISSUED FOR CASH – NET OF ISSUANCE
EXPENSES
|
|
|
10,178,002
|
|
|
10,178
|
|
|
5,774,622
|
|
|
|
|
|
5,784,800
|
|
SHARES
ISSUED FOR SERVICES
|
|
|
293,025
|
|
|
293
|
|
|
115,817
|
|
|
|
|
|
116,110
|
|
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
DIRECTORS
|
|
|
|
|
|
|
|
|
459,467
|
|
|
|
|
|
459,467
|
|
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
CONSULTANTS
|
|
|
|
|
|
|
|
|
203,982
|
|
|
|
|
|
203,982
|
|
IMPUTED
INTEREST
|
|
|
|
|
|
|
|
|
3,780
|
|
|
|
|
|
3,780
|
|
NET
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
(2,769,271
|
)
|
|
(2,769,271
|
)
|
BALANCE
AS OF AUGUST 31, 2008
|
|
|
56,252,806
|
|
$
|
56,252
|
|
$
|
11,785,012
|
|
$
|
(7,248,204
|
)
|
$
|
4,593,060
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
ORAMED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Period from April
12, 2002
(inception date)
through
|
|
|
|
Year ended August 31
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,769,271
|
)
|
$
|
(3,236,009
|
)
|
$
|
(7,248,204
|
)
|
Adjustments
required to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
15,454
|
|
|
|
|
|
15,454
|
|
Amortization
of debt discount
|
|
|
|
|
|
108,000
|
|
|
108,000
|
|
Exchange
differences on long term deposits
|
|
|
(1,642
|
)
|
|
|
|
|
(1,642
|
)
|
Stock
based compensation
|
|
|
663,449
|
|
|
2,146,329
|
|
|
2,809,778
|
|
Common
stock issued for services
|
|
|
116,110
|
|
|
98,750
|
|
|
214,860
|
|
Impairment
of investment
|
|
|
|
|
|
|
|
|
434,876
|
|
Imputed
interest
|
|
|
3,780
|
|
|
3,780
|
|
|
12,217
|
|
Changes
in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
|
(390,668
|
)
|
|
*(11,906
|
)
|
|
(402,574
|
)
|
Accounts
payable and accrued expenses
|
|
|
525,830
|
|
|
287,220
|
|
|
866,702
|
|
Total
net cash used in operating
activities
|
|
|
(1,836,958
|
)
|
|
(603,836
|
)
|
|
(3,190,533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(112,014
|
)
|
|
(1,736
|
)
|
|
(113,750
|
)
|
Short
term investments
|
|
|
(2,728,000
|
)
|
|
|
|
|
(2,728,000
|
)
|
Lease
deposits
|
|
|
(3,738
|
)
|
|
*(5,444
|
)
|
|
(9,182
|
)
|
Total
net cash used in investing
activities
|
|
|
(2,843,752
|
)
|
|
(7,180
|
)
|
|
(2,850,932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING
|
|
|
|
|
|
|
|
|
|
|
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sales of common stocks and warrants - net of issuance
expenses
|
|
|
5,029,801
|
|
|
1,823,056
|
|
|
7,961,481
|
|
Receipts
on account of shares issuances
|
|
|
|
|
|
255,000
|
|
|
6,061
|
|
Proceeds
from convertible notes
|
|
|
|
|
|
275,000
|
|
|
275,000
|
|
Proceeds
from short term note payable
|
|
|
|
|
|
20,000
|
|
|
120,000
|
|
Payments
of short term note payable
|
|
|
|
|
|
(20,000
|
)
|
|
(120,000
|
)
|
Shareholder
advances
|
|
|
|
|
|
|
|
|
66,243
|
|
Net
cash provided by financing
activities
|
|
|
5,029,801
|
|
|
2,353,056
|
|
|
8,308,785
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
|
|
349,091
|
|
|
1,742,040
|
|
|
2,267,320
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
1,918,229
|
|
|
176,189
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF
|
|
|
|
|
|
|
|
|
|
|
PERIOD
|
|
$
|
2,267,320
|
|
$
|
1,918,229
|
|
$
|
2,267,320
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
Receipts
on account of shares issuance - reclassified from liability to
shareholder's equity
|
|
|
6,061
|
|
|
|
|
|
|
|
Stock
issued for receipts on account of shares issuance and convertible
notes
|
|
$
|
1,030,000
|
|
$
|
1,944
|
|
|
|
|
Discount
on convertible note related to beneficial conversion
feature |
|
|
|
|
$
|
108,000 |
|
$ |
108,000 |
|
Shares
issued for offering costs |
|
|
|
|
|
|
|
$ |
1,753 |
|
Contribution
to paid in capital |
|
|
|
|
|
|
|
$ |
18,991 |
|
*
Reclassified
The
accompanying notes are an integral part of the financial
statements.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES:
Oramed
Pharmaceuticals, Inc. (a development stage company) (the “Company”) was
incorporated on April 12, 2002, under the laws of the State of Nevada. From
incorporation until March 3, 2006, the Company was an exploration stage company
engaged in the acquisition and exploration of mineral properties. On February
17, 2006, the Company entered into an agreement with Hadasit Medical Services
and Development Ltd. to acquire the provisional patent related to orally
ingestible insulin pill to be used for the treatment of individuals with
diabetes. The Company has been in the development stage since its formation
and
has not yet realized any revenues from its planned operations.
On
May
14, 2007, the Company incorporated a wholly-owned subsidiary in Israel, Oramed
Ltd., which is engaged in research and development. Unless the context indicates
otherwise, the term “Group” refers to Oramed Pharmaceuticals Inc. and its
Israeli subsidiary, Oramed Ltd (the “Subsidiary”).
The
Company is engaged in research and development in the biotechnology field and
is
considered a development stage company in accordance with Statement of financial
Accounting Standard (“SFAS”)
No. 7
“Accounting
and Reporting by Development Stage Enterprises”.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. The Company has net losses for
the
period from inception (April 12, 2002) through August 31, 2008 of
$7,248,204, as well as negative cash flow from operating activities. Presently,
the Company does not have sufficient cash resources to meet its requirements
in
the twelve months following September 1, 2008. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management
is
in the process of evaluating various financing alternatives as the Company
will
need to finance future research and development activities and general and
administrative expenses through fund raising in
the
public or private equity markets. Although there is no assurance that the
Company will be successful with those initiatives, management believes that
it
will be able to secure the necessary financing as a result of ongoing financing
discussions with third party investors and existing shareholders.
These
consolidated financial statements do not include any adjustments that may be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent on its ability to obtain
additional financing as may be required and ultimately to attain
profitability.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America
(“U.S.
GAAP”).
|
c. |
Use
of estimates in the preparation of financial
statements
|
The
preparation of the consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the financial statement date and the reported expenses during
the reporting periods. Actual results could differ from those
estimates.
The
currency of the primary economic environment in which the operations of the
Company are conducted is the US dollar (“$”
or
“dollar”).
Most
of
the Company’s research and development costs are incurred in dollars. A
significant part of the Company’s capital expenditures and most of their
financing is in dollars. Thus, the functional currency of the Company is the
dollar.
Transactions
and balances originally denominated in dollars are presented at their original
amounts. Balances in foreign currencies are translated into dollars using
historical and current exchange rates for non-monetary and monetary balances,
respectively. For foreign transactions and other items reflected in the
statements of operations, the following exchange rates are used: (1) for
transactions – exchange rates at transaction dates or average rates and (2) for
other items (derived from non-monetary balance sheet items such as depreciation)
– historical exchange rates. The resulting transaction gains or losses are
carried to financial income or expenses, as appropriate.
|
e. |
Principles
of consolidation
|
The
consolidated financial statements include the accounts of Oramed Pharmaceuticals
Inc. and its Israeli subsidiary Oramed Ltd. All material inter-company
transactions and balances have been eliminated in consolidation.
|
f. |
Property
and equipment
|
Property
and equipment are recorded at cost and depreciated by the straight-line method
over the estimated useful lives of the assets.
Annual
rates of depreciation are as follows:
|
|
%
|
|
Computers
and peripheral equipment
|
|
|
33
|
|
Office
furniture and equipment
|
|
|
15-33
|
|
Leasehold
improvements are amortized over the term of the lease which is shorter than
the
estimated useful life of the improvements
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Deferred
taxes are determined utilizing the asset and liability method based on the
estimated future tax effects of differences between the financial accounting
and
tax bases of assets and liabilities under the applicable tax laws. Deferred
tax
balances are computed using the tax rates expected to be in effect when those
differences reverse. A valuation allowance in respect of deferred tax assets
is
provided if, based upon the weight of available evidence, it is more likely
than
not that some or all of the deferred tax assets will not be realized. The
Company has provided a full valuation allowance with respect to its deferred
tax
assets.
Regarding
the Subsidiary, paragraph 9(f) of FAS 109, “Accounting
for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise
from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were
not
reflected in the computation of deferred tax assets and liabilities
|
h. |
Research
and development
|
Research
and development expenses include costs directly attributable to the conduct
of
research and development programs, including the cost of salaries, payroll
taxes, employee benefits, costs of registered patents materials, supplies,
the
cost of services provided by outside contractors, including services related
to
the Company’s clinical trials, clinical trial expenses, the full cost of
manufacturing drug for use in research, preclinical development. All costs
associated with research and development are expensed as incurred.
Clinical
trial costs are a significant component of research and development expenses
and
include costs associated with third-party contractors. The Company out sources
a
substantial portion of its clinical trial activities, utilizing external
entities such as contract research organizations, independent clinical
investigators, and other third-party service providers to assist the Company
with the execution of its clinical studies. For each clinical trial that the
Company conducts, certain clinical trial costs are expensed immediately, while
others are expensed over time based on the expected total number of patients
in
the trial, the rate at which patients enter the trial, and the period over
which
clinical investigators or contract research organizations are expected to
provide services.
Clinical
activities which relate principally to clinical sites and other administrative
functions to manage the Company’s clinical trials are performed primarily by
contract research organizations (“CROs”). CROs typically perform most of the
start-up activities for the Company’s trials, including document preparation,
site identification, screening and preparation, pre-study visits, training,
and
program management.
The
Company considers all short term, highly liquid investments, which include
short-term deposits with original maturities of three months or less from the
date of purchase that are not restricted as to withdrawal or use and are readily
convertible to known amounts of cash, to be cash equivalents.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
Company has no other comprehensive loss components other than net loss for
the
fiscal years of 2007 and 2008.
Basic
and
diluted net losses per share of common stock are computed by dividing the net
loss for the period by the weighted average number of shares of common stock
outstanding and receipts on account of shares in equity during the period.
Outstanding stock options, warrants and convertible notes have
been excluded from the calculation of the diluted loss per share because all
such securities are anti-dilutive for all periods presented. The total number
of
common stock options, warrants and convertible notes excluded from the
calculation of diluted net loss was 16,611,697 for the year ended August 31,
2008 (12,033,677 for the year ended August 31, 2007).
|
l. |
Impairment
in value of long-lived
assets
|
The
Company reviews long-lived assets, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. In the event the sum of the expected future
cash
flows (undiscounted and without interest charges) of the long-lived assets
is
less than the carrying amount of such assets, an impairment loss would be
recognized, and the assets are written down to their estimated fair
values.
|
m. |
Stock
based compensation
|
Effective
March 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-based
Payment”
(“FAS
123(R)”).
FAS
123(R) requires awards classified as equity awards be accounted for using the
grant-date fair value method. The fair value of share-based payment transactions
is recognized as expense over the requisite service period, net of estimated
forfeitures. The Company estimated forfeitures based on historical experience
and anticipated future conditions.
In
March
2005, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 107 (“SAB
107”).
SAB
107 provides supplemental implementation guidance on FAS 123(R), including
guidance on valuation methods, inventory capitalization of share-based
compensation cost, income statement effects, disclosures and other issues.
SAB
107 requires share-based payment to be classified in the same expense line
items
as cash compensation. The
Company has applied the provisions of SAB 107 in its adoption of FAS
123(R).
The
Company elected to recognize compensation cost for an award with only service
conditions that has a graded vesting schedule using the accelerated method
based
on multiple option award approach.
FAS
123(R) applies to all awards granted or modified after the Statement’s effective
date. In addition, compensation cost for the unvested portion of previously
granted awards that remain outstanding on the Statement’s effective date shall
be recognized on or after the effective date, as the related services are
rendered, based on the awards’ grant-date fair value as previously calculated
for the pro-forma disclosure under FAS 123.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
Company elected to adopt the modified prospective application transition method,
as permitted by FAS 123(R). Under such transition method, upon the adoption
of
FAS 123(R), the Company’s financial statements for periods prior to the
effective date of the Statement are not restated.
In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (“SAB 110”) relating to the use of a “simplified” method
in developing an estimate of the expected term of “plain vanilla” share options.
SAB 107 previously allowed the use of the simplified method until
December 31, 2007. SAB 110 allows, under certain circumstances, to continue
to accept the use of the simplified method beyond December 31, 2007. The
Company has applied the provisions of SAB 110 in its financial
statement.
The
Company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value based on an option-pricing
model or when more reliability is based on the fair value of the services
received, pursuant to the guidance in EITF 96-18 “Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or
in Conjunction with Selling Goods or Services”.
The
fair value of the options granted is revalued over the related service periods
and recognized using the accelerated method.
|
n.
|
Uncertainty
in income tax
|
As
of
September 1, 2007, the Company adopted FASB Interpretation No. 48, ‘‘Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109’’
(‘‘FIN 48’’). FIN 48 specifies how tax benefits for uncertain tax positions are
to be recognized, measured and derecognized in financial statements; requires
certain disclosures of uncertain tax positions; specifies how reserves for
uncertain tax positions should be classified on the balance sheet; and provides
transition and interim-period guidance, among other provisions. On May 2, 2007,
the FASB issued FASB Staff Position No. FIN 48-1, ‘‘Definition of Settlement in
FASB Interpretation No. 48-1’’ (‘‘FSP FIN 48-1’’). FSP FIN 48-1 provides
guidance regarding how an entity should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized
tax
benefits.
|
o. |
Concentration
of credit risks
|
Financial
instruments that subject the Company to credit risk consist primarily of cash
and cash equivalents and deposit, which are deposited in major financial
institutions. The company is of the opinion the credit risk in respect of these
balances is remote.
|
p. |
Newly
issued and recently adopted accounting
pronouncements:
|
|
1)
|
In
September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, “Fair
Value Measurements” (“SFAS 157”).
SFAS 157 defines fair value, establishes a framework and gives guidance
regarding the methods used for measuring fair value, and expands
disclosures about fair value measurements. SFAS 157 is effective
for
financial statements issued for fiscal years beginning after November
15,
2007, and interim periods within those fiscal years (September 1,
2009,
for the Company). The Company is currently assessing the impact that
SFAS
157 may have on its results of operations and financial
position.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
2)
|
In
February 2007, the FASB issued Statement of Financial Accounting
Standards
No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities—Including
an amendment of FASB Statement No. 115” (“SFAS 159”).
SFAS 159 is expected to expand the use of fair value accounting but
does
not affect existing standards which require certain assets or liabilities
to be carried at fair value. The objective of SFAS 159 is to improve
financial reporting by providing companies with the opportunity to
mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex
hedge
accounting provisions. Under SFAS 159, a company may choose, at its
initial application or at other specified election dates, to measure
eligible items at fair value and report unrealized gains and losses
on
items for which the fair value option has been elected in earnings
at each
subsequent reporting date. SFAS 159 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years (September 1, 2009, for the Company).
If
the company is to elect the fair value option for its existing assets
and
liabilities, the effect as of the adoption date, shall be reported
as a
cumulative-effect adjustment to the opening balance of retained earnings.
The Company is currently assessing the impact that SFAS 159 may have
on
its financial position.
|
|
3)
|
In
June 2007, the Emerging Issues Task Force (EITF) reached Issue No.
07-03,
"Accounting
for Nonrefundable Advance Payments for Goods or Services Received
to Be
Used in Future Research and Development Activities" (EITF No.
07-03).
EITF No. 07-03 requires that nonrefundable advance payments for goods
or
services that will be used or rendered for future research and development
activities be deferred and amortized over the period that the goods
are
delivered or the related services are performed, subject to an assessment
of recoverability. The provisions of EITF 07-03 will be effective
for
financial statements issued for fiscal years beginning after December
15,
2007, and interim periods within those fiscal years (September 1,
2009,
for the Company). The provisions of this EITF are applicable for
new
contracts entered into on or after the effective date. Earlier application
is not permitted.
|
|
4)
|
In
December 2007, the FASB ratified EITF Issue No. 07-01, "Accounting
for
Collaborative Arrangements" ("EITF 07-01"). EITF 07-01 defines
collaborative arrangements and establishes reporting requirements
for
transactions between participants in a collaborative arrangement
and
between participants in the arrangement and third parties. EITF 07-01
also
establishes the appropriate income statement presentation and
classification for joint operating activities and payments between
participants, as well as the sufficiency of the disclosures related
to
these arrangements. EITF 07-01 is effective for fiscal years beginning
after December 15, 2008 (September 1, 2009, for the Company). EITF
07-01
shall be applied using modified version of retrospective transition
for
those arrangements in place at the effective date. An entity should
report
the effects of applying this Issue as a change in accounting principle
through retrospective application to all prior periods presented
for all
arrangements existing as of the effective date, unless it is impracticable
to apply the effects the change retrospectively. The Company is currently
assessing the impact that EITF 07-01 may have on its results of operations
and financial position.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
|
5)
|
In
May 2008, the FASB issued SFAS No. 162, "The
Hierarchy of Generally Accepted Accounting Principles" ("FAS
162").
FAS 162 is intended to improve financial reporting by identifying
a
consistent framework, or hierarchy, for selecting accounting principles
to
be used in preparing financial statements that are presented in conformity
with GAAP for nongovernmental entities. FAS 162 is effective 60 days
following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly
in
Conformity with Generally Accepted Accounting Principles." We do
not
expect the adoption of this statement to have a material impact on
our
results of operations, financial position or cash
flows.
|
|
6)
|
In
June 2007, the Emerging Issues Task Force (EITF) reached Issue No.
07-03,
"Accounting for Nonrefundable Advance Payments for Goods or Services
Received to Be Used in Future Research and Development Activities"
(EITF
No. 07-03). EITF No. 07-03 requires that nonrefundable advance payments
for goods or services that will be used or rendered for future research
and development activities be deferred and amortized over the period
that
the goods are delivered or the related services are performed, subject
to
an assessment of recoverability. The provisions of EITF 07-03 will
be
effective for financial statements issued for fiscal years beginning
after
December 15, 2007, and interim periods within those fiscal years
(September 1, 2008, for the Company). The provisions of this EITF
are
applicable for new contracts entered into on or after the effective
date.
Earlier application is not
permitted.
|
Certain
figures in respect of prior years have been reclassified to conform to the
current year presentation.
NOTE
2 – SHORT TERM INVESTMENTS:
Amount
represents bank deposits with an original maturity of more than three months
but
less than one year. The bank deposits are in US Dollars and bear interest at
2.56% – 2.66% per annum.
NOTE
3 – FAIR VALUE OF FINANCIAL INSTRUMENTS:
The
financial instruments of the Group consist mainly of cash and cash equivalents,
current receivables, accounts payable and accruals, convertible debentures.
The
fair
value of the financial instruments included in the working capital of the Group
is identical or close to their carrying value (refer to note 1o).
NOTE
4 - PROPERTY AND EQUIPMENT, Net:
|
a. |
Composition
of property and equipment, grouped by major classifications, is as
follows:
|
|
|
August 31
|
|
|
|
2008
|
|
2007
|
|
Cost:
|
|
|
|
|
|
|
|
Leasehold
improvements
|
|
$
|
76,029
|
|
|
|
|
Office
furniture and equipment
|
|
|
17,684
|
|
|
|
|
Computers
and peripheral equipment
|
|
|
20,037
|
|
$
|
1,736
|
|
|
|
|
113,750
|
|
|
1,736
|
|
Less
- accumulated depreciation
|
|
|
15,454
|
|
|
-
|
|
|
|
$
|
98,296
|
|
$
|
1,736
|
|
|
b.
|
Depreciation
expense totaled $15,454 and $0 in the years ended August 31, 2008
and
2007, respectively.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
5 - CONVERTIBLE NOTES
In
February 2007, the Company borrowed $125,000 on a convertible note without
interest, due on demand and unsecured. The note is convertible at $0.50 per
share. The Company analyzed the note under EITF 98-5 and EITF 00-27 to determine
if it contained a beneficial conversion feature. It was determined the note
did
contain a beneficial conversion feature with an intrinsic value of $60,000.
Because the note is due on demand, the entire amount of the beneficial
conversion feature was amortized immediately to interest expense.
In
May
2007, the Company borrowed $150,000 on a convertible note without interest,
due
on demand and unsecured. The note is convertible at $0.50 per share. The Company
analyzed the note under EITF 98-5 and EITF 00-27 to determine if it contained
a
beneficial conversion feature. It was determined the note did contain a
beneficial conversion feature with an intrinsic value of $48,000. Because the
note is due on demand, the entire amount of the beneficial conversion feature
was amortized immediately to interest expense.
The
Company analyzed the conversion option of both notes and determined it did
not
require derivative treatment under FAS 133 and EITF 00 - 19.
During
the year ended August 31, 2008, the Company received conversion notices
regarding the above mentioned convertible notes. The common stock underlying
the
convertible notes were issued on July 1, 2008.
NOTE
6 - RECEIPTS ON ACCOUNT OF SHARES ISSUANCE
The
balance of the Receipts on account of shares issuance as of August 31, 2007
represent 1,012,317 shares of common stock sold during fiscal year 2006, for
$506,061, of which 1,000,000 were issued on July 1, 2008, and 510,000 shares
of
common stock sold during fiscal year 2007, for $255,000, which were issued
on
November 8, 2007. As of August 31, 2008 the balance of unissued shares is
12,317. The Company has included the shares as outstanding for the calculation
of the annual loss per share.
NOTE
7 - COMMITMENTS:
|
a.
|
On
March 8, 2006, the Company entered into an agreement with Hadasit
Medical
Services and Development Ltd (“ Hadasit”) to acquire provisional patent
application No. 60/718716, including related intellectual property.
The
provisional patent application No. 60/718716 related to a method
of
preparing insulin so that it may be taken orally for the use in the
treatment of individuals with
diabetes.
|
Under
the
terms of the agreement, the Company agreed to contract Hadasit to provide
consulting services relating to the completion of clinical trials on provisional
patent application No. 60/718716. As remuneration for the services provided
under the agreement Hadasit is entitled to $200,000, of which $163,000 was
expensed through August 31, 2008.
Hadasit
is a 7% shareholder of the Company. The primary researcher for Hadasit is Dr.
Miriam Kidron, a director of the Company. As part of the above agreement, the
Company entered into an employment agreement with Dr. Kidron that included
the
grant of 3,361,360 options exercisable at $0.001 per share for a period of
five
years (See note 8g). On July 1, 2008, the employment agreement was replaced
by a
consulting agreement (See note 14c).
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
7 - COMMITMENTS (continued):
|
b.
|
The
Subsidiary has entered into operating lease agreements for vehicles
used
by its employees for a period of 3
years.
|
The
lease
expenses for the year ended August 31, 2008 were $20,325. The future lease
payments under the lease agreement are $30,748, $30,748 and $9,851 for the
years
ending August 31, 2009, 2010 and 2011 respectively.
As
security for its obligation under the lease agreements the Subsidiary paid
$10,824, which are classified as long term deposits.
|
c.
|
On
September 19, 2007 the Subsidiary entered into a new lease agreement
for
its new office facilities, in Israel. The new lease agreement is
for a
period of 51 months. The monthly lease payment is 2,396 NIS and is
linked
to the increase in the Israeli consumer price index (As of August
31, 2008
the monthly payment in the Company's functional currency is $667),
the
future lease payments under the lease are $8,004 for the years ending
August 31, 2009, 2010 and 2011 and $2,668 for the year ending August
31,
2012.
|
As
security for its obligation under this lease agreement the Company provided
a
bank guarantee in an amount equal to three monthly lease payments.
|
d.
|
During
January and April 2008 the Company entered into agreements with OnQ
consulting, a clinical research organization (CRO) located in
Johannesburg, South Africa, to conduct Phase 1B and 2B clinical trials
on
its oral insulin capsules. The total cost estimated for the studies
is
$262,595 of which $15,325 was expensed through August 31,
2008.
|
|
e.
|
On
April 21, 2008, the Company entered into a five year service agreement
with Encorium Group, Inc. (“Encorium”) pursuant to which Encorium will
provide services for the purpose of filing an Investigational New
Drug
Application (IND) for a phase 2 study as required by the US Food
and Drug
Administration (FDA). The total cost under the agreement is estimated
at
$1,455,143 of which $171,000 was paid through August 31, 2008, and
included in prepaid expenses.
|
|
f.
|
During
April 2008, the Company entered into a five years master services
agreement with SAFC,
an
operating division of Sigma-Aldrich, Inc. (“SAFC”), pursuant to which SAFC
will provide services for individual projects, which may include
strategic
planning, expert consultation, clinical trial services, statistical
programming and analysis, data processing, data management, regulatory,
clerical, project management, central laboratory services, pre-clinical
services, pharmaceutical sciences services, and other research and
development services, in accordance with mutually agreed upon work
orders.
The total cost under the agreement is estimated at $605,159 of which
$266,403 was paid through August 31, 2008, of which $82,431 was expensed
and the remaining was included in prepaid
expenses.
|
|
g.
|
On
May 1, 2008, the Company entered into a consulting agreement with
a third
party (“the Consultant”) for a period of twelve months, pursuant to which
the Consultant will assist Oramed’s efforts to complete the FDA approval
process for its oral insulin capsule. On October 3, 2008 the Company
and
the Consultant agreed to amend the agreement effective July 1, 2008.
The
Consultant is entitled to a fixed monthly fee of $16,666 (for the
period
from May 1, 2008 through June 30, 2008 the monthly fee was $8,333)
and
reimbursement of pre-approved out of pocket expenses.
|
|
h.
|
As
to a Clinical Trail Manufacturing Agreement with Swiss Caps AG, see
note
9a.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
8 - STOCK HOLDERS’ EQUITY:
The
Company’s shares are traded on the Over-The-Counter Bulletin Board.
The
following are capital stock transactions that took place during the years ended
August 31, 2008 and 2007:
|
a. |
On
January 3, 2007, the Company entered into a subscription agreement
for the
sale of 50,000 units at a purchase price of $0.50 per unit for total
consideration of $25,000. Each unit consisted of one share of the
Company’s common stock and one common stock purchase warrant. Each warrant
entitles the holder to purchase one share of common stock exercisable
for
two years at an exercise price of at $0.75 per share.
|
The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to the warrants estimated by using the Black
Scholes option-pricing model is $8,630 and was based on the following
assumptions: dividend yield of 0%; expected volatility of 135.2%; risk-free
interest rates of 4.76%; and expected lives of 2 years.
|
b. |
On
June 15, 2007, the Company entered into a subscription agreement
for the
sale of 3,600,000 units at a purchase price of $0.50 per unit for
total
consideration of $1,800,000. Each unit consisted of one share of
the
Company's common stock and one common stock purchase warrant. Each
warrant
entitles the holder to purchase one share of common stock exercisable
for
three years at an exercise price of $0.75 per share.
|
The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to all warrants estimated by using the Black
Scholes option-pricing model is $620,569 and was based on the following
assumptions: dividend yield of 0%; expected volatility of 121.5%; risk-free
interest rates of 5.07%; and expected lives of 3 years.
|
c. |
On
August 2, 2007, the Company entered into a subscription agreement
for the
sale of 510,000 units at a purchase price of $0.50 per unit for total
consideration of $255,000. Each unit consisted of one share of the
Company's common stock and one common stock purchase warrant. Each
warrant
entitles the holder to purchase one share of common stock exercisable
for
three years at an exercise price of $0.75 per
share.
|
The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to all warrants estimated by using the Black
Scholes option-pricing model is $93,847 and was based on the following
assumptions: dividend yield of 0%; expected volatility of 121.9%; risk-free
interest rates of 4.57%; and expected lives of 3 years.
In
connection with the subscription agreement the Company issued, to third parties
who assisted in securing the agreement, 10,000 shares of the Company's common
stock.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
8 - STOCK HOLDERS’ EQUITY (continued):
|
d. |
On
July 14, 2008, the Company entered into a Securities Purchase Agreement
with twenty-nine accredited investors for the sale of 8,524,669 units
at a
purchase price of $0.60 per unit for total consideration of $5,114,799.
Each unit consisted of one share of the Company's common stock and
one
common stock purchase warrant. Each warrant entitles the holder to
purchase half a share of common stock exercisable for three years
at an
exercise price of $0.90 per share.
|
The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to the warrants was estimated by using the
Black
Scholes option-pricing model at $1,124,564 and was based on the following
assumptions: dividend yield of 0%; expected volatility of 117.9%; risk-free
interest rates of 2.8%; and expected lives of 3 years.
As
finders fee, in connection with the securities purchase agreement, the Company
paid $85,000 cash fee to a director (see note 13b), as well as issued 143,333
shares of the Company's common stock for other individuals.
|
e. |
As
to shares issued as part of stock based compensation plan see Note
8.
|
NOTE
9 - STOCK BASED COMPENSATION:
On
October 15, 2006, the Company’s board of directors adopted the 2006 Stock Option
Plan (the “2006 Stock Option Plan”).
On
May 5,
2008, the Company’s board of directors adopted the 2008 Stock Option Plan (the
“2008 Stock Option Plan”).
Under
both plans 11,000,000 shares have been reserved for the grant of options, which
may be issued at the discretion of the Company’s Board of Directors from time to
time. Under these plans, each option is exercisable into one share of common
stock of the Company.
The
options may be exercised after vesting and in accordance with vesting schedules
which will be determined by the board of directors for each grant. The maximum
term of the options is 10 years.
The
fair
value of each stock option grant is estimated at the date of grant using a
Black
Scholes option pricing model. The volatility is based on a historical
volatility, by statistical analysis of the daily share price for past periods.
The expected term is the length of time until the expected dates of exercising
the options, based on estimated data regarding employees’ exercise
behavior.
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
9 - STOCK BASED COMPENSATION (continued):
The
following are stock options and warrants transactions made during the years
ended August 31, 2008 and 2007, (See Note 15 as to grants of stock options
subsequent to August 31, 2008):
|
a.
|
On
October 30, 2006 the Company entered into a Clinical Trial Manufacturing
Agreement with Swiss Caps AG (“Swiss”),
pursuant to which Swiss would manufacture and deliver the oral insulin
capsule developed by the Company. In consideration for the services
being
provided to the Company by Swiss, the Company agreed to pay a certain
predetermined amounts which are to be paid in common stocks of the
Company, the number of stocks to be issued is based on the invoice
received from Swiss, and the stock market price 10 days after the
invoice
was issued. The Company accounted the transaction with Swiss according
to
FAS 150 "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and Equity".
|
On
December 27, 2006 and September 10, 2007, respectively, the Company issued
125,000 and 283,025, shares of its common stock to Swiss as remuneration for
the
services provided. The shares of common stock issued for service rendered at
$98,750 and $113,210, respectively. As for shares issued following August 31,
2008 see note 15c.
|
b.
|
On
November 23, 2006, 500,000 options were granted to an employee under
the
2006 Stock Option Plan at an exercise price of $0.76 per share (equivalent
to the traded market price on the date of grant), the options vest
in
twelve equal monthly installments over the first year and expire
on
November 23, 2009. The fair value of these options on the date of
grant
was $214,431 using the Black Scholes option-pricing model and was
based on
the following assumptions: dividend yield of 0%; expected volatility
of
115%; risk-free interest rates of 4.7%; and expected lives of 1.77
years.
|
|
c.
|
On
November 23, 2006, 250,000 options were granted to an outside consultant
under the 2006 Stock Option Plan at an exercise price of $0.76 per
share
(equivalent to the traded market price on the date of grant), the
options
vest in twelve equal monthly installments over the first year and
expire
on November 23, 2009. The fair value of these options on November
30, 2007
(the date when the option were fully vested) was $33,075 using the
Black
Scholes option-pricing model and was based on the following assumptions:
dividend yield of 0%; expected volatility of 119%; risk-free interest
rates of 3.0%; and the remaining contractual life of 1.98
years.
|
|
d.
|
On
December 31, 2006, 400,000 options were granted to four then new
member of
the Scientific Advisory Board, an outside parties, under the 2006
Stock
Option Plan. at an exercise price of $0.76 per share (less then the
traded
market price on the date of grant), the options vest in twelve equal
monthly installments over the first year and expired on June 30,
2008. The
fair value of these options on December 31, 2007 (the date when the
option
were fully vested) was $7,262 using the Black Scholes option-pricing
model
and was based on the following assumptions: dividend yield of 0%;
expected
volatility of 120%; risk-free interest rates of 3.5%; and the remaining
contractual life of 0.5 years. These options expired on June 30,
2008.
|
|
e.
|
On
March 18, 2007, 100,000 options were granted to a then new member
of the
Scientific Advisory Board, an outside party under the 2006 Stock
Option
Plan at an exercise price of $0.76 per share (over the traded market
price
on the date of grant), the options vest in twelve equal monthly
installments over the first year and expire on March 18, 2010. The
fair
value of these options on March 17, 2008 (the date when the option
were
fully vested) was $27,939 using the Black Scholes option-pricing
model and
was based on the following assumptions: dividend yield of 0%; expected
volatility of 122%; risk-free interest rates of 3.5%; and the remaining
contractual life of 2.00 years.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
9 - STOCK BASED COMPENSATION (continued):
|
f. |
On
August 2, 2007, 1,700,000 options were granted to Nadav Kidron, the
Company’s President, Chief Executive Officer and director, and Miriam
Kidron, the Company’s Chief Medical and Technology Officer and director,
both are related parties, under the 2006 Stock Option Plan at an
exercise
price of $0.45 per share (over the traded market price on the date
of
grant), the options vested immediately and expire on August 2, 2012.
The
fair value of these options on the date of grant was $450,449 using
the
Black Scholes option-pricing model and was based on the following
assumptions: dividend yield of 0%; expected volatility of 105%; risk-free
interest rates of 4.6%; and expected lives of 3.0
years.
|
|
g. |
On
August 14, 2007, 3,361,630 stock options were granted to Miriam Kidron,
the Company’s Chief Medical and Technology Officer and director, at an
exercise price of $0.001 per share, the options vested immediately
and
expire on August 14, 2012. The fair value of these options on the
date of
grant was $1,348,340 using the Black Scholes option-pricing model
and was
based on the following assumptions: dividend yield of 0%; expected
volatility of 105%; risk-free interest rates of 4.6%; and expected
lives
of 3.0 years.
|
|
h. |
On
September 4, 2007, 300,000 options were granted to two outside
consultants, at an exercise price of $0.45 per share (equivalent
to the
traded market price on the date of grant), the options vest in twelve
equal monthly installments over the first year and expire on September
4,
2009. The fair value of these options as of August 31, 2008 was $125,440,
using the Black Scholes option-pricing model and was based on the
following assumptions: dividend yield of 0% for all years; expected
volatility of 118%; risk-free interest rates of 2.17%; and the remaining
contractual life of 1.01 years.
|
|
i. |
On
October 30, 2007, 100,000 options were granted to an advisory board
member, at an exercise price of $0.76 per share (over the traded
market
price on the date of grant), the options vest in eighteen equal monthly
installments from the date of grant and expire on October 30, 2010.
The
fair value of these options as of August 31, 2008 was $39,615, using
the
Black Scholes option-pricing model and was based on the following
assumptions: dividend yield of 0% for all years; expected volatility
of
118%; risk-free interest rates of 2.17%; and the remaining contractual
life of 1.66 years.
|
|
j. |
On
May 7, 2008, an aggregate of 1,728,000 options were granted to Nadav
Kidron, the Company’s President, Chief Executive Officer and director, and
Miriam Kidron, the Company’s Chief Medical and Technology Officer and
director, both are related parties, at an exercise price of $0.54
per
share (equivalent to the traded market price on the date of grant),
288,000 of the options vested immediately on the date of grant and
the
remainder will vest in twenty equal monthly installments. These options
expire on May 7, 2018. The fair value of these options on the date
of
grant was $784,430, using the Black Scholes option-pricing model
and was
based on the following assumptions: dividend yield of 0% for all
years;
expected volatility of 116%; risk-free interest rates of 3.41%; and
expected lives of 5.44 years.
|
|
k. |
On
July 17, 2008, 100,000 options were granted to an advisory board
member,
at an exercise price of $0.62 per share (equivalent to the traded
market
price on the date of grant), the options vest in four equal quarterly
installments commencing on September 17, 2008 and expire on July
17, 2011.
The fair value of these options as of August 31, 2008 was $51,624,
using
the Black Scholes option-pricing model and was based on the following
assumptions: dividend yield of 0% for all years; expected volatility
of
118%; risk-free interest rates of 2.36%; and the remaining contractual
life of 2.88 years.
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
9 - STOCK BASED COMPENSATION (continued):
|
l.
|
On
August 4, 2008, 50,000 options were granted to an outside consultant,
at
an exercise price of $0.90 per share (equivalent to the traded market
price on the date of grant), the options vest in four equal quarterly
installments commencing on October 1, 2008 and expire on August 4,
2011.
The fair value of these options as of August 31, 2008 was $23,873,
using
the Black Scholes option-pricing model and was based on the following
assumptions: dividend yield of 0% for all years; expected volatility
of
118%; risk-free interest rates of 2.36%; and the remaining contractual
life of 2.93 years.
|
The
fair
value of each option grant is estimated on the date of grant using the Black
Scholes option-pricing model with the following assumptions:
|
|
For options granted in
|
|
|
|
year ended August 31
|
|
|
|
2008
|
|
2007
|
|
Expected
option life (years)
|
|
|
1.0-5.4
|
|
|
1.5-3.0
|
|
Expected
stock price volatility (%)
|
|
|
116.3-118.0
|
|
|
105.4-117.4
|
|
Risk
free interest rate (%)
|
|
|
2.2-3.4
|
|
|
4.4-4.7
|
|
Expected
dividend yield (%)
|
|
|
0.0
|
|
|
0.0
|
|
A
summary
of the status of the stock options granted to employees and directors as of
August 31, 2008 and 2007, and changes during the year ended on this date, is
presented below:
|
|
Year ended August 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
|
options
|
|
price
|
|
options
|
|
price
|
|
|
|
|
|
$
|
|
|
|
$
|
|
Options
outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of year
|
|
|
5,561,360
|
|
|
0.21
|
|
|
-
|
|
|
|
|
Changes
during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
– at market price
|
|
|
1,728,000
|
|
|
0.54
|
|
|
|
|
|
|
|
Granted
– at an exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
above market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
|
|
|
2,200,000
|
|
|
0.52
|
|
Granted
– at an exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
below market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
|
|
|
|
|
|
|
|
|
3,361,360
|
|
|
0.001
|
|
Options
outstanding at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
7,289,360
|
|
|
0.29
|
|
|
5,561,360
|
|
|
0.21
|
|
Options
exercisable at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
6,137,360
|
|
|
|
|
|
5,436,360
|
|
|
|
|
Weighted
average fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value
of options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during
the year
|
|
$
|
0.45
|
|
|
|
|
$
|
0.35
|
|
|
|
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9
- STOCK BASED COMPENSATION (continued):
Costs
incurred in respect of stock based compensation for employees and directors,
for
year ended August 31, 2008, 2007 were $459,467 and $1,968,547,
respectively.
The
following table presents summary information concerning the options outstanding
as of August 31, 2008:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Range of
|
|
|
|
Remaining
|
|
average
|
|
|
|
exercise
|
|
Number
|
|
Contractual
|
|
exercise
|
|
Aggregate
|
|
prices
|
|
outstanding
|
|
Life
|
|
price
|
|
intrinsic value
|
|
$
|
|
|
|
Years
|
|
$
|
|
$
|
|
0.001
|
|
|
3,361,360
|
|
|
3.95
|
|
|
0.001
|
|
|
2,416,818
|
|
0.45
to 0.62
|
|
|
3,428,000
|
|
|
6.83
|
|
|
0.50
|
|
|
770,040
|
|
0.76
to 0.90
|
|
|
500,000
|
|
|
1.23
|
|
|
0.76
|
|
|
-
|
|
|
|
|
7,289,360
|
|
|
5.12
|
|
|
0.29
|
|
|
3,186,858
|
|
The
following table presents summary information concerning the options exercisable
as of August 31, 2008:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Range of
|
|
|
|
Remaining
|
|
average
|
|
|
|
exercise
|
|
Number
|
|
Contractual
|
|
exercise
|
|
Aggregate
|
|
prices
|
|
exercisable
|
|
Life
|
|
price
|
|
intrinsic value
|
|
$
|
|
|
|
Years
|
|
$
|
|
$
|
|
0.001
|
|
|
3,361,360
|
|
|
3.95
|
|
|
0.001
|
|
|
2,416,818
|
|
0.45
to 0.62
|
|
|
2,276,000
|
|
|
5.38
|
|
|
0.47
|
|
|
562,680
|
|
0.76
to 0.90
|
|
|
500,000
|
|
|
1.23
|
|
|
0.76
|
|
|
-
|
|
|
|
|
6,137,360
|
|
|
4.26
|
|
|
0.24
|
|
|
2,979,498
|
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9
- STOCK BASED COMPENSATION (continued):
A
summary
of the status of the stock options granted to non-employees as of August 31,
2008, and changes during the year ended on this date, is presented
below:
|
|
Year ended August 31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
|
options
|
|
price
|
|
options
|
|
price
|
|
|
|
|
|
$
|
|
|
|
$
|
|
Options
outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of year
|
|
|
750,000
|
|
|
0.76
|
|
|
-
|
|
|
|
|
Changes
during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
– at market price
|
|
|
150,000
|
|
|
0.71
|
|
|
|
|
|
|
|
Granted
– at an exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
above market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
400,000
|
|
|
0.53
|
|
|
350,000
|
|
|
0.76
|
|
Granted
– at an exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
below market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
|
|
|
|
|
|
|
|
|
400,000
|
|
|
0.76
|
|
Expired
|
|
|
400,000
|
|
|
0.76
|
|
|
|
|
|
|
|
Options
outstanding at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
900,000
|
|
|
0.65
|
|
|
750,000
|
|
|
0.76
|
|
Options
exercisable at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
733,333
|
|
|
|
|
|
495,833
|
|
|
|
|
The
Company recorded stock compensation of $203,982 and $177,782 during the year
ended August 31, 2008 and 2007 respectively, related to consulting
services.
The
following table presents summary information concerning the options outstanding
as of August 31, 2008:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Range of
|
|
|
|
Remaining
|
|
average
|
|
|
|
exercise
|
|
Number
|
|
Contractual
|
|
exercise
|
|
Aggregate
|
|
prices
|
|
outstanding
|
|
Life
|
|
price
|
|
intrinsic value
|
|
$
|
|
|
|
Years
|
|
$
|
|
$
|
|
0.45
to 0.62
|
|
|
400,000
|
|
|
1.48
|
|
|
0.49
|
|
|
91,000
|
|
0.76
to 0.90
|
|
|
500,000
|
|
|
1.55
|
|
|
0.77
|
|
|
-
|
|
|
|
|
900,000
|
|
|
1.52
|
|
|
0.65
|
|
|
91,000
|
|
ORAMED
PHARMACEUTICALS INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9
- STOCK BASED COMPENSATION (continued):
The
following table presents summary information concerning the options exercisable
as of August 31, 2008:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Range of
|
|
|
|
Remaining
|
|
average
|
|
|
|
exercise
|
|
Number
|
|
Contractual
|
|
exercise
|
|
Aggregate
|
|
prices
|
|
exercisable
|
|
Life
|
|
price
|
|
intrinsic value
|
|
$
|
|
|
|
Years
|
|
$
|
|
$
|
|
0.45
to 0.62
|
|
|
300,000
|
|
|
1.01
|
|
|
0.45
|
|
|
81,000
|
|
0.76
to 0.90
|
|
|
433,333
|
|
|
1.38
|
|
|
0.76
|
|
|
-
|
|
|
|
|
733,333
|
|
|
1.23
|
|
|
0.63
|
|
|
81,000
|
|
Unrecognized
compensation as determined under FAS 123R as of August 31, 2008 totaled
$670,698, to be recorded over the next 17 months.
NOTE 10
– ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
|
|
Year ended
|
|
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Service
providers
|
|
$
|
635,762
|
|
$
|
275,465
|
|
Tax
provisions
|
|
|
162,164
|
|
|
|
|
Related
parties
|
|
|
28,062
|
|
|
65,407
|
|
Payroll
and related expenses
|
|
|
40,714
|
|
|
|
|
|
|
$
|
866,702
|
|
$
|
340,872
|
|
NOTE
11 - RESEARCH AND DEVELOPMENT EXPENSES:
|
|
|
|
Period
from April
|
|
|
|
|
|
12, 2002
|
|
|
|
|
|
(inception)
|
|
|
|
Year ended
|
|
through
|
|
|
|
August 31,
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
Clinical
trials
|
|
$
|
538,056
|
|
$
|
417,045
|
|
$
|
1,063,326
|
|
Consulting
fees
|
|
|
205,372
|
|
|
93,731
|
|
|
388,625
|
|
Costs
for registration of patents
|
|
|
89,645
|
|
|
11,045
|
|
|
100,690
|
|
Compensation
costs in respect of warrants granted
to employees, directors and consultants
|
|
|
285,336
|
|
|
1,664,666
|
|
|
1,951,802
|
|
Other
|
|
|
57,248
|
|
|
26,142
|
|
|
83,391
|
|
|
|
$
|
1,175,657
|
|
$
|
2,214,429
|
|
$
|
3,587,834
|
|
NOTE
12 - GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
|
Period
from
April
|
|
|
|
|
|
12,
2002
|
|
|
|
|
|
(inception)
|
|
|
|
Year
ended
|
|
through
|
|
|
|
August
31
|
|
August
31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
Compensation
costs in respect of warrants
granted
to employees, directors
and
consultants
|
|
$
|
378,113
|
|
$
|
479,863
|
|
$
|
857,976
|
|
Professional
services
|
|
|
391,309
|
|
|
120,018
|
|
|
771,279
|
|
Consulting
fees
|
|
|
151,037
|
|
|
146,756
|
|
|
325,319
|
|
Travel
costs
|
|
|
141,862
|
|
|
122,412
|
|
|
278,173
|
|
Write
off of debt
|
|
|
|
|
|
|
|
|
275,000
|
|
Business
development
|
|
|
154,357
|
|
|
|
|
|
154,357
|
|
Payroll
and related expenses
|
|
|
130,081
|
|
|
|
|
|
130,081
|
|
Insurance
|
|
|
23,630
|
|
|
|
|
|
23,630
|
|
Other
|
|
|
133,965
|
|
|
49,428
|
|
|
214,643
|
|
|
|
$
|
1,504,354
|
|
$
|
918,477
|
|
$
|
3,030,458
|
|
NOTE
13 - TAXES ON INCOME:
|
a.
|
Corporate
taxation in the U.S.
|
Taxes
on
income included in the consolidated statements of operations represent current
taxes due to taxable income of the US Company.
The
applicable corporate tax rate for the Company is 35%.
As
of
August 31, 2008, the Company has an accumulated tax loss carryforward of
approximately $3,425,168 (August 31, 2007 approximately - $1,317,244). Under
USA
tax laws, carryforward tax losses expire 20 years after the year in which it
incurred, in the case of the Company the net loss carryforward will expire
in
the years 2025 through 2027.
|
b.
|
Corporate
taxation in Israel:
|
The
Subsidiary is taxed in accordance with Israeli tax laws. The regular corporate
tax rate in Israel for 2008 is 27%. The corporate tax rates for 2009 and
thereafter are as follows: 2009 - 26% and for 2010 and thereafter -
25%.
NOTE
13 - TAXES ON INCOME (continued):
|
c.
|
Deferred
income taxes:
|
|
|
August
31
|
|
|
|
2008
|
|
2007
|
|
In
respect of:
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
1,194,401
|
|
$
|
480,353
|
|
Less
- Valuation allowance
|
|
|
(1,194,401
|
)
|
|
(480,353
|
)
|
Net
deferred tax assets
|
|
|
|
|
|
|
|
Realization
of deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. As the achievement of required future
taxable income is uncertain, the Company recorded a full valuation
allowance.
|
d.
|
Income
loss before taxes on income and income taxes included in the income
statements:
|
|
|
|
|
Period
from April
|
|
|
|
|
|
12, 2002
|
|
|
|
|
|
(inception)
|
|
|
|
Year ended
|
|
through
|
|
|
|
August 31
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
Loss
before taxes on income:
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
2,315,686
|
|
$
|
3,164,462
|
|
$
|
6,885,236
|
|
Outside
U.S.
|
|
|
291,421
|
|
|
71,547
|
|
|
362,968
|
|
|
|
|
2,607,107
|
|
|
3,236,009
|
|
|
7,248,204
|
|
Taxes
on income:
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
39,799
|
|
|
|
|
|
39,799
|
|
Outside
U.S.
|
|
|
122,365
|
|
|
|
|
|
122,365
|
|
|
|
$
|
162,164
|
|
|
|
|
$
|
162,164
|
|
NOTE
13 - TAXES ON INCOME (continued):
|
e.
|
Reconciliation
of the theoretical tax expense to actual tax
expense
|
Following
is a reconciliation of the theoretical tax expense, assuming all income is
taxed
at the regular tax rates applicable to companies in U.S., and the actual tax
expense:
|
|
|
|
Period from
April
|
|
|
|
|
|
12, 2002
|
|
|
|
|
|
(inception)
|
|
|
|
Year ended
|
|
through
|
|
|
|
August 31
|
|
August 31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
Loss
before income taxes as reported in the consolidated statement of
operations
|
|
$
|
(2,607,107
|
)
|
$
|
(3,236,009
|
)
|
$
|
(7,086,040
|
)
|
Computed
“expected” tax benefit
|
|
|
(912,487
|
)
|
|
(1,132,603
|
)
|
|
(2,480,114
|
)
|
Increase
(decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
Change
in the balance of the valuation allowance for deferred tax
losses
|
|
|
714,048
|
|
|
336,541
|
|
|
1,194,401
|
|
Disallowable
deductions
|
|
|
200,916
|
|
|
790,338
|
|
|
1,282,466
|
|
Increase
in taxes resulting from different tax rates applicable to
non
|
|
|
|
|
|
|
|
|
|
|
U.S.
subsidiary
|
|
|
29,037
|
|
|
5,724
|
|
|
34,761
|
|
Uncertain
tax position
|
|
|
130,650
|
|
|
|
|
|
130,650
|
|
Taxes
on income for the reported year
|
|
$
|
162,164
|
|
|
-;-
|
|
$
|
162,164
|
|
|
f.
|
Uncertainty
in Income Taxes
|
The
Company adopted FIN 48 effective September 1, 2007. FIN 48 requires significant
judgment in determining what constitutes an individual tax position as well
as
assessing the outcome of each tax position. Changes in judgment as to
recognition or measurement of tax positions can materially affect the estimate
of the effective tax rate and consequently, affect the operating results of
the
Company. The Company had no unrecognized tax benefits as of September 1, 2007.
As a result of the implementation of FIN 48 the Company recoded an additional
provision for income taxes in the amount of $130,650 do to uncertainty in its
tax position. The Company recognizes interest and penalties related to its
tax
contingencies as income tax expense. As of August 31, 2008 the Company recorded
$37,469 of penalties related to tax contingencies.
|
|
Year ended
December 31, 2008
|
|
|
|
|
|
Balance
at September 1, 2007
|
|
|
-
|
|
Increase
in tax positions for current year
|
|
|
130,650
|
|
Net
deferred tax assets
|
|
$ |
130,650
|
|
The
Company do not expect unrecognized tax expenses to change significantly over
the
next 12 months.
NOTE
13 - TAXES ON INCOME (continued):
As
of
September 1, 2007, the Company is subject to Israeli income tax examinations
and
to U.S. Federal income tax examinations for the tax years of 2002 through 2007.
As of August 31, 2008, the Company did not record any change to its unrecognized
tax benefits.
NOTE
14 - RELATED PARTIES - TRANSACTIONS:
|
a. |
On
March 8, 2006, the Company entered into a research and license agreement
with Hadasit, a 9% shareholder of the Company. The primary researcher
for
Hadasit is Miriam Kidron the Company’s Chief Medical and Technology
Officer and director.
|
|
b. |
On
January 18, 2008, Oramed entered into an agreement with a director
that
will provide managerial services, pursuant to which the director
will be
entitled to an annual payment of $15,000, as a reimbursement of expenses.
. In connection with the Company’s private placement on July 14, 2008, the
director received $85,000 as a finders fee.
|
|
c. |
On
July 1, 2008, the Subsidiary entered into a consulting agreement
with KNRY
Ltd. (“KNRY”), an Israeli company owned by Nadav Kidron, whereby Mr. Nadav
Kidron, through KNRY, will provide services as President and Chief
Executive Officer of both Oramed and the Subsidiary (the “Nadav Kidron
Consulting Agreement”). Additionally, on July 1, 2008, the Subsidiary
entered into a consulting agreement with KNRY whereby Dr. Miriam
Kidron,
through KNRY, will provide services as Chief Medical and Technology
Officer of both Oramed and the Subsidiary (the “Miriam Kidron Consulting
Agreement” and together with the Nadav Kidron Consulting Agreement, the
“Consulting Agreements”). The Consulting Agreements replace the existing
employment agreements entered into between the Company and KNRY,
dated as
of August 1, 2007, pursuant to which Nadav Kidron and Miriam Kidron,
respectively, provide services to Oramed and the
Subsidiary.
|
The
Consulting Agreements are both terminable by either party upon 60 days prior
written notice. The Consulting Agreements provide that KNRY (i) will be paid,
under each of the Consulting Agreements, in New Israeli Shekels (“NIS”) a gross
amount of NIS50,400 + Value-Added-Tax per month (as of August 31, 2008 the
monthly payment in the Company's functional currency is $14,030+VAT) and (ii)
will be reimbursed for reasonable expenses incurred in connection with
performance of the Consulting Agreements.
NOTE
15 – SUBSEQUENT EVENTS:
|
a.
|
On
September 8, 2008, the Company entered into Clinical Research agreement
with ETI Karle Clinical Pvt. Ltd. (“ETI”), pursuant to the agreement ETI
will be conducting clinical trials for the Company in India. In
consideration for the services provided under the agreement ETI will
be
entitled to an estimated cash compensation of $227,604.
|
|
b.
|
On
October 12, 2008, an aggregate of 884,000 options were granted to
two
employees of the subsidiary at an exercise price of $0.47 per share.
The
options vest in three equal annual installments commencing on May
1, 2009
and will expire on October 12,
2018.
|
|
c.
|
On
October 17, 2008, the Company issued 203,904 shares of its common
stock to
Swiss as remuneration for the services provided, in the amount of
$152,928.
|
ITEM
8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM
8A – CONTROLS AND PROCEDURES
(a)
Our management, including our chief executive officer and chief financial
officer, has evaluated the effectiveness of our disclosure controls and
procedures as of August 31, 2008. Based on such review, our chief executive
officer and chief financial officer have determined that in light of their
conclusion with respect to the effectiveness of our internal control over our
financial reporting as of such date, that the company did not have in place
effective controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934, as amended, is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure, and is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and
forms.
(b)
Our management, under the supervision of our chief executive officer and chief
financial officer, is responsible for establishing and maintaining adequate
internal control over our financial reporting, as defined in Rules 13a-15(f)
and
15d-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s
internal control over financial reporting is defined as a process designed
to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control over financial
reporting includes policies and procedures that:
|
· |
pertain
to the maintenance of records that in reasonable detail accurately
and
fairly reflect our transactions and asset dispositions;
|
|
· |
provide
reasonable assurance that transactions are recorded as necessary
to permit
the preparation of our financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures
are
being made only in accordance with authorizations of our management
and
directors; and
|
|
· |
provide
reasonable assurance regarding the prevention or timely detection
of
unauthorized acquisition, use or disposition of assets that could
have a
material effect on our financial statements.
|
Under
the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we evaluated the
effectiveness of our internal control over financial reporting as of August
31,
2008 based on the framework for Internal Control-Integrated Framework set forth
by The Committee of Sponsoring Organizations of the Treadway Commission. Due
to
the inherent limitations of our company, derived from our small size and the
limited number of employees, management evaluation concluded that there is
a
material weakness with respect to segregation of duties that may not provide
reasonable assurance regarding the reliability of internal control over
financial reporting and may not prevent or detect misstatements. Specifically,
our CFO serves as our only qualified internal accounting and financial reporting
personnel and as such performs all accounting and financial reporting functions
without the benefit of independent checks, confirmations or backup other than
bookkeeping functions performed by an outside accounting firm. In addition,
projections of any evaluation of effectiveness to future periods are subject
to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Based
on this evaluation, our management concluded that there is no reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and that the Company’s internal controls over
financial reporting were not effective as of August 31, 2008.
Subsequent
to August 31, 2008, management, including our principal executive officer and
principal financial officer, has started an extensive process, of documenting
all process related to the financial reporting, in order to strengthen our
internal controls over financial reporting in order to reasonably ensure that
reliability of financial reporting and the preparation of financial statements.
This
management report on internal control over financial reporting shall not be
deemed to be filed for purposes of Section 18 of the Securities Exchange Act
of
1934, as amended or otherwise subject to the liabilities of that Section.
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 temporary rules of the Commission that permit us
to
provide only management’s report in this Annual report.
To
improve our internal control over financial reporting, subsequent to year-end,
we have launched a comprehensive program designed to strengthen our internal
controls over financial reporting. Among other things, the program provides
for
the engagement of an outside consulting accounting firm (separate from our
independent auditing firm) to review the Company’s financial reports on a
quarterly basis and the implementation of an improved documentation system
underlying financial reports
(c)
There were no changes in our internal controls over financial reporting
identified with the evaluation thereof that occurred during the quarter ended
August 31, 2008 that have materially affected, or are reasonable likely to
materially affect our internal control over financial reporting.
ITEM
8B – OTHER INFORMATION
None
PART
III
ITEM
9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
Set
forth
below is certain information with respect to the individuals who are our
directors, executive officers and significant employees.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Nadav
Kidron
|
|
34
|
|
President,
Chief Executive Officer and Director
|
|
|
|
|
|
Miriam
Kidron
|
|
67
|
|
Chief
Medical and Technology Officer and Director
|
|
|
|
|
|
Leonard
Sank
|
|
43
|
|
Director
|
|
|
|
|
|
Harold
Jacob
|
|
54
|
|
Director
and member of the Scientific Advisory Board
|
|
|
|
|
|
Chaime
Orlev
|
|
38
|
|
Chief
Financial Officer and Treasurer
|
Business
Experience
The
following is a brief account of the education and business experience during
at
least the past five years of each director, executive officer and significant
employee, indicating the principal occupation during that period, and the name
and principal business of the organization in which such occupation and
employment were carried out.
Mr.
Nadav Kidron
was
appointed as President Chief Executive Officer and Director in March
2006. Mr. Kidron is an entrepreneur whose expertise includes senior executive
roles in a wide range of industries. From 2003 – 2006 he was the managing
director at the Institute of Advanced Jewish Studies – Bar Ilan University.
From 2001 - 2003, he was a lawyer intern at with Wine Mishaiker and Erenstof
Law
Offices in Jerusalem, Israel. Mr. Kidron obtained his LLB from the Bar –
Ilan University and is currently enrolled in the International MBA program
at
the Bar - Ilan University.
Dr.
Miriam Kidron was
appointed as Chief Medical and Technology Officer and Director on March 2006,
Dr. Kidron is a pharmacologist and a biochemist with a PhD in biochemistry.
From
1990 to 2007, Dr. Kidron has been a senior researcher in the Diabetes Unit
at
Hadassah University Hospital in Jerusalem, Israel. During
2003 and 2004 Dr. Kidron served as a consultant to Emisphere Technologies
Inc. a
company specializes in the developed broad-based proprietary drug delivery
platforms. Dr Kidron was formerly a visiting professor at the Medical School
at
the University of Toronto (Canada), and is a member of the American, European
and Israeli Diabetes Associations. Dr. Kidron is a recipient of the Bern
Schlanger Award.
Mr.
Leonard Sank
was
appointed as a Director during October 2007. Mr. Sank is a South African
entrepreneur and business man who is devoted to entrepreneurial endeavors
and
initiatives. He has over 20 years of experience where he has played an
important leadership role in developing businesses. During the past two
years Mr. Sank has disposed of his holdings in Eastvaal Motor Group a
diversified retail motor business and resigned as a director in 2007 He also
sold his investment in Vecto Finance a credit lending business and resigned
his
directorship in 2007. Mr. Sank has since acquired property and various other
investments as well as his stake in Oramed. Mr. Sank maintains a directorship
on
the board of South Africa’s biggest private company Macsteel Service Centers SA
Pty Ltd as well as serves on the board of local non profit charity organizations
in Cape Town where he resides.
Mr.
Chaime Orlev
joined
our Company in May 2008, he has many years of experience of financial management
experience in publicly traded companies, specializing in the high technology
sector. Mr, Orlev served as Chief Financial Officer of Gammacan International
Inc., a life science company focused on the development of immunotherapy and
related approaches to treat cancer, from October 2005 through February 2008.
From September 2004 to September 2005, Mr. Orlev acted as Chief Financial
Officer for Solel Solar Systems, an Israeli-based company specializing in the
development, manufacturing and marketing of solar energy systems and related
equipment, as well as coatings for different substrates. From April 2001 to
August 2004 Mr. Orlev was the Vice President, Finance and Chief Financial
Officer of Huntleigh, a provider of airport services to carriers. Mr. Orlev
holds an MBA from the Leon Recanati Graduate School of Business Administration
at the Tel Aviv University and a BA in Business Administration from the College
of Business in Israel. Mr. Orlev is a certified public accountant in
Israel.
Dr.
Harold Jacob
has a
strong background, both in medical sciences as well as biotechnology and medical
devices. He practiced clinical gastroenterology in New York and served as Chief
of Gastroenterology at St. Johns Episcopal Hospital and South Nassau Communities
Hospital in the years 1986-1995, and was a Clinical Assistant Professor of
Medicine at SUNY during the years 1983-1990. Dr. Jacob founded and served as
Editor in Chief of Endoscopy Review and has authored numerous publications
in
the field of gastroenterology. Since 1998, Dr. Jacob is president of Medical
Instrument, a company which provides a range of support and consulting services
to start-up and early stage companies as well as patenting it's own proprietary
medical devices. Dr. Jacob has advised a spectrum of companies in the past
and
he served as a consultant and then as the Director of Medical Affairs at Given
Imaging Ltd., during the years 1997 to 2003, a company that developed the first
swallowable wireless pill camera for inspection of the intestine. He has
licensed patents to a number of companies including Kimberly Clark Ballard.
Since 2003, Dr. Jacob is CEO of NanoVibronix, a medical device company using
surface acoustics to prevent catheter acquired infection as well as other
applications.
Board
of Directors and Officers
There
are
no agreements with respect to the election of directors. Each director is
elected for a period of one year at our annual meeting of stockholders and
serves until the next such meeting and until his or her successor is duly
elected. The board of directors may also appoint additional directors up to
a
maximum of fifteen directors. A director so chosen or appointed will hold office
until the next annual meeting of stockholders.
There
have been no events under any bankruptcy act, no criminal proceedings and no
judgments, injunctions, orders or decrees material to the evaluation of the
ability and integrity of any director, executive officer, or control person
of
the Company during the past five years.
Board
Meeting Attendance
During
the year ended August 31, 2008, our board held 3 meetings and took actions
by
written consent on 16 occasions. No incumbent director of the meeting attended
fewer than 75% of the aggregate of: (i) the total number of meetings of the
board (during the period for which such director served as a director); and
(ii) the total number of meetings held by all committees of the board on
which such director served (during the period for which such director served
on
such committees). Board members are encouraged to attend our annual meetings
of
stockholders.
Committees
As
of
August 31, 2008 the Board has not established any committees. The Board is
intending to establish and Audit and Compensation committee during the year
ending August 31, 2009.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished
to
us during fiscal year 2008, we believe that during fiscal year 2008,
other
than as set forth below, our
executive officers, directors and all persons who own more than ten percent
of a
registered class of our equity securities complied with all Section 16(a) filing
requirements. The Form 3 of one of our directors, Harold Jacob, was not timely
filed.
Code
of Ethics
We
have
adopted a Code of Ethics for our officers, directors and employees. A copy
of
the Code of Ethics is located at our website at www.oramed.com.
ITEM
10 - EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth the compensation earned during the years ended August
31 2007 and 2008 by our President and Chief Executive Officer, our Chief Medical
and Technology Officer, our Chief Financial Officer and former Chief Financial
Officer (the “Named
Executive Officers”):
Name and
Principal
Position
|
|
Year
(1)
|
|
Salary
($)
|
|
Bonus
($)
(2)
|
|
Stock
Awards
($)
(3)
|
|
Option
Awards
($)
(4)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(5)
|
|
Nonqualified
Deferred
Compensation
($)
(6)
|
|
All Other
Compensation
($)
(7)
|
|
Total
($)
|
|
Nadav
Kidron
President
and
|
|
|
2008
|
|
|
151,037
|
|
|
Nil
|
|
|
Nil
|
|
|
216,504
|
|
|
Nil
|
|
|
Nil
|
|
|
14,511
|
|
|
382,053
|
|
CEO
and
director
(8)
|
|
|
2007
|
|
|
84,900
|
|
|
Nil
|
|
|
Nil
|
|
|
225,225
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
310,125
|
|
Miriam
Kidron
Chief
Medical
and
|
|
|
2008
|
|
|
145,405
|
|
|
Nil
|
|
|
Nil
|
|
|
216,504
|
|
|
Nil
|
|
|
Nil
|
|
|
10,774
|
|
|
372,683
|
|
Technology
Officer
and
director
(9)
|
|
|
2007
|
|
|
62,500
|
|
|
Nil
|
|
|
Nil
|
|
|
1,573,564
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
1,636,064
|
|
Chaime
Orlev
|
|
|
2008
|
|
|
23,484
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
7,981
|
|
|
31,466
|
|
CFO
and
Secretary(10)
|
|
|
2007
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Alex
Werber
CFO
and
|
|
|
2008
|
|
|
36,129
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
36,129
|
|
Secretary(11)
|
|
|
2007
|
|
|
4,000
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
4,000
|
|
1
|
|
The
information is provided for each fiscal year which begins on September
1
and ends on August 31.
|
2
|
|
No
bonus awards were made to the Named Executive Officers in the fiscal
years
ended August 31, 2008 and 2007.
|
3
|
|
No
stock awards were granted to the Named Executive Officers in the
fiscal
years ended August 31, 2008 and 2007.
|
4
|
|
The
amounts reflect the compensation expense in accordance with FAS
123(R) of
these option awards. The assumptions used to determine the fair
value of
the option awards for fiscal years ended August 31, 2008 and 2007
are set
forth in the notes to of our audited consolidated financial statements
included in our Form 10-KSB for fiscal year ended August 31, 2008.
Our
Named Executive Officers will not realize the value of these awards
in
cash unless and until these awards are exercised and the underlying
shares
subsequently sold.
|
5
|
|
We
do not have a non-equity incentive compensation plan.
|
6
|
|
We
do not have a deferred non-qualified compensation plan.
|
7
|
|
See
All Other Compensation Table below.
|
8
|
|
Mr.
Kidron was appointed as our President, CEO and Director on March
8,
2006.
|
9
|
|
Ms.
Kidron was appointed as our Chief Medical and Technology Officer
and
Director on March 8, 2006.
|
10
|
|
Mr.
Orlev was appointed as our CFO and Secretary on May 1,
2008.
|
11
|
|
Mr.
Werber served as our CFO and Secretary from August 1, 2007 thorough
April
30, 2008.
|
All
Other Compensation Table
All
Other
Compensation amounts in the Summary Compensation Table consist of the
following:
Name
|
|
Year
|
|
Automobile
Related
Expenses
($)
|
|
Manager’s
Insurance
*
($)
|
|
Education
Fund*
($)
|
|
Total
($)
|
|
Nadav
Kidron
|
|
|
2008
|
|
|
14,511
|
|
|
Nil
|
|
|
Nil
|
|
|
14,511
|
|
Miriam
Kidron
|
|
|
2008
|
|
|
10,774
|
|
|
Nil
|
|
|
Nil
|
|
|
10,774
|
|
Chaime
Orlev
|
|
|
2008
|
|
|
3,218
|
|
|
3,379
|
|
|
1,384
|
|
|
7,981
|
|
_______________
*
|
Manager’s
insurance and education funds are customary benefits provided to
employees
based in Israel. Manager’s insurance is a combination of severance savings
(in accordance with Israeli law), defined contribution tax-qualified
pension savings and disability insurance premiums. An Education fund
is a
savings fund of pre-tax contributions to be used after a specified
period
of time for educational or other permitted
purposes.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information concerning stock options and stock awards
held by the Named Executive Officers as of August 31, 2008.
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
Held
That
Have
Not Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock Held
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
Nadav
Kidron
|
|
|
850,000
|
(1)
|
|
-
|
|
|
-
|
|
|
0.45
|
|
|
08/01/12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
288,000
|
(2)
|
|
576,000
|
(2)
|
|
-
|
|
|
0.54
|
|
|
05/06/18
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Miriam
|
|
|
3,361,360
|
(3)
|
|
-
|
|
|
-
|
|
|
0.001
|
|
|
08/13/12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Kidron
|
|
|
850,000
|
(1)
|
|
-
|
|
|
-
|
|
|
0.45
|
|
|
08/01/12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
288,000
|
(2)
|
|
576,000
|
(2)
|
|
-
|
|
|
0.54
|
|
|
05/06/18
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1)
|
On
August 2, 2007, 1,700,000 options were granted to Nadav Kidron and
Miriam
Kidron under the 2006 Stock Option Plan at an exercise price of $0.45
per
share; the options vested immediately and have an expiration date
of
August 2, 2012.
|
|
|
(2)
|
On
May 7, 2008, 1,728,000 options were granted to Nadav Kidron and Miriam
Kidron under the 2008 Stock Option Plan at an exercise price of $0.54
per
share, 288,000 of the options vested immediately on the date of grant
and
the remainder will vest in twenty equal monthly installments, commencing
on June 7, 2008. The options have an expiration date of May 7,
2018.
|
|
|
(3)
|
On
August 14, 2007, 3,361,630 stock options were granted to Miriam Kidron,
at
an exercise price of $0.001 per share; the options vested immediately
and
have an expiration date of August 14, 2012. These options were not
issued
pursuant to any outstanding award plans.
|
Stock
Option Plans
2006
Stock Option Plan
On
October 15, 2006, the Company’s board of directors adopted the 2006 Stock Option
Plan (the “2006 Plan”) in order to attract and retain quality personnel. Under
the 2006 Plan, 3,000,000 shares have been reserved for the grant of options
by
the board. As of August 31, 2008, options with respect to 2,950,000 shares
have
been granted under the 2006 Plan.
2008
Stock Incentive Plan
On
May 5,
2008, the Company’s board of directors adopted the 2008 Stock Incentive Plan
(the “2008 Plan”) in order to attract and retain quality personnel. The 2008
Plan provides for the grant of stock options, restricted stock, restricted
stock
units and stock appreciation rights, collectively referred to as “awards.” Stock
options granted under the Plan may be either incentive stock options under
the
provisions of Section 422 of the Internal Revenue Code, or non-qualified stock
options. Incentive stock options may be granted only to employees of the Company
or a parent or subsidiary of the Company. Awards other than incentive stock
options may be granted to employees, directors and consultants. Under the 2008
Plan, 8,000,000 shares have been reserved for the grant of options, which may
be
issued at the discretion of our board of directors from time to time. As of
August 31, 2008, options exercisable for an aggregate of 1,878,000 shares have
been granted.
On
August
14, 2007 the Company granted to Miriam Kidron options to purchase up to
3,361,360 shares at an exercise price of $0.001; the options vested immediately
and have an expiration date of August 14, 2012. These options are not governed
by any of the plans detailed above.
Employment
and Consulting Agreements
Effective
August 1, 2007 we entered into employment agreements with KNRY Ltd. (“KRNY”),
pursuant to which Nadav Kidron and Dr. Miriam Kidron provided employment
services to our company. Based on the agreements, Nadav Kidron served as the
President and Chief Executive officer and Miriam Kidron served as the Chief
Medical and Technology Officer of the Company. As remuneration for such
services, KNRY was paid $20,000 per month, commencing on August 1,
2007.
On
July
1, 2008, Oramed Ltd., our Israeli subsidiary, entered into a consulting
agreement with KNRY, whereby Mr. Nadav Kidron, through KNRY, provides services
as President and Chief Executive Officer of both the Company and Oramed Ltd.
(the “Nadav Kidron Consulting Agreement”). Additionally, on July 1, 2008, Oramed
Ltd. entered into a consulting agreement with KNRY whereby Dr. Miriam Kidron,
through KNRY, provides services as Chief Medical and Technology Officer of
both
the Company and Oramed Ltd. (the “Miriam Kidron Consulting Agreement” and
together with the Nadav Kidron Consulting Agreement, the “Consulting
Agreements”). The Consulting Agreements replace the employment agreements
entered into between the Company and KNRY, dated as of August 1, 2007 referenced
above.
The
Consulting Agreements are both terminable by either party upon 60 days prior
written notice. The Consulting Agreements provide that KNRY (i) will be paid,
under each of the Consulting Agreements, in New Israeli Shekels (“NIS”) a gross
amount of NIS50,400 + Value-Added-Tax per month and (ii) will be reimbursed
for
reasonable expenses incurred in connection with performance of the Consulting
Agreements.
Pursuant
to the Consulting Agreements, KNRY, Nadav Kidron and Miriam Kidron each agree
that during the term of the Consulting Agreements and for a 12 month period
thereafter, none of them will compete with Oramed Ltd. nor solicit employees
of
Oramed Ltd.
The
Company, through its Israeli subsidiary, Oramed Ltd., has entered into an
employment agreement with Chaime Orlev (the “Orlev Employment Agreement”) as of
May 1, 2008, pursuant to which Mr. Orlev was appointed as Chief Financial
Officer (“CFO”), Treasurer and Secretary of Oramed. Mr. Orlev’s responsibilities
include oversight of Oramed’s financial reporting and controls.
The
Orlev
Employment Agreement provides that for the period through July 31, 2008 (the
“First Term”), Mr. Orlev was employed to work on a part-time basis and was
compensated a gross monthly amount of NIS 20,000. Beginning on September 1,
2008
and continuing until the Orlev Employment Agreement is terminated by either
party pursuant to the Orlev Employment Agreement (the “Second Term”), Mr. Orlev
will serve Oramed in a full-time capacity and will be compensated a gross
monthly amount of NIS 30,000. Mr. Orlev has also agreed that during the term
of
his employment with Oramed and for a 12 month period thereafter, he will not
compete with Oramed nor solicit employees of Oramed.
On
May 1,
2008 Oramed entered into a consulting agreement with a Dr. Ehud Arbit (“Dr.
Arbit”) for a period of twelve months, pursuant to which the Consultant will
assist our efforts to complete the FDA approval process for its oral insulin
capsule. Dr. Arbit is entitled to a fixed monthly fee of $8,333 effective from
May 1, 2008, and reimbursement of pre-approved out of pocket expenses. On
October 3, 2008, the Company amended a consulting agreement with Dr. Arbit,
pursuant to the amendment the Consultant will perform his work under the
contract on a full time basis and his compensation will be $16,666 per month
commencing on July 1, 2008.
On
November 2, 2008, we entered into indemnification agreements with our directors
and officers pursuant to which we agreed to indemnify each director and
executive officer for any liability he or she may incur by reason of the fact
that he or she serves as our director or executive officer, to the maximum
extent permitted by law.
Director
Compensation
Directors
are entitled to reimbursement for reasonable travel and other out-of-pocket
expenses incurred in connection with attendance at meetings of our board of
directors. Effective September 1, 2008, each independent director is entitled
to
receive as remuneration for his or her service as a member of the board a sum
equal to US$8,000 per annum, to be paid quarterly and shortly after the close
of
each quarter. Leonard Sank and Harold Jacob are the only independent members
of
the board of directors. The board of directors may award special remuneration
to
any director undertaking any special services on behalf of us other than
services ordinarily required of a director.
Other
than indicated in this Annual Report, no director received and/or accrued any
compensation for his or her services as a director, including committee
participation and/or special assignments.
The
following table sets forth director compensation for the year ended August
31,
2008.
Name of Director
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards(1)
($)
|
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Nadav
Kidron (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miriam
Kidron (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard
Sank
|
|
|
100,000
|
(3)
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
100,000
|
|
Harold
Jacob
|
|
|
Nil
|
|
|
Nil
|
|
|
7,567
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
7,567
|
|
1
|
The
amounts reflect the compensation expense in accordance with FAS
123(R) of
these option awards. The assumptions used to determine the fair
value of
the option awards are set forth in Note 8 of our audited consolidated
financial statements included in this Form 10-KSB. Our directors
will not
realize the value of these awards in cash unless and until these
awards
are exercised and the underlying shares subsequently
sold.
|
2
|
Please
refer to the summary compensation table for executive compensation
with
respect to the named individual.
|
3
|
The
Compensation includes $85,000 received as finders fee in connection
with
the July 2008 private placement as well as $15,000 as reimbursement
of
expense pursuant to an agreement dated January 18,
2008.
|
ITEM
11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth certain information regarding beneficial ownership
of
our common stock as of August 31, 2008 by (i) by each person who is known
by us to own beneficially more than 5% of the Common Stock, (ii) by each of
the Named Executive Officers and (iv) by all our directors and executive
officers as a group. On such date, we had 56,456,710 shares of Common Stock
outstanding.
As
used
in the table below and elsewhere in this form, the term “beneficial
ownership”
with
respect to a security consists of sole or shared voting power, including the
power to vote or direct the vote and/or sole or shared investment power,
including the power to dispose or direct the disposition, with respect to the
security through any contract, arrangement, understanding, relationship, or
otherwise, including a right to acquire such power(s) during the next 60 days
following August 31, 2008.
Name an address of Beneficial
Owner
|
|
Number of Shares
|
|
Percentage of Shares
Beneficially Owned
|
|
|
|
|
|
|
|
Nadav
Kidron †‡
10
Itamar Ben Avi St.
Jerusalem,
Israel
|
|
|
11,581,735
|
(1)
|
|
20.08
|
%
|
Zeev
Bronfeld
6
Uri St.
Tel-Aviv,
Israel
|
|
|
6,158,517
|
|
|
10.91
|
%
|
Miriam
Kidron †‡
2
Elza St.
Jerusalem,
Israel
|
|
|
4,571,360
|
(2)
|
|
7.49
|
%
|
Apollo
Nominees Inc
One
Financial Place Suite 100
Lower
Collymore Rock
St.
Michael, Barbados
|
|
|
4,517,501
|
(3)
|
|
7.78
|
%
|
Hadassit
Medical Research
Services
& Development Ltd
P.O.
Box 12000
Jerusalem,
Israel
|
|
|
4,141,532
|
|
|
7.34
|
%
|
Leonard
Sank †
3
Blair Rd Camps Bay
Cape
Town, South Africa
|
|
|
3,982,650
|
(4)
|
|
6.88
|
%
|
Harold
Jacob †
Haadmur
Mebuyon 26
Jerusalem,
Israel
|
|
|
100,000
|
(5)
|
|
*
|
|
Chaime
Orlev ‡
10
Hameyasdim St.
Kiryat
Ono, Israel
|
|
|
Nil
|
|
|
Nil
|
|
All
current Executive Officers and Directors as a group (five
persons)
|
|
|
12,729,385
|
(6)
|
|
26.37
|
%
|
*
|
|
Less
than 1%
|
†
|
|
Indicates
Director
|
‡
|
|
Indicates
Officer
|
(1)
|
|
Includes
1,210,000 shares of common stock issuable upon the exercise of outstanding
stock options.
|
(2)
|
|
Includes
4,571,360 shares of common stock issuable upon the exercise of outstanding
stock options.
|
(3)
|
|
Includes
1,645,834 shares of common stock issuable upon the exercise of warrants
beneficially owned by the referenced entity.
|
(4)
|
|
Includes
1,625,000 shares of common stock issuable upon the exercise of warrants
beneficially owned by such individual.
|
(5)
|
|
Consists
of 100,000 shares of common stock issuable upon the exercise of
outstanding stock options.
|
(6)
|
|
Includes
2,935,000 shares of common stock issuable upon the exercise of outstanding
stock options.
|
ITEM
12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Except
as
otherwise indicated below, we have not been a party to any transaction, proposed
transaction, or series of transactions in which the amount involved exceeds
$60,000, and in which, to its knowledge, any of its directors, officers, five
percent beneficial security holder, or any member of the immediate family of
the
foregoing persons has had or will have a direct or indirect material interest.
Our
policy is to enter into transactions with related parties on terms that, on
the
whole, are no less favorable than those available from unaffiliated third
parties. Based on our experience in the business sectors in which we operate
and
the terms of our transactions with unaffiliated third parties, we believe that
all of the transactions described below met this policy standard at the time
they occurred.
Leonard
Sank, one of our directors, was paid a finders fee of $85,000 in connection
with
our private placement of shares of our common stock and warrants on July 14,
2008.
Dr.
Miriam Kidron is Mr. Nadav Kidron’s mother. There are no other directors or
officers of our company who are related by blood or marriage.
The
Board
has determined that Leonard Sank and Harold Jacob are independent as defined
under the rules promulgated by the NASDAQ Stock Market.
See
“Employment and Consulting Agreements” above for information as to the
agreements with our employees and consultants.
ITEM
13 – EXHIBITS
Exhibits:
3.1
Articles
of Incorporation (incorporated by reference from our Registration Statement
on
Form SB-2, filed on November 29, 2002).
3.2
Bylaws
(incorporated by reference from our Current Report on Form 8-K filed on April
10, 2006).
3.3
Articles
of Merger filed with the Nevada Secretary of State on March 29, 2006
(incorporated by reference to our Current Report on Form 8-K filed on April
10,
2006).
4.1
Specimen
Stock Certificate (incorporated by reference from our Registration Statement
on
Form SB-2, filed on November 29, 2002).
4.2 Form
of
Warrant Certificate (incorporated by reference from our current report on Form
8-K filed July 15, 2008)
4.3 Convertible
Debenture issued by the Registrant to Epsom Investment Services, dated February
12, 2007 (incorporated by reference from our Quarterly Report on Form 10-QSB
filed on April 14, 2008)
4.4 Convertible
Debenture issued by the Registrant to Epsom Investment Services, dated May
31,
2007 (incorporated by reference from our Quarterly Report on Form 10-QSB filed
on April 14, 2008)
10.1
Form
of
Securities Purchase Agreement for February 6, 2006 private placement
(incorporated by reference from our current report on Form 8-K filed February
6,
2006)
10.2
Agreement
between our company and Hadasit Medical Services and Development Ltd. dated
February 17, 2006 concerning the acquisition of U.S. patent application
60/718716 (incorporated by reference from our current report on Form 8-K filed
February 17, 2006).
10.3
Consulting
Agreement between our company and Dr. Miriam Kidron (incorporated by reference
from our current report on Form 8-K filed February 17, 2006).
10.4
Agreement
between our company and Swiss Caps Ag dated October 30, 2006 (incorporated
by
reference from our current report on Form 8-K filed October 26, 2006).
10.5
Stock
Option Plan dated October 15, 2006 (incorporated by reference from our current
report on Form 8-K filed on November 28, 2006).
10.6
Stock
Option Agreement dated November 23, 2006 (incorporated by reference from our
current report on Form 8-K filed on November 28, 2006).
10.7
Form
of
subscription agreement and warrant certificate (incorporated by reference from
our current report on Form 8-K filed on June 18, 2007)
10.8
Service
Agreement, dated April 21, 2008, between Oramed Pharmaceuticals Inc. and
Encorium Group, Inc.
10.9
Employment
Agreement dated August 1, 2007 between Oramed Pharmaceuticals Inc. and Alex
Werber (incorporated by reference from our current report on Form 8-K filed
on
August 3, 2007)
10.10
Form
of
Shares for Services agreement (incorporated by reference from our current report
on Form 8-K filed on August 3, 2007)
10.11
Employment
Agreement dated August 1, 2007 between Oramed Pharmaceuticals Inc. and Nadav
Kidron (incorporated by reference from our current report on Form 8-K filed
on
August 28, 2007)
10.12
Employment
Agreement dated August 1, 2007 between Oramed Pharmaceuticals Inc. and Dr.
Miriam Kidron (incorporated by reference from our current report on Form 8-K
filed on August 28, 2007)
10.13
Investor
Relations Agreement dated August 27, 2007 between Oramed Pharmaceuticals Inc.
and The Investor Relations Group Inc. (incorporated by reference from our
current report on Form 8-K filed on September 10, 2007)
10.14 Master
Services Agreement dated January 29, 2008 between Oramed Pharmaceuticals Inc.
and OnQ Consulting (incorporated by reference from our current report on Form
8-K filed on February 1, 2008)
10.15 Expense
Agreement dated January 18, 2008 between Oramed Pharmaceuticals Inc. and Leonard
Sank (incorporated by reference from our current report on Form 8-K filed on
February 1, 2008)
10.16 Employment
Agreement by and between Oramed Ltd. and Chaime Orlev entered into as of May
1,
2008 (incorporated by reference from our current report on Form 8-K filed on
May
7, 2008)
10.17 Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July
1,
2008 for the services of Nadav Kidron (incorporated by reference from our
current report on Form 8-K filed on July 2, 2008)
10.18 Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July
1,
2008 for the services of Miriam Kidron (incorporated by reference from our
current report on Form 8-K filed on July 2, 2008)
10.19 Oramed
Pharmaceuticals Inc. 2008 Stock Incentive Plan (incorporated by reference from
our current report on Form 8-K filed on July 2, 2008)
10.20 Form
of
Notice of Stock Option Award and Stock Option Award Agreement (incorporated
by
reference from our current report on Form 8-K filed on July 2,
2008).
10.21 Form
of
Stock Purchase Agreement (incorporated by reference from our current report
on
Form 8-K filed on July 15, 2008)
10.22* Consulting
Agreement, dated May 1, 2008, between Oramed Pharmaceuticals Inc. and Dr. Ehud
Arbit
10.23*
Amended and Restated Consulting Agreement, dated as of May 1, 2008, between
Oramed Pharmaceuticals Inc. and Dr. Ehud Arbit
10.24*
Amended to Consulting Agreement, dated as of October 3,
2008, between Oramed Pharmaceuticals Inc. and Dr. Ehud Arbit
14.1 Code
of
Ethics (incorporated by reference from our current report on Form 8-K filed
on
November 29, 2007)
31.1*
Certification
Statement of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2*
Certification
Statement of the Principal Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1*
Certification
Statement of the Principal Executive and Accounting Officers pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act Of 2002
* Filed
herewith
ITEM
14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
We
incurred the following fees to Kesselman & Kesselman, certified public
accountants (Isr.), a member of PricewaterhouseCoopers International Limited,
for services rendered during the fiscal year ended August 31, 2008. For the
year
ending August 31, 2007 the fees are in connection with services provided by
Malone & Bailey, PC, certified public accountants (US):
Summary:
|
|
2008
|
|
2007
|
|
Audit
fees(1)
|
|
$
|
105,965
|
|
$
|
31,500
|
|
Audit
related fees(2)
|
|
|
—
|
|
|
—
|
|
Tax
fees(3)
|
|
$
|
32,630
|
|
|
—
|
|
Other
fees
|
|
|
—
|
|
|
—
|
|
|
(1) |
Amount
represents fees paid for professional services for the audit of our
consolidated annual financial statements and review of our interim
consolidated financial statements included in quarterly reports and
services that are normally provided by our accountants in connection
with
statutory and regulatory filings or
engagements.
|
|
(2) |
Amount
represents fees paid for professional services for assurance and
related
services by our accountants that are reasonably related to the performance
of the audit or review of our financial statements and are not reported
under item (1).
|
|
(3) |
Amount
represents fees paid for professional services for tax compliance
and tax
advice.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
of
1934, the Registrant has duly caused this Report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
|
ORAMED
PHARMACEUTICLAS INC. |
|
|
|
/s/
NADAV KIDRON
|
|
Nadav
Kidron,
|
|
President
and Chief Executive Officer
|
|
(principal
executive officer)
|
|
|
|
/s/
CHAIME ORLEV
|
|
Chaime
Orlev,
|
|
Chief
Financial Officer
|
|
(principal
accounting officer)
|
|
|
|
Date:
November 26, 2008
|
Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report
has
been signed below by the following persons on behalf of the registrant in the
capacities as on November 26, 2008.
|
/s/
NADAV KIDRON
|
|
Nadav
Kidron,
|
|
President
and Chief Executive Officer and Director
|
|
|
|
/s/
MIRIAM KIDRON
|
|
Miriam
Kidron,
|
|
Chief
Medical and Technology Officer and Director
|
|
|
|
/s/
LEONARD SANK
|
|
Leonard
Sank,
|
|
Director
|
|
|
|
/s/
HAROLD JACOB
|
|
Harold
Jacob,
|
|
|