As used in this Annual
Report on Form 10-K, the terms “we,” “us,” “our,” the “Company,” and “Oramed”
mean Oramed Pharmaceuticals Inc. and our wholly-owned subsidiaries, Oramed Ltd. an Israeli corporation, and Oramed HK Limited,
a Hong Kong corporation, unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.
PART
I
ITEM
1. BUSINESS.
DESCRIPTION
OF BUSINESS
Research
and Development
We
are a pharmaceutical company currently engaged in the research and development of innovative pharmaceutical solutions, including
an oral insulin capsule to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules or
pills for delivery of other polypeptides. We utilize Clinical Research Organizations, or CROs, to conduct our clinical studies.
Through
our research and development efforts, we have successfully developed an oral dosage form intended to withstand the harsh environment
of the stomach and intestines and effectively deliver active insulin or other proteins, such as Glucagon-like peptide-1, or GLP-1,
leptin, and others. The excipients in the formulation are not intended to modify the proteins chemically or biologically, and
the dosage form is designed to be safe to ingest. We plan to continue to conduct clinical trials to show the effectiveness of
our technology.
Oral
insulin: Our proprietary flagship product, an orally ingestible insulin capsule, or ORMD-0801, 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 the passage in a more physiological manner than current delivery methods of insulin.
FDA
Guidance: In August 2017, the U.S. Food and Drug Administration, or FDA, instructed us that the regulatory pathway for the
submission of ORMD-0801 would be a Biologics License Application, or BLA. If approved the BLA pathway would grant us 12 years
of marketing exclusivity for ORMD-0801, from the approval date, and an additional six months of exclusivity may be granted to
us if the product also receives approval for use in pediatric patients.
Phase IIb Study:
In May 2018, we initiated a three-month dose-ranging Phase IIb clinical trial of ORMD-0801 (Cohort A). This placebo controlled,
randomized, 90-day treatment clinical trial was conducted on 269 type 2 diabetic patients in multiple centers throughout the United
States pursuant to an Investigational New Drug application, or IND, with the FDA. The primary endpoints of the trial were to assess
the safety and evaluate the effect of ORMD-0801 on HbA1c levels over a 90-day treatment period. Secondary endpoints of the trial
included measurements of fasting plasma glucose, or FPG, post-prandial glucose, or PPG levels, during a mixed-meal tolerance test,
or MMTT, and weight. In May 2019, we initiated an extension of this protocol for approximately 75 type 2 diabetic patients, who
were dosed using a lower dosage of insulin (Cohort B).
Cohort
A: In November 2019, we announced positive results from the initial cohort of the Phase IIb trial. Patients randomized in the
trial to once-daily ORMD-0801 achieved a statistically significant (p-value 0.036) reduction from baseline in HbA1c of 0.60% (0.54%
with placebo adjustment). This 0.54% reduction in HbA1c is clinically meaningful. Treatment with ORMD-0801 demonstrated an excellent
safety profile, with no serious drug-related adverse events and with no increased frequency of hypoglycemic episodes when compared
to placebo. In addition, during this 90-day trial, no weight gain was observed. In the initial cohort, 269 U.S.-based patients
were enrolled and treated with a dose-increasing approach: 16 mg initial dose, titrated to 24 mg per dose, and then titrated to
32 mg per dose. Patients were randomized into three groups to assess dosing frequency: once-daily (32 mg per day), twice-daily
(64 mg per day), thrice daily (96 mg per day). There was a corresponding placebo for each treatment arm. Two hundred nine (209)
patients completed treatment to the 12-week endpoint and were included in the data analysis (24 subjects did not complete the full
12 weeks of treatment). The twice-daily arms achieved statistically significant (p-value 0.042) reductions from baseline in HbA1c
of 0.59% (0.53% with placebo adjustment). The thrice-daily arm did not meet statistical significance (p-value 0.093). In addition,
due to evidence of treatment-by-center interaction, two sites (36 patients (13.4% of enrolled subjects)) were excluded from the
statistical analysis as they showed results opposite from the rest of the statistically significant results. Our internal investigation
as well as an independent investigation did not find a cause for such discrepancy.
Cohort
B: In February 2020, we announced positive topline data from the second and final cohort of the Phase IIb trial with a different
regimen across three daily dose ranges (8 mg, 16 mg, 32 mg). Patients randomized in the trial treated with 8 mg of ORMD-0801 once-daily
achieved a statistically significant (p-value 0.028) observed mean reduction of 1.29% from baseline and a least square mean reduction
of 0.95% from baseline, or 0.81% adjusted for placebo. Patients who had HbA1c readings above 9% at baseline and received 8 mg
of oral insulin once-daily experienced a 1.26% reduction in HbA1c by week 12. Treatment with ORMD-0801 at all doses demonstrated
an excellent safety profile, with no serious drug-related adverse events and with no increased frequency of hypoglycemic episodes
or weight gain compared to placebo. The primary efficacy endpoint was a reduction in HbA1c at week 12.
Phase III Study:
Based on guidance received from the FDA as part of the end-of-phase II meeting process for our oral insulin candidate, ORMD-0801,
we have submitted to the FDA the protocols for our upcoming pivotal Phase III studies. In line with the FDA’s expectations
and recommendations, we intend to conduct two Phase III studies concurrently in patients with type 2 diabetes. These studies involve
about 1,125 patients to provide evidence of ORMD-0801’s safety and efficacy in type 2 diabetic patients over a treatment
period of 6 to 12 months. A geographically diverse patient population will be recruited from multiple sites throughout the United
States, European, and Israel. Our phase III study will be composed from 2 protocols:
ORA-D-013-1:
This study will treat type 2 diabetic patients with inadequate glycaemic control who are currently on 1, 2 or 3 oral glucose-lowering
agents. This U.S. study will recruit 675 patients from 75 clinical sites located throughout the U.S. Patients will be randomized
1:1:1 in this double-dummy study into cohorts of: 8 mg ORMD-0801 once-daily at night and placebo 45 minutes before breakfast; 8
mg ORMD-0801 twice-daily, at night and 45 minutes before breakfast; and placebo twice-daily, at night and 45 minutes before breakfast.
The primary endpoint of the study is to evaluate the efficacy of ORMD-0801 compared to placebo in improving glycaemic control as
assessed by HbA1c, with a secondary efficacy endpoint of assessing the change from baseline in fasting plasma glucose at 26 weeks.
We expect to initiate this trial on the fourth quarter of 2020.
ORA-D-013-2:
This study will include type 2 diabetic patients with inadequate glycaemic control who are managing their condition with either
diet alone or with diet and metformin monotherapy. A total of 450 patients will be recruited through 36 sites in the U.S. and 25
sites in Western Europe and Israel. Patients will be randomized 1:1 into two cohorts dosed with: 8 mg ORMD-0801 at night; and placebo
at night. The primary endpoint is to evaluate the efficacy of ORMD-0801 compared to placebo in improving glycaemic control as assessed
by HbA1c over a 26-week treatment period, with a secondary efficacy endpoint of assessing the change from baseline in fasting plasma
glucose at 26 weeks. We expect to initiate this trial on the first half of 2021.
If we successfully
complete the pivotal studies, we expect to conduct a pre-BLA meeting with the FDA to finalize the plans and data for the BLA submission.
After BLA submission and review, if the BLA is approved by the FDA, a full 12 years of marketing exclusivity would be granted.
NASH Study: In
June 2020, we presented preliminary data from our open-label study of the first 8 patients of a planned 40-patient multi-center
(U.S., Europe and Israel) pilot study, aimed to assess the safety, tolerability, and early effects of 16 mg ORMD-0801 (2x8 mg capsules)
on liver fat in type 2 diabetic patients with nonalcoholic steatohepatitis, or NASH. The 12-week, once-daily treatment had no serious
adverse events, and induced an observed mean 6.9±6.8% reduction in liver fat content (p value: 0.035), and the relative
reduction was 30%, as measured by MRI-derived proton density fat fraction. In parallel, concentrations of gamma-glutamyltransferase
(GGT), a key marker of chronic hepatitis, were significantly lower after 12 weeks of treatment as compared to baseline (-14.6±13.1
U/L; p value: 0.008).
Type
1 Study: In November 2019, we initiated a crossover study of type 1 diabetic patients to compare the effects of ORMD-0801
given once daily versus the effects of ORMD-0801 given three times daily. This study showed no statistically significant, or clinically
meaningful differences in total exogenous insulin requirements, or plasma glucose levels in type 1 diabetic subjects treated with
ORMD-0801 8mg dosed once daily in the evening compared to those dosed with ORMD-0801 three times daily.
Oral
GLP-1: GLP-1 is an incretin hormone, which stimulates the secretion of insulin from the pancreas. In addition to our flagship
product, the ORMD-0801 insulin capsule, we are using our technology for an orally ingestible GLP-1 capsule, or ORMD-0901.
In February 2019, we
completed a Phase I pharmacokinetic trial to evaluate the safety and pharmacokinetics of ORMD-0901 compared to placebo. Based on
this trial results, we will conduct a follow-up Phase I trial in type 2 diabetic patients which will start its enrollment by the
end of 2020 in the United States under an IND submitted to the FDA.
The
following table gives an overview of the above described primary R&D pipeline:
Our
clinical trials are planned in order to substantiate our results as well as for purposes of making future filings for drug approval.
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.
Other Products:
We are developing a new drug candidate, a weight loss treatment in the form of an oral leptin capsule. We anticipate initiating
a proof of concept single dose study for this candidate to evaluate its pharmacokinetics and pharmacodynamics (glucagon reduction)
in 10 type 1 adult diabetic patients. During the third quarter of 2020, we finalized the study without any safety issues, and we
are waiting for the final lab results.
Raw
Materials
Our
oral insulin capsule is currently manufactured by Fidelio Healthcare, a diversified European Contract Development and Manufacturing
Organization (CDMO) in the pharmaceutical and healthcare industries.
In
July 2010, Oramed Ltd. entered into the Manufacturing and Supply Agreement, or MSA, with Sanofi-Aventis Deutschland GMBH, or Sanofi-Aventis.
According to the MSA, Sanofi-Aventis will supply Oramed Ltd. with specified quantities of recombinant human insulin to be used
for clinical trials. We also entered into an Insulin Supply Agreement in September 2020 with Hefei Tianmai Biological Technology
Development Limited, who will also supply Oramed Ltd. with specified quantities of recombinant human insulin to be used for clinical
trials.
We
purchase, pursuant to separate agreements with third parties, the raw materials required for the manufacturing of our oral capsule.
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 if we need to change suppliers. The termination
of our relationships with our suppliers or the failure of these suppliers to meet our requirements for raw materials on a timely
and cost-effective basis could have a material adverse effect on our business, prospects, financial condition and results of operations.
Market
Overview
Diabetes is a disease
in which the body does not produce or properly use insulin. Insulin is a hormone that causes sugar to be absorbed into cells, where
the sugar is converted into energy needed for daily life. The cause of diabetes is attributed both to genetics (type 1 diabetes)
and, most often, to environmental factors such as obesity and lack of exercise (type 2 diabetes). According to the International
Diabetes Federation, or IDF, an estimated 463 million adults (20-79 years) worldwide suffered from diabetes in 2019 and the IDF
projects this number will increase to 700 million by 2045. Also, according to the IDF, in 2019, an estimated 4.2 million people
died from diabetes. According to the American Diabetes Association, or ADA, in the United States there were approximately 34.2
million people with diabetes, or 10.5% of the United States population in 2018. Diabetes is a leading cause of blindness, kidney
failure, heart attack, stroke and amputation. The latest report of the ADA that analyzed the economic costs of diabetes in the
U.S in 2017 indicates that the total cost of diagnosed diabetes in the United States in 2017 was $327 billion.
Intellectual
Property
We
own a portfolio of patents and patent applications covering our technologies, and we are aggressively protecting these technology
developments on a worldwide basis.
Leadership
Management:
We are led by an experienced management team knowledgeable in the treatment of diabetes. Our Chief Scientific Officer, Miriam
Kidron, PhD, is a 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 Scientific Advisory Board is comprised of Dr. Roy Eldor, Professor Ele Ferrannini,
Professor Avram Hershko, Dr. Harold Jacob, Dr. Julio Rosenstock and Dr. Jay Skyler.
Strategy
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 increase the likelihood of obtaining 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, marketing and support of our products 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
2015 we successfully executed this strategy when we, Oramed Ltd. and HTIT entered into a Technology License Agreement pursuant
to which we granted HTIT an exclusive commercialization license in the territory of the People’s Republic of China, Macau
and Hong Kong, or the Territory, related to our oral insulin capsule, ORMD-0801. Any future strategic partner, or partners, may
also provide capital and expertise that would enable the partnership to develop new oral dosage forms for other polypeptides.
While our strategy is to partner with an appropriate party, no assurance can be given that we will in fact be able to reach an
agreeable partnership with any third party. Under certain circumstances, we may determine to develop one or more of our oral dosage
forms 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 complement our existing drug portfolio.
Potential
Material Impact of COVID-19
The COVID-19 pandemic
has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility
and disruption of financial markets. Although to date the COVID-19 pandemic has not had a material adverse effect on us, the COVID-19
pandemic may have a material adverse effect on our business and financial performance in the future. The extent of the impact of
the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments,
including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted.
Although,
as of the date of this Annual Report on Form 10-K, we do not expect any material impact on our long-term activity, the extent
to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its
impact, among others.
Patents
and Licenses
We
maintain a proactive intellectual property strategy, which includes patent filings in multiple jurisdictions, including the United
States and other commercially significant markets. We hold 26 patent applications currently pending, with respect to various compositions,
methods of production and oral administration of proteins and exenatide. Expiration dates for pending patents, if granted, will
fall between 2026 and 2039.
We hold 79 patents,
2 of which were issued during the fiscal year ended August 31, 2020, or fiscal 2020, including patents issued by the United States,
Swiss, German, French, U.K., Italian, Netherlands, Swedish, Spanish, Australian, Israeli, Japanese, New Zealand, South African,
Russian, Canadian, Hong Kong, Chinese, European and Indian patent offices that cover a part of our technology, which allows for
the oral delivery of proteins; patents issued by the Australian, Canadian, European, Austrian, Belgian, French, German, Irish,
Italian, Luxembourg, Monaco, Netherlands, Norwegian, Spanish, Swedish, Swiss, U.K., Israeli, New Zealand, South African, Russian
and Japanese patent offices that cover part of our technology for the oral delivery of exenatide; and patents issued by the European,
Austrian, Belgian, Denmark, French, German, Irish, Italian, Luxembourg, Monaco, Netherlands, Norway, Spanish, Swedish, Swiss, U.K.
and Japanese patent offices for treating diabetes.
Consistent
with our strategy to seek protection in key markets worldwide, we have been and will continue to pursue 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:
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Aggressively
protect all current and future technological developments to assure strong and broad protection by filing patents and/or continuations
in part as appropriate,
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Protect
technological developments at various levels, in a complementary manner, including the base technology, as well as specific applications
of the technology, and
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Establish
comprehensive coverage in the United States and in all relevant foreign markets in anticipation of future commercialization opportunities.
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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,
our board of directors, or our Board, 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.
Out-Licensed
Technology
In
June 2010, Oramed Ltd. entered into a joint venture agreement with D.N.A Biomedical Solutions Ltd., or D.N.A, for the establishment
of Entera Bio Ltd., or Entera.
Under the terms of
a license agreement, as amended, that was entered into between Oramed Ltd. and Entera in August 2010, we out-licensed technology
to Entera, on an exclusive basis, for the development of oral delivery drugs for certain indications to be agreed upon between
the parties. The out-licensed technology differs from our main delivery technology that is used for oral insulin and GLP-1 analog
and is subject to different patent applications. Entera’s initial development effort is for an oral formulation for the treatment
of osteoporosis. In March 2011, we entered into a patent transfer agreement, or the Patent Transfer Agreement, to replace the original
license agreement pursuant to which Oramed Ltd. assigned to Entera all of its right, title and interest in and to the patent application
that it had licensed to Entera in August 2010. Under this agreement, Oramed Ltd. is entitled to receive from Entera royalties of
3% of Entera’s net revenues and a license back of that patent application for use in respect of diabetes and influenza.
In
March 2011, we also consummated a transaction with D.N.A, whereby we sold to D.N.A 47% of Entera’s outstanding share capital
on an undiluted basis, retaining a 3% interest as of March 2011. In consideration for the shares sold to D.N.A, we received, among
other payments, ordinary shares of D.N.A. The D.N.A ordinary shares are traded on the Tel Aviv Stock Exchange and its quoted price
is subject to market fluctuations, and may, at times, have a price below the value on the date we acquired such shares. In addition,
the ordinary shares of D.N.A have historically experienced low trading volume; as a result, there is no guarantee that we will
be able to resell the ordinary shares of D.N.A at the prevailing market prices. During the years ended August 31, 2020, 2019 and
2018, we did not sell any of the D.N.A ordinary shares. As of August 31, 2020, we held approximately 5.6% of D.N.A’s outstanding
ordinary shares.
As of August 31, 2020,
Entera had not yet realized any revenues. On December 11, 2018, Entera announced that it had entered into a research collaboration
and license agreement, or the Amgen License, with Amgen Inc. related to research of inflammatory disease and other serious illnesses.
As reported by Entera, under the terms of the Amgen License, Entera will receive a modest initial technology access fee from Amgen
and will be responsible for preclinical development at Amgen’s expense. Entera will be eligible to receive up to $270,000,000
in aggregate payments, as well as tiered royalties up to mid-single digits, upon achievement of various clinical and commercial
milestones if Amgen decides to move all of these programs forward. To the extent the Amgen License results in net revenues as defined
in the Patent Transfer Agreement, Oramed Ltd. will be entitled to the aforementioned royalties.
On
November 30, 2015, we, Oramed Ltd. and HTIT entered into a Technology License Agreement, or TLA, and on December 21, 2015, these
parties entered into an Amended and Restated Technology License Agreement that was further amended by the parties on June 3, 2016
and July 24, 2016, or the License Agreement. According to the License Agreement, we granted HTIT an exclusive commercialization
license in the Territory, related to our oral insulin capsule, ORMD-0801, or the Product. Pursuant to the License Agreement, HTIT
will conduct, at its own expense, certain pre-commercialization and regulatory activities with respect to our subsidiary’s
technology and ORMD-0801 capsule, and will pay (i) royalties of 10% on net sales of the related commercialized products to be
sold by HTIT in the Territory, or Royalties, and (ii) an aggregate of $37.5 million, of which $3 million was payable immediately,
$8 million will be paid subject to our entry into certain agreements with certain third parties, and $26.5 million will be payable
upon achievement of certain milestones and conditions. In the event that we will not meet certain conditions, the Royalties rate
may be reduced to a minimum of 8%. Following the final expiration of our patents covering the technology in the Territory in 2033,
the Royalties rate may be reduced, under certain circumstances, to 5%. The royalty payment obligation shall apply during the period
of time beginning upon the first commercial sale of the Product in the Territory, and ending upon the later of (i) the expiration
of the last-to-expire licensed patents in the Territory; and (ii) 15 years after the first commercial sale of the Product in the
Territory, or the Royalty Term. The License Agreement shall remain in effect until the expiration of the Royalty Term. The License
Agreement contains customary termination provisions. Through August 31, 2020, we received aggregate milestone payments of $20.5
million.
On August 21, 2020, we received a
letter from HTIT, disputing certain pending payment obligations of HTIT under the TLA. The payment obligation being disputed is
$4 million, out of which only an amount of $2 million has been received and has been included in Deferred revenue in each of the
consolidated balance sheets as of the fiscal years ended August 31, 2020, and 2019. In addition, the dispute includes a payment
obligation of $2 million for certain milestones that we assert it met under the TLA subsequent to the fiscal year ended August
31, 2020. We wholly dispute the claims made by HTIT and has been engaged in discussions and exchanges with HTIT in an attempt to
clarify and resolve disagreements between the parties regarding milestone payments and work plan implementation.
We
also entered into a separate securities purchase agreement with HTIT, or the SPA, pursuant to which HTIT invested $12 million
in us in December 2015. In connection with the License Agreement and the SPA, we received a non-refundable payment of $500,000
as a no-shop fee.
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. As a strategic decision, we decided to first explore the FDA regulatory pathway. The following is a summary 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 CROs.
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 IND application to the
FDA. The application contains, among other documents, 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:
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Who
must be recruited as qualified participants,
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How
often to administer the drug or product,
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What
tests to perform on the participants, and
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What
dosage of the drug or amount of the product to give to the participants.
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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 CRO 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.
Phase
I. Phase I studies involve testing a drug or product on a limited number of healthy or patient 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.
Phase
II. Phase II trials involve testing of no more than 300 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.
Phase II studies may be split into Phase IIa and Phase IIb sub-studies. Phase IIa studies may be conducted with patient volunteers
and are exploratory (non-pivotal) studies, typically designed to evaluate clinical efficacy or biological activity. Phase IIb
studies are conducted with patients defined to evaluate definite dose range and evaluate efficacy. If Phase II studies show that
a new drug has an acceptable range of safety risks and probable effectiveness, a company will generally continue to review the
substance in Phase III studies.
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.
Biological
License Application. The results of the clinical trials for a biological product are submitted to the FDA as part of a BLA. 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, the sponsor will generally submit a BLA 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. Approval of a BLA provides 12 years of exclusivity in the U.S. market.
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.
Similar
to the U.S., a European sponsor of a biological product may submit a Marketing Approval Application to the EMA for the registration
of the product. The approval process in Europe consists of several stages, which together are summed up to 210 days from the time
of submission of the application (net, without periods in which the sponsor provides answers to questions raised by the agency)
following which, a Marketing Approval may be granted. During the approval process, the sponsor’s manufacturing facilities
will be audited in order to assess Good Manufacturing Practice compliance.
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.
Other
Regulations
Various
federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory practices, the
experimental use of animals, the environment 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 U.S. 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 compliance with these and other laws, regulations
and recommendations can be time-consuming and involve substantial costs. In addition, the extent of governmental regulation which
might result from future legislation or administrative action cannot be accurately predicted and may have a material adverse effect
on our business, financial condition, results of operations and prospects.
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 regulatory 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 effect 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.
The following are some of the treatment options for type 1 and type 2 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.
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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 their particular areas of expertise. The Scientific Advisory Board consists of the following members, information
with respect to whom is set forth below: Dr. Roy Eldor, Professor Ele Ferrannini, Professor Avram Hershko, Dr. Harold Jacob, Dr.
Julio Rosenstock and Dr. Jay Skyler.
Dr.
Roy Eldor, MD, PhD, joined the Oramed Scientific Advisory Board in July 2016. He is an endocrinologist, internist
and researcher with over twenty years of clinical and scientific experience. He is currently Director of the Diabetes Unit at
the Institute of Endocrinology, Metabolism & Hypertension, Tel-Aviv Sourasky Medical Center. Prior to that, Dr. Eldor served
as Principal Scientist at Merck Research Laboratories, Clinical Research - Diabetes & Endocrinology, Rahway, New Jersey. He
has previously served as a senior physician in internal medicine at the Diabetes Unit in Hadassah Hebrew University Hospital,
Jerusalem, Israel; and the Diabetes Division at the University of Texas Health Science Center in San Antonio, Texas (under the
guidance of Dr. R.A. DeFronzo). Dr. Eldor is a recognized expert, with over 35 peer reviewed papers and book chapters, and has
been a guest speaker at numerous international forums.
Professor
Ele Ferrannini, MD, joined the Oramed Scientific Advisory Board in February 2007. He is a past President to the
European Association for the Study of Diabetes, which supports scientists, physicians and students from all over the world who
are interested in diabetes and related subjects in Europe, and performs functions similar to that of the ADA in the United States.
Professor Ferrannini has worked with various institutions including the Department of Clinical & Experimental Medicine, University
of Pisa School of Medicine, and CNR (National Research Council) Institute of Clinical Physiology, Pisa, Italy; and the Diabetes
Division, Department of Medicine, University of Texas Health Science Center at San Antonio, Texas. He has also had extensive training
in internal medicine and endocrinology, and has specialized in diabetes studies. Professor 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 at the University of Torino. He has published over 500 original papers and 50
book chapters and he is a “highly cited researcher,” according to the Institute for Scientific Information.
Professor
Avram Hershko, MD, PhD, joined the Oramed Scientific Advisory Board in July 2008. He earned his MD degree (1965) and PhD
degree (1969) from the Hebrew University-Hadassah Medical School of Jerusalem. Professor Hershko served as a physician in the
Israel Defense Forces from 1965 to 1967. 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 a professor in 1980. He is now Distinguished Professor
in the Unit of Biochemistry in the B. Rappaport Faculty of Medicine of the Technion. Professor Hershko’s main research interests
concern the mechanisms by which cellular proteins are degraded, a formerly neglected field of study. Professor Hershko and his
colleagues showed that cellular proteins are degraded by a highly selective proteolytic system. This system tags proteins for
destruction by linkage to a protein called ubiquitin, which had previously been identified in many tissues, but whose function
was previously unknown. Subsequent work by Professor Hershko 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. Professor 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 Gairdner Award (1999), the
Lasker Prize for Basic Medical Research (2000), the Wolf Prize for Medicine (2001) and the Louisa Gross Horwitz Award (2001).
Professor Hershko is a member of the Israel Academy of Sciences (2000) and a Foreign Associate of the U.S. Academy of Sciences
(2003).
Dr.
Harold Jacob, MD, joined the Oramed Scientific Advisory Board in November 2016. Since 1998, Dr. Jacob has served as the
president of Medical Instrument Development Inc., a company which provides a range of support and consulting services to start-up
and early stage companies as well as patenting its own proprietary medical devices. Since 2011, Dr. Jacob has also served as an
attending physician at Hadassah University Medical Center, where he has served as the director of the gastrointestinal endoscopy
unit since September 2013. 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., from 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 Corporation.
Since 2014, Dr. Jacob has served as the Chief Medical Officer and a director of NanoVibronix, Inc., a medical device company using
surface acoustics to prevent catheter acquired infection as well as other applications, where he served as Chief Executive Officer
from 2004 to 2014. He practiced clinical gastroenterology in New York and served as Chief of Gastroenterology at St. John’s
Episcopal Hospital and South Nassau Communities Hospital from 1986 to 1995, and was a Clinical Assistant Professor of Medicine
at SUNY from 1983 to 1990. Dr. Jacob founded and served as Editor in Chief of Endoscopy Review and has authored numerous publications
in the field of gastroenterology.
Dr.
Julio Rosenstock, MD, joined the Oramed Scientific Advisory Board in January 2020. Dr. Rosenstock is the current Director
of the Dallas Diabetes Research Center at Medical City Dallas and a Clinical Professor of Medicine at the University of Texas
Southwestern Medical Center, Dallas. He received his medical degree from the University of Costa Rica School of Medicine and completed
Fellowships in Endocrinology and Diabetes at the Royal Postgraduate Medical School, Hammersmith Hospital, London, UK, and at the
University of Texas Southwestern Medical Center. His clinical research efforts focus on exploring novel agents and therapeutic
strategies to improve glycemic control. Over the last 30 years, he has participated in hundreds of clinical trials and has had
an active role in the development of new oral agents and insulin preparations acting often as a lead clinical investigator and
scientific advisor. He has authored or co-authored 296 peer-reviewed manuscripts and numerous abstracts. Dr. Rosenstock is a member
of the National Board of Directors of the ADA and is currently an Associate Editor of Diabetes Care.
Dr.
Jay Skyler, MD, MCAP, joined the Oramed Scientific Advisory Board in January 2020. Dr. Skyler is Professor of Medicine,
Pediatrics, & Psychology in the Division of Endocrinology, Diabetes & Metabolism, Department of Medicine, University of
Miami Leonard M. Miller School of Medicine. He previously held the position of Director of the Division of Endocrinology, Diabetes
& Metabolism. In addition, Dr. Skyler is Deputy Director of Clinical Research and Academic Programs at the Diabetes Research
Institute, and an Adjunct Professor of Pediatrics at the Barbara Davis Center for Childhood Diabetes, University of Colorado at
Denver. Dr. Skyler’s research focuses on the clinical aspects of diabetes, specifically the conduct of randomized controlled
clinical trials. From 1993 until 2015, he was Chairman of the NIH (NIDDK)-sponsored Diabetes Prevention Trial - Type 1 (DPT-1)
and its successor Type 1 Diabetes TrialNet, a nationwide (and global) network conducting clinical trials to prevent type 1 diabetes.
Employees
We
have been successful in retaining experienced personnel involved in our research and development program. In addition, we believe
we have successfully recruited the 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, 2020, we have contracted
with twelve individuals for employment or consulting arrangements. Of our staff, four are senior management, four are engaged
in research and development work, and the remaining four are involved in administration work.
Additional
Information
Additional
information about us is contained on our Internet website at www.oramed.com. Information on our website is not incorporated by
reference into this report. On our website, under “Investors”, “SEC Filings”, we make available free of
charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon
as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange
Commission, or the SEC. Reports filed with the SEC are made available on its website at www.sec.gov. The following Corporate Governance
documents are also posted on our website: Code of Ethics, Whistleblowing Policy and the Charters for each of the Audit Committee,
Compensation Committee and Nominating Committee of our Board.
ITEM
1A. RISK FACTORS.
An
investment in our securities 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 on Form 10-K before making an investment decision.
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 value of our securities could decline as a result of any of these risks. You could lose all or
part of your investment in our securities. Some of the statements in “Item 1A. Risk Factors” are forward-looking statements.
The following risk factors are not the only risk factors facing our Company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.
Risks
Related to Our Business
We
continue, and in the future expect, to incur losses.
Successful
completion of our development programs and our transition to normal operations are dependent upon obtaining necessary regulatory
approvals from the FDA prior to selling our products within the United States, and foreign regulatory approvals must be obtained
to sell our products internationally. There can be no assurance that we will receive regulatory approval of any of our product
candidates, and a substantial amount of time may pass before we achieve a level of revenues adequate to support our operations.
We also expect to incur substantial expenditures in connection with the regulatory approval process for each of our product candidates
during their respective developmental periods. Obtaining marketing approval will be directly dependent on our ability to implement
the necessary regulatory steps required to obtain marketing approval in the United States and in other countries. We cannot predict
the outcome of these activities.
Based
on our current cash resources and commitments, we believe we will be able to maintain our current planned development activities
and the corresponding level of expenditures for at least the next 12 months, although no assurance can be given that we will not
need additional funds prior to such time. If there are unexpected increases in our operating expenses, we may need to seek additional
financing during the next 12 months.
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 and 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:
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Continued
scientific progress in our research and development programs,
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Costs
and timing of conducting clinical trials and seeking regulatory approvals and patent
prosecutions,
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Competing
technological and market developments,
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Our
ability to establish additional collaborative relationships, and
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Effects
of commercialization activities and facility expansions if and as required.
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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
have a history of losses and can provide no assurance as to our future operating results.
We
do not have sufficient revenues from our research and development activities to fully support our operations. Consequently, we
have incurred net losses and negative cash flows since inception. We currently have only licensing revenues and no product revenues,
and may not succeed in developing or commercializing any products which could generate product 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, 2020, August 31, 2019 and August 31, 2018, we had working capital of $35,975,000,
$28,016,000 and $26,484,000, respectively, and stockholders’ equity of $32,879,000, $19,393,000 and $31,112,000, respectively.
During fiscal 2020 and the fiscal years ended August 31, 2019, or fiscal 2019, and 2018, we generated revenues of $2,710,000,
$2,703,000 and $2,449,000, respectively. For the period from our inception on April 12, 2002 through August 31, 2020, fiscal 2020,
fiscal 2019 and fiscal 2018, we incurred net losses of $92,614,000, $11,511,000, $14,355,000 and $12,727,000, respectively. We
may never achieve profitability and expect to incur net losses in the foreseeable future. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
We
rely upon patents to protect our technology.
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.
Patent
litigation is becoming widespread in the biopharmaceutical and 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.
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, Canada, Brazil, Europe, India, Hong Kong, Japan and China for our
technologies covering oral administration of insulin and other proteins and oral administration of exenatide and proteins and
79 patents issued by the United States, Australian, Canadian, Chinese, Israeli, Japanese, New Zealand, South African, Russian,
European, Hong Kong, Swiss, German, Spanish, French, United Kingdom, Italian, Indian, Austrian, Belgian, Irish, Swedish, Denmark,
Luxembourg, Monaco, Norway and Netherlands patent offices for our technologies covering oral administration of insulin and other
proteins, or for our technologies covering oral administration of exenatide, or for methods and compositions for treating diabetes.
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 or against companies to which we have licensed our technology, 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 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.
Further, we may need to indemnify companies to which we licensed our technology in the event that such technology is found to
infringe upon the rights of others.
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 “Item 1. Business—Description of Business—Patents
and Licenses.”
At
present, our success depends primarily on the successful commercialization of our oral insulin capsule.
The
successful commercialization of our oral insulin capsule is crucial for our success. At present, our principal product is the
oral insulin capsule. Our oral insulin capsule is in a clinical development stage and faces a variety of risks and uncertainties.
Principally, these risks include the following:
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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,
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Future
clinical trial results may be inconsistent with previous preliminary testing results and data from our earlier studies may be
inconsistent with clinical data,
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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,
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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,
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Even
if our oral insulin capsule is successfully developed, commercially produced and receives all necessary regulatory approvals,
there is no guarantee that there will be market acceptance of our product, and
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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.
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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 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
have entered into agreements with Integrium LLC to assist us in designing, conducting and managing our various clinical trials
in the United States and Europe. Any failure of Integrium LLC or any other consultant to fulfill their obligations could result
in significant additional costs as well as delays in designing, consulting and completing clinical trials on our products.
Our
clinical trials may encounter delays, suspensions or other problems.
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. Finally, the COVID-19 pandemic has impacted
clinical trials broadly. We may experience delays in site initiation and patient enrollment, failures to comply with study protocols,
delays in the manufacture of our product candidates for clinical testing and other difficulties in starting or competing our clinical
trials.
Clinical
trials of our products conducted by third parties may encounter delays, suspensions or other problems and are outside of our control.
Third
parties who conduct clinical trials of our products may encounter problems that may cause delays, suspensions or other problems
at any phase. These problems could include the possibility that they may not be able to conduct clinical trials at their preferred
sites, enroll a sufficient number of patients for their clinical trials at one or more sites or begin or successfully complete
clinical trials in a timely fashion, if at all. In addition, these third parties are not controlled by us and may conduct these
trials in a manner in which we disagree or which may prove to be unsuccessful. Furthermore, domestic or foreign regulatory agencies
may suspend clinical trials at any time if they believe the subjects participating in the trials are being exposed to unacceptable
health risks or if they find deficiencies in the clinical trial process or conduct of the investigation. If such clinical trials
conducted by third parties fail, it 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 or regulatory agencies of other
countries. We have completed certain non-FDA clinical trials and pre-clinical trials for our products. In addition, we have completed
a Phase IIb clinical trial in patients with type 2 diabetes under an IND with the FDA and we have completed Phase IIa clinical
trials of ORMD-0801 in patients with type 1 diabetes under an IND with the FDA. However, success in pre-clinical testing and early
clinical trials does not ensure that later clinical trials will be successful. Even within a clinical trial there might be discrepancies
from statistically significant data, as occurred at two of the sites in the initial cohort of our Phase IIb trial, which we excluded
while we investigate such discrepancies. For example, a number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials.
We
cannot predict with any certainty the amount of time necessary to obtain regulatory approvals, including from the FDA or other
foreign regulatory authorities, 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 “Item 1. Business—Description of Business—Government
Regulation.”
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 and GLP-1 capsules and do not currently have any long-term
agreements in place for the supply of oral insulin or GLP-1 capsules. While we believe that there are numerous sources of supply
available, if the third party suppliers were to cease production, including as a result of the COVID-19 pandemic, 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.
Our
future revenues from HTIT are dependent upon third party suppliers and Chinese regulatory approvals.
Our
future revenues from HTIT are dependent upon the achievement of certain milestones and conditions, and the success of HTIT to
implement our technology and to manufacture the oral insulin capsule. Our future revenues from HTIT are also dependent upon the
ability of third parties to scale-up one of our oral capsule ingredients and to scale-up the manufacturing process of our capsules.
Our future revenues from royalties from HTIT are further dependent upon the granting of regulatory approvals in the Territory.
Accordingly, if any of the foregoing does not occur, we may not be successful in receiving future revenues from HTIT and may not
succeed with our business plans in China.
If we do not resolve our dispute with
HTIT favorably, we may need to reverse deferred revenue of up to $2 million and may not receive an additional $4 million in royalties.
On August 21, 2020,
we received a letter from HTIT, disputing certain pending payment obligations of HTIT under the TLA. We estimate this obligation
to be between $2 million and $6 million. While we wholly dispute said claims and have been engaged in discussions and exchanges
with HTIT in an attempt to clarify and resolve disagreements between the parties regarding milestone payments and work plan implementation,
we may be subsequently required to repay to HTIT up to $2 million, which has been received and has been included in our deferred
revenue in each of the consolidated balance sheets fiscal years ended August 31, 2020 and 2019. In addition, we may not receive
an additional $4 million in Royalties if HTIT is entitled to the full disputed amount of $6 million.
We
are highly dependent upon our ability to enter into agreements with collaborative partners to develop, commercialize and market
our products.
Our long-term strategy is to ultimately seek a strategic commercial
partner, or partners, such as large pharmaceutical companies, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs. Although phase III clinical trials for our oral insulin
candidate, ORMD-0801 will start without a partner, if we engage such a partner, we anticipate such partner or partners would be
responsible for, or substantially support, late stage clinical trials, and sales and marketing of our oral insulin capsule and
other products. 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. While our strategy is to partner with an
appropriate party for our expected phase III clinical trials, no assurance can be given that any third party would be interested
in partnering with us. We currently lack the resources to manufacture any of our product candidates on a large scale and we have
no sales, marketing or distribution capabilities. In the event we are not able to enter into a collaborative agreement with a partner,
or partners, on commercially reasonable terms, or at all, 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.
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 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 “Item 1. Business—Description
of Business—Competition.”
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 “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” “Item 1. Business—Description of
Business—Strategy” and “—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, including Dr. Miriam Kidron, our Chief Scientific Officer. 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. We do not maintain “key man” life insurance policies for any of our senior executives.
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 developing, manufacturing and commercialization of
products and related 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.
Healthcare
policy changes, including pending legislation recently adopted and further proposals still pending to reform the U.S. healthcare
system, may harm our future business.
Healthcare
costs have risen significantly over the past decade. There have been and continue to be proposals by legislators, regulators and
third-party payors to keep these costs down. Certain proposals, if passed, would impose limitations on the prices we will be able
to charge for the products that we are developing, or the amounts of reimbursement available for these products from governmental
agencies or third-party payors. These limitations could in turn reduce the amount of revenues that we will be able to generate
in the future from sales of our products and licenses of our technology.
In
2010, the federal government enacted healthcare reform legislation that has significantly impacted the pharmaceutical industry.
In addition to requiring most individuals to have health insurance and establishing new regulations on health plans, this legislation
requires discounts under the Medicare drug benefit program and increased rebates on drugs covered by Medicaid. In addition, the
legislation imposes an annual fee, which has increased annually, on sales by branded pharmaceutical manufacturers. There can be
no assurance that our business will not be materially adversely affected by these increased rebates, fees and other provisions.
In addition, these and other initiatives in the United States may continue the pressure on drug pricing, especially under the
Medicare and Medicaid programs, and may also increase regulatory burdens and operating costs. The announcement or adoption of
any such initiative could have an adverse effect on potential revenues from any product that we may successfully develop. An expansion
in government’s role in the U.S. healthcare industry may lower the future revenues for the products we are developing and
adversely affect our future business, possibly materially.
In
September 2017, members of the U.S. Congress introduced legislation with the announced intention to repeal and replace major provisions
of the Patient Protection and Affordable Care Act, or the ACA. In addition to those efforts, on October 12, 2017, President Trump
signed an executive order that modified certain aspects of the ACA. Various litigation to invalidate parts of the ACA are pending
in court and, despite an upcoming change in presidential administration, attempts to repeal or to repeal and replace the ACA may
continue. In addition, various other healthcare reform proposals have also emerged at the federal and state level. We cannot predict
what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or
regulation will have on us.
We
are exposed to fluctuations in currency exchange rates.
A
considerable amount of our expenses are generated in dollars or in dollar-linked currencies, but a significant portion of our
expenses such as some clinical studies and payroll costs are generated in other currencies such as NIS and Euro. Most of the time,
our non-dollar assets are not totally offset by non-dollar liabilities. Due to the foregoing and to the fact that our financial
results are measured in dollars, our results could be adversely affected as a result of a strengthening or weakening of the dollar
compared to these other currencies. During the fiscal years ended August 31, 2016, 2017, 2019 and 2020, the dollar depreciated
in relation to the NIS, which raised the dollar cost of our Israeli based operations and adversely affected our financial results,
while during the fiscal years ended August 31, 2015 and 2018 the dollar increased in relation to the NIS, which reduced the dollar
cost of our Israeli based operations costs. In addition, our results could also be adversely affected if we are unable to guard
against currency fluctuations in the future. Although we may in the future decide to undertake foreign exchange hedging transactions
to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange
risks. These transactions, however, may not adequately protect us from future currency fluctuations and, even if they do protect
us, may involve operational or financing costs we would not otherwise incur.
The
COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our
business and operations.
The recent
outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread globally, including to the United States,
Israel and other European countries where we expected to initiate clinical trials. On March 11, 2020, the World Health Organization
declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to
estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the
pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines
established in certain jurisdictions and various institutions and companies being closed. On March 10, 2020, the Government of
Israel announced that effective March 12, 2020 foreign travelers arriving from any country will be required to remain in home quarantine
until 14 days have passed since the date of entry into Israel, and effective March 18, 2020, non-Israeli residents or citizens,
except for non-nationals whose lives are based in Israel, are not allowed to enter Israel. In addition, the Ministry of Health
in the State of Israel issued guidelines on March 11, 2020, which were most recently updated in October 2020, recommending people
avoid gatherings in one space and providing that no gathering of more than 10 people should be held under any circumstances.
Employers
(including us) are also required to prepare and increase as much as possible the capacity and arrangement for employees to work
remotely. In addition, on March 11, 2020, the President of the United States issued a proclamation to restrict travel to the United
States from foreign nationals who have recently been in certain European and Latin America countries. Although to date these restrictions
have not impacted our operations other than the delay of one of our trials, the effect on our business, from the spread of COVID-19
and the actions implemented by the governments of the State of Israel, the United States and elsewhere across the globe, may worsen
over time.
The
spread of COVID-19 may also result in the inability of our suppliers to deliver supplies to us on a timely basis. In addition,
health professionals may reduce staffing and reduce or postpone meetings with clients in response to the spread of an infectious
disease. Though we have not yet experienced such events, if they would occur, they could result in a period of business disruption,
and in reduced operations, any of which could materially affect our business, financial condition and results of operations. Although,
as of the date of this Annual Report on Form 10-K, we do not expect any material impact on our long-term activity, the extent
to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its
impact, among others. We are actively monitoring the pandemic and we are taking any necessary measures to respond to the situation
in cooperation with the various stakeholders.
The
outbreak of COVID-19 may materially and adversely affect our clinical trial operations and our financial results.
The
outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread to multiple countries, including the United
States, Israel and several European countries where we expected to initiate clinical trials. The extent to which COVID-19 may
impact our clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, such as the duration of the outbreak, the severity of COVID-19, or the effectiveness of actions to contain and treat
for COVID-19. The continued spread of COVID-19 globally could adversely impact our clinical trial operations in the United States,
Israel and in Europe, including our ability to recruit and retain patients and principal investigators and site staff who, as
healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography or due to government or
institutional quarantines or stay-at-home measures.
Moreover,
COVID-19 may also affect employees of third-party contract research organizations located in affected geographies that we rely
upon to carry out such enrollments and trials. Any negative impact COVID-19 has to patient enrollment or treatment could cause
costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to
commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results.
Risks
Related 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. As of November 24, 2020, we had outstanding 23,675,530 shares of common stock,
a large majority of which are freely tradable. Giving effect to the exercise in full of all of our outstanding warrants, options
and restricted stock units, or RSUs, including those currently unexercisable or unvested, we would have outstanding 28,948,286
shares of common stock.
Our
issuance of warrants, options and RSUs to investors, employees and consultants 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, RSUs and convertible notes at, above or below the current market price. As of November 24,
2020, we had outstanding warrants and options exercisable for 3,407,819 shares of common stock at a weighted average exercise price
of $6.97. We also had outstanding RSUs exercisable for 164,636 shares of common stock at a total exercise price of $900. In addition
to the dilutive effect of a large number of shares of common stock and a low exercise price for the warrants and options, there
is a potential that a large number of underlying shares of common stock 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 in the foreseeable future, investors may have to sell shares of our common stock 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 and will be dependent upon our financial condition, results of operations,
capital requirements and any other factors that our Board decides is relevant.
Because
certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions
requiring stockholder approval.
As
of November 24, 2020, our directors, executive officers and principal affiliated stockholders beneficially own approximately 16.7%
of our outstanding shares of common stock, excluding shares issuable upon the exercise of options, warrants and RSUs. As a result,
these stockholders, should they act together, may have the ability to control the outcome of matters submitted to our stockholders
for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.
In addition, these stockholders, should they act together, may have the ability to control our management and affairs. Accordingly,
this concentration of ownership might harm the market price of our common stock by:
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Delaying,
deferring or preventing a change in corporate control,
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Impeding
a merger, consolidation, takeover or other business combination involving us, or
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Discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control
of us.
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Risks
Related to Conducting Business in Israel
We
are affected by the political, economic and military risks of having operations in Israel.
We
have operations in the State of Israel, and we are directly affected by political, economic and security conditions in that country.
Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab
neighbors and a state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. In
addition, acts of terrorism, armed conflicts or political instability in the region could negatively affect local business conditions
and harm our results of operations. We cannot predict the effect on the region of any diplomatic initiatives or political developments
involving Israel or the Palestinians or other countries and territories in the Middle East. Recent political events, including
political uprisings, social unrest and regime change, in various countries in the Middle East and North Africa have weakened the
stability of those countries and territories, which could result in extremists coming to power. In addition, Iran has threatened
to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among
extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. This situation has escalated in the past and may
potentially escalate in the future to violent events which may affect Israel and us. 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, unless exempt, may be required to perform 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 or in the future may be 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
we received grants from the Israel Innovation Authority of the Israeli Ministry of Economy & Industry we are subject to ongoing
restrictions.
We
received royalty-bearing grants from the Israel Innovation Authority of the Israeli Ministry of Economy & Industry, or IIA,
for research and development programs that meet specified criteria. We did not recognize any grants in fiscals 2020, 2019 and
2018. We do not expect to receive further grants from the IIA in the future. The terms of the IIA grants limit our ability to
transfer know-how developed under an approved research and development program outside of Israel, regardless of whether the royalties
were fully paid.
It
may be difficult to enforce a U.S. judgment against us or our officers and directors and to assert U.S. securities laws claims
in Israel.
Almost
all of our directors and officers are nationals and/or residents of countries other than the United States. As a result, service
of process upon us, our Israeli subsidiary and our directors and officers, may be difficult to obtain within the United States.
Furthermore, because the majority of our assets and investments, and most of our directors and officers are located outside the
United States, it may be difficult for investors to enforce within the United States any judgments obtained against us or any
such officers or directors. Additionally, it may be difficult to assert U.S. securities law claims in original actions instituted
in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most
appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine
that Israeli law and not U.S. law is applicable to such claim. If U.S. law is found to be applicable, the content of applicable
U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be
governed by Israeli law.
Subject
to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel,
Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of
the U.S. securities laws, as well as a monetary or compensatory judgment in a non-civil matter, provided that the following key
conditions are met:
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subject
to limited exceptions, the judgment is final and non-appealable;
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the
judgment was given by a court competent under the laws of the state in which the court
is located and is otherwise enforceable in such state;
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the
judgment was rendered by a court competent under the rules of private international law
applicable in Israel;
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the
laws of the state in which the judgment was given provides for the enforcement of judgments
of Israeli courts;
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adequate
service of process has been effected and the defendant has had a reasonable opportunity
to present its arguments and evidence;
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the
judgment and its enforcement are not contrary to the law, public policy, security or
sovereignty of the State of Israel;
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the
judgment was not obtained by fraud and does not conflict with any other valid judgment
in the same matter between the same parties; and
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an
action between the same parties in the same matter was not pending in any Israeli court
at the time the lawsuit was instituted in the U.S. court.
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If
any of these conditions are not met, Israeli courts will likely not enforce the applicable U.S. judgment.
General
Risk Factors
Changes
to tax laws could have a negative effect on us or our stockholders.
At
any time, the U.S. federal or state income tax laws, or the administrative interpretations of those laws, may be amended. Federal
and state tax laws are constantly under review by persons involved in the legislative process, the U.S. Internal Revenue Service,
the U.S. Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations,
which may have retroactive application, could adversely affect us.
Tax
reform legislation in December 2017 made substantial changes to the Internal Revenue Code of 1986, as amended, or the Code, particularly
as it relates to the taxation of both corporate income and international income. Among those changes are a significant permanent
reduction in the generally applicable corporate income tax rate and the modification of tax policies, credits and deductions for
businesses and individuals. This legislation also imposes additional limitations on the deduction of net operating losses, which
could negatively impact our ability to utilize our net operating losses to offset our taxable income in future taxable years.
The effect of these and other changes made in this legislation is still uncertain in many respects, both in terms of their direct
effect on the taxation of an investment in our securities and their indirect effect on the value of assets owned by us. Furthermore,
many of the provisions of the new law will require additional guidance in order to assess their effect. It is also possible that
there will be technical corrections or other legislation proposed with respect to the tax reform legislation, the effect of which
cannot be predicted and may be adverse to us or our stockholders. Further, a new presidential administration in 2021 may result
in additional amendments to the Code or reversal of 2017 changes. Our stockholders are encouraged to consult with their tax advisors
about the potential effects that changes in law may have on them and their ownership of our securities.
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 currently listed on Nasdaq and on the Tel Aviv Stock Exchange 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:
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Clinical
trial results and the timing of the release of such results,
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The
amount of cash resources and our ability to obtain additional funding,
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Announcements
of research activities, business developments, technological innovations or new products
by us or our competitors,
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Entering
into or terminating strategic relationships,
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Changes
in government regulation,
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The
impact of the recent outbreak of COVID-19 on our business or on the economy generally,
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Departure
of key personnel,
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Disputes
concerning patents or proprietary rights,
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Changes
in expense level,
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Future
sales of our equity or equity-related securities,
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Public
concern regarding the safety, efficacy or other aspects of the products or methodologies
being developed,
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Activities
of various interest groups or organizations,
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Status
of the investment markets.
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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 anticipate that we will
need to raise capital through offerings of equity and 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
stockholders may experience significant dilution as a result of any additional financing using our equity securities.
To
the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution.
Our
management will have significant flexibility in using the net proceeds of any offering of securities.
We
intend generally to use the net proceeds from any offerings of our securities for expenses related to our clinical trials, research
and product development activities, and for general corporate purposes, including general working capital purposes. Our management
will have significant flexibility in applying the net proceeds of any such offering. The actual amounts and timing of expenditures
will vary significantly depending on a number of factors, including the amount of cash used in our operations and our research
and development efforts. Management’s failure to use these funds effectively would have an adverse effect on the value of
our common stock and could make it more difficult and costly to raise funds in the future.
Delaware
law could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable
to you, and thereby adversely affect existing stockholders.
The
Delaware General Corporation Law contains provisions that may have the effect of making more difficult or delaying attempts by
others to obtain control of our Company, even when these attempts may be in the best interests of stockholders. Delaware law imposes
conditions on certain business combination transactions with “interested stockholders.” These provisions and others
that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management,
including transactions in which stockholders might otherwise receive a premium for their shares of common stock over then current
market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in
their best interests.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not
applicable.
ITEM
2. PROPERTIES.
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. MINE SAFETY DISCLOSURES.
Not
applicable.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Set
forth below is certain information with respect to the individuals who are our directors and executive officers.
Name
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Age
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Position
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Nadav Kidron
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46
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President, Chief Executive Officer and Director
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Miriam Kidron
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80
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Chief Scientific Officer and Director
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Avraham Gabay
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35
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Chief Financial Officer, Treasurer and Secretary
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Joshua Hexter
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50
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Chief Operating & Business Officer
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Aviad Friedman
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49
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Director
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Arie Mayer
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64
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Director
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Kevin Rakin
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60
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Chairman, Director
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Leonard Sank
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55
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Director
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Gao Xiaoming
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58
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Director
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Dr.
Miriam Kidron is Mr. Nadav Kidron’s mother. There are no other directors or officers of the Company who are related by blood
or marriage.
Business
Experience
The
following is a brief account of the education and business experience during at least the past five years of each director and
our executive officers who are not also directors, 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 President, Chief Executive Officer and a director in March 2006.
He is also a director of Israel Advanced Technology Industries organization, and until 2016 was a director of Entera Bio Ltd.
In 2009, he was a fellow at the Merage Foundation for U.S.-Israel Trade Programs for executives in the life sciences field. From
2003 to 2006, he was the managing director of the Institute of Advanced Jewish Studies at Bar Ilan University. From 2001 to 2003,
he was a legal intern at Wine, Mishaiker & Ernstoff Law Offices in Jerusalem, Israel. Mr. Kidron holds an LL.B. and an International
MBA from Bar Ilan University, Israel, and is a member of the Israel Bar Association.
We
believe that Mr. Kidron’s qualifications to serve on our Board include his familiarity with the Company as its founder,
his experience in capital markets, as well as his knowledge and familiarity with corporate management.
Dr.
Miriam Kidron was appointed Chief Scientific Officer and a director in March 2006. Dr. Kidron
is a pharmacologist and a biochemist with a Ph.D. in biochemistry. From 1990 to 2007, Dr. Kidron was 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 that specializes in developing 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.
We
believe that Dr. Kidron’s qualifications to serve on our Board include her expertise in the Company’s technology,
as it is based on her research, as well as her experience and relevant education in the fields of pharmacology and diabetes.
Mr.
Avraham Gabay was appointed Chief Financial Officer, Treasurer and Secretary effective June 2019. Prior
to his appointment, from 2015 until 2019, Mr. Gabay served as a corporate controller at Orcam Technologies Ltd., a company which
develops, manufactures and sells a wearable assistive technology device for people who are blind, visually impaired or have reading
or other disabilities. From 2014 to 2015, Mr. Gabay provided economic services in the advisory department of KPMG Israel, a certified
public accounting firm. From 2013 until 2014, Mr. Gabay worked in the tax department of the law firm, Gornitzky & Co. Mr.
Gabay holds a bachelor’s degree in law and accounting from Tel-Aviv University and is a certified public accountant in Israel
and a member of the Israeli Bar Association.
Mr.
Joshua Hexter was appointed Chief Operating & Business Officer, effective September 2019. Prior to his
appointment, Mr. Hexter served as Chief Business Officer at BrainsWay Ltd. (Nasdaq/TASE: BWAY) from 2018 to 2019, commercial stage
medical device company focused on the development and sale of non-invasive neuromodulation products. From 2013 to 2018, Mr. Hexter
served as Chief Operating Officer and VP Business Development of the Company and from 2007 to 2013, Mr. Hexter was a Director
or Executive Director of BioLineRx Ltd. (Nasdaq/TASE: BLRX), a biopharmaceutical development company dedicated to identifying,
in-licensing and developing innovative therapeutic candidates. Prior to his employment with BioLineRx, Mr. Hexter was a member
of the board of directors and Chief Executive Officer of Biosensor Systems Design, Inc., a company developing market-driven biosensors.
Mr. Hexter holds a bachelor’s degree from the University of Wisconsin and a master’s degree in management from Boston
University.
Mr.
Aviad Friedman became a director in August 2016. Mr. Friedman is an international businessman. Since 2007,
he has been Chief Executive Officer of Most Properties 1998 Ltd. Mr. Friedman was the first Director General of Israel’s
Ministry of Diaspora Affairs and served as personal advisor to Prime Minister Ariel Sharon from 2001 to 2005. Mr. Friedman served
as Chief Operating Officer of one of Israel’s premier newspapers, Ma’ariv from 2003 to 2007, and has more than 18
years of experience serving on boards of public and private companies including Maayan Ventures, Capital Point, Rosetta Green
Ltd. and Aerodrome Groupe Ltd. Mr. Friedman additionally served as an investor and consultant at Rhythmia Medical Inc. from 2007,
and was actively involved in the sale of the company to Boston Scientific in 2012. Mr. Friedman holds a bachelor’s degree
and master’s degree with honors in Public Administration from Bar-Ilan University.
We
believe that Mr. Friedman’s qualifications to serve on our Board include his experience in serving as a director of public
and private companies as well as his knowledge and familiarity with corporate finance.
Dr.
Arie Mayer became a director in December 2019. Dr. Mayer is currently the Managing Director and Chairman
of the Board of Merck Life Science Israel (formerly Sigma-Aldrich Israel Ltd.) and has held that position since January 2010.
Dr. Mayer has held various roles with Sigma-Aldrich Israel Ltd. since 1995 and was instrumental in introducing and developing
the Cell Culture and Molecular Biology business for Sigma Aldrich Israel Ltd. Dr. Mayer holds a Bachelor of Science degree in
chemistry from Hebrew University and a Ph.D. in biochemistry from Israel Institute of Technology.
We
believe that Dr. Mayer’s qualifications to serve on our Board include his experience as an executive in the biotechnology
industry, as well as his experience and relevant education in the fields of chemistry and biochemistry.
Mr.
Kevin Rakin became a director in August 2016 and Chairman of the Board in July 2017. Mr. Rakin is a co-founder
and partner at HighCape Partners, a growth equity life sciences fund where he has served since 2013. From June 2011 to November
2012, Mr. Rakin was the President of Regenerative Medicine at Shire plc, or Shire, a leading specialty biopharmaceutical company.
Prior to joining Shire, Mr. Rakin served as the Chairman and Chief Executive Officer of Advanced BioHealing, Inc. from 2007 until
its acquisition by Shire for $750 million in June 2011. Mr. Rakin currently serves on the boards of Nyxoah SA, HighCape Capital
Acquisition Corp., Aziyo Biologics, Inc. and on the boards of number of private companies. Mr. Rakin holds an MBA from Columbia
University and received his graduate and undergraduate degrees in Commerce from the University of Cape Town, South Africa.
We
believe that Mr. Rakin’s qualifications to serve on our Board include his extensive experience as an executive in the biotechnology
industry, as well as his service in positions in various companies as a chief executive officer, chief financial officer and president
and his involvement in public and private financings and mergers and acquisitions in the biotechnology industry.
Mr.
Leonard Sank became a director in October 2007. Mr. Sank is a South African entrepreneur and businessman,
whose interests lie in entrepreneurial endeavors and initiatives, with over 20 years’ experience of playing significant
leadership roles in developing businesses. For the past nineteen years, Mr. Sank has served on the boards of a few national businesses
and local non-profit charity organizations in Cape Town and South Africa, where he resides.
We
believe that Mr. Sank’s qualifications to serve on our Board include his years of experience in development stage businesses,
as well as his experience serving as a director of many entities.
Mr.
Gao Xiaoming became a director in July 2019. Mr. Gao has more than 25 years’ experience in the bio-pharmaceutical
field. Mr. Gao has experience in the registration, license-in, sales and promotion of pharmaceuticals and was involved in the
introduction of Novo Nordisk (Denmark)’s insulin into China. Mr. Gao is proficient in the insulin industry. From 2005 to
2009, Mr. Gao led a team for the registration of imported Insulin-SciLin in China and obtained an Imported Drug License. Since
2007, Mr. Gao founded Hefei Tianmai Biotechnology Development Co., Ltd. and HTIT, which are committed to the research, development
and commercialization of high-tech bio-pharmaceutical products. Mr. Gao is the Chairman and chief executive officer of HTIT.
We
believe that Mr. Gao’s qualifications to serve on our Board include his years of experience in the bio-pharmaceutical industry
as well as his experience and familiarity with the Eastern market.
Board
of Directors
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 or until his or her earlier
resignation or removal. The Board may also appoint additional directors. A director so chosen or appointed will hold office until
the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier
resignation or removal. The Board has determined that Aviad Friedman, Arie Mayer, Kevin Rakin, Leonard Sank and Gao Xiaoming are
independent as defined under the rules promulgated by the Nasdaq. Mr. Gao is the chief executive officer of HTIT, a stockholder
holding more than 5% of our common stock and was initially appointed to serve on our Board pursuant to the terms of the securities
purchase agreement with HTIT dated November 30, 2015, but does not otherwise have any relationship with us. The Board considered
this relationship and determined that they would not interfere with Mr. Gao’s exercise of independent judgment in carrying
out the responsibilities of a director.
We
have determined that each of the directors is qualified to serve as a director of the Company based on a review of the experience,
qualifications, attributes and skills of each director. In reaching this determination, we have considered a variety of criteria,
including, among other things: character and integrity; ability to review critically, evaluate, question and discuss information
provided, to exercise effective business judgment and to interact effectively with the other directors; and willingness and ability
to commit the time necessary to perform the duties of a director.
Board
Meeting Attendance
During
fiscal 2020, our Board held 7 meetings and took actions by written consent on 8 occasions. Board members are encouraged to attend
our annual meetings of stockholders.
All
of our directors, except Mr. Gao Xiaoming, attended at least 75% of the aggregate number of meetings of the Board and the committees
that were held during the period such director served on the Board.
Committees
Audit
Committee and Audit Committee Financial Expert
The
members of our Audit Committee are Aviad Friedman, Arie Mayer and Kevin Rakin. Our Board has determined that Aviad Friedman is
an “audit committee financial expert” as set forth in Item 407(d)(5) of Regulation S-K and that all members of the
Audit Committee are “independent” as defined by the rules of the SEC and the Nasdaq rules and regulations. The Audit
Committee operates under a written charter that is posted on the “Investors” section of our website, www.oramed.com.
The primary responsibilities of our Audit Committee include:
|
●
|
Overseeing
the accounting and financial reporting processes of the Company and the audits of the
financial statements of the Company;
|
|
●
|
Appointing,
compensating and retaining our registered independent public accounting firm;
|
|
●
|
Overseeing
the work performed by any outside accounting firm;
|
|
●
|
Assisting
the Board in fulfilling its responsibilities by reviewing: (i) the financial reports
provided by us to the SEC, our stockholders or to the general public and (ii) our internal
financial and accounting controls; and
|
|
●
|
Recommending,
establishing and monitoring procedures designed to improve the quality and reliability
of the disclosure of our financial condition and results of operations.
|
Compensation
Committee
The
members of our Compensation Committee are Aviad Friedman, Kevin Rakin and Leonard Sank. The Board has determined that all of the
members of the Compensation Committee are “independent” as defined by the rules of the SEC and Nasdaq rules and regulations.
The Compensation Committee operates under a written charter that is posted on the “Investors” section of our website,
www.oramed.com. The primary responsibilities of our Compensation Committee include:
|
●
|
Reviewing,
negotiating and approving, or recommending for approval by our Board the salaries and
incentive compensation of our executive officers;
|
|
●
|
Administering
our equity based plans and making recommendations to our Board with respect to our incentive-compensation
plans and equity-based plans; and
|
|
●
|
Making
recommendations to our Board with respect to director compensation.
|
Nominating
Committee
The
members of our Nominating Committee are Aviad Friedman and Leonard Sank. The Board has determined that all of the members of the
Nominating Committee are “independent” as defined by the rules of the SEC and Nasdaq rules and regulations. The Nominating
Committee operates under a written charter that is posted on the “Investors” section of our website, www.oramed.com.
The primary responsibilities of our Nominating Committee include:
|
●
|
Overseeing
the composition and size of the Board, developing qualification criteria for Board members
and actively seeking, interviewing and screening individuals qualified to become Board
members for recommendation to the Board;
|
|
●
|
Recommending
the composition of the Board for each annual meeting of stockholders; and
|
|
●
|
Reviewing
periodically with the Chairman of the Board and the Chief Executive Officer the succession
plans relating to positions held by directors, and making recommendations to the Board
with respect to the selection and development of individuals to occupy those positions.
|
Delinquent
Section 16(a) Reports
Based
solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished to us during fiscal 2020, we believe that during fiscal
2020, 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, except: (a) Aviad Friedman, one of our directors, failed to timely file a
Form 4 reporting his January 8, 2020 acquisition of options to purchase 20,000 shares of our common stock. Mr. Friedman filed
a Form 4 reporting this transaction on January 14, 2020, (b) Gao Xiaoming, one of our directors, failed to timely file a Form
4 reporting his January 8, 2020 acquisition of options to purchase 20,000 shares of our common stock. Mr. Gao filed a Form 4 reporting
this transaction on January 14, 2020, (c) Miriam Kidron, our Chief Scientific Officer and one of our directors, failed to timely
file a Form 4 reporting her January 8, 2020 acquisition of options to purchase 100,000 shares of our common stock. Ms. Kidron
filed a Form 4 reporting this transaction on January 14, 2020, (d) Nadav Kidron, our President, Chief Executive Officer and one
of our directors, failed to timely file a Form 4 reporting his January 8, 2020 acquisition of options to purchase 190,000 shares
of our common stock. Mr. Kidron filed a Form 4 reporting this transaction on January 14, 2020, (d) Arie Mayer, one of our directors,
failed to timely file a Form 4 reporting his January 8, 2020 acquisition of options to purchase 20,000 shares of our common stock.
Mr. Mayer filed a Form 4 reporting this transaction on January 14, 2020, (e) Kevin Rakin, one of our directors, failed to timely
file a Form 4 reporting his January 8, 2020 acquisition of options to purchase 20,000 shares of our common stock. Mr. Rakin filed
a Form 4 reporting this transaction on January 14, 2020, and (f) Leonard Sank, one of our directors, failed to timely file a Form
4 reporting his January 8, 2020 acquisition of options to purchase 20,000 shares of our common stock. Mr. Sank filed a Form 4
reporting this transaction on January 14, 2020.
Code
of Ethics
We
have adopted a Code of Ethics and Business Conduct for our senior officers, directors and employees. A copy of the Code of Ethics
and Business Conduct is located at our website at www.oramed.com. We intend to satisfy the disclosure requirement regarding any
amendment to, or a waiver from, a provision of the Code of Ethics that applies to our Chief Executive Officer, or CEO, Chief Financial
Officer or controller, or persons performing similar functions and that relates to the Code of Ethics by posting such information
on our website, www.oramed.com.
ITEM
11. EXECUTIVE COMPENSATION.
Compensation
Discussion and Analysis
This
section explains the policies and decisions that shape our executive compensation program, including its specific objectives and
elements, as it relates to our “named executive officers,” or NEOs. Our NEOs for fiscal 2020 are those four individuals
listed in the “Summary Compensation Table” below. The Compensation Committee believes that our executive compensation
is appropriately designed to incentivize our named executive officers to work for our long-term prosperity, is reasonable in comparison
with the levels of compensation provided by comparable companies and reflects a reasonable cost. We believe our named executive
officers are critical to the achievement of our corporate goals, through which we can drive stockholder value.
The
Compensation Committee of our Board is comprised solely of independent directors as defined by Nasdaq and non-employee directors
as defined by Rule 16b-3 under the Exchange Act. The Compensation Committee has the authority and responsibility to review and
approve the compensation of our CEO and other executive officers. Other information concerning the structure, roles and responsibilities
of our Compensation Committee is set forth in “Board Meetings and Committees—Compensation Committee” section.
Our
executive compensation program and our NEOs’ compensation packages are designed around the following objectives:
|
●
|
attract, hire, and retain
talented and experienced executives;
|
|
●
|
motivate,
reward and retain executives whose knowledge, skills and performance are critical to our success;
|
|
●
|
ensure fairness among the executive management
team via recognizing the contributions of each executive to our success;
|
|
●
|
focus executive behavior
on achievement of our corporate objectives and strategy; and
|
|
●
|
align the interests of management
and stockholders by providing management with longer-term incentives through equity ownership.
|
The
Compensation Committee reviews the allocation of compensation components regularly to ensure alignment with strategic and operating
goals, competitive market practices and legislative changes. The Compensation Committee does not apply a specific formula to determine
the allocation between cash and non-cash forms of compensation. Certain compensation components, such as base salaries, benefits
and perquisites, are intended primarily to attract, hire, and retain well-qualified executives. Other compensation elements, such
as long-term incentive opportunities, are designed to motivate and reward performance. Long-term incentives are intended to reward
NEOs for our long-term performance and executing our business strategy, and to strongly align NEOs’ interests with those
of stockholders.
With
respect to equity compensation, the Compensation Committee makes awards to executives under our 2019 Stock Incentive Plan, as
amended and restated, or the 2019 Plan. Executive compensation is paid or granted based on such matters as the Compensation Committee
deems appropriate, including our financial and operating performance and the alignment of the interests of the executive officers
and our stockholders.
Elements
of Compensation
Our
executive officer compensation program is comprised of: (i) base salary or monthly compensation; (ii) discretionary bonus; (iii)
long-term equity incentive compensation in the form of stock option grants; and (iv) benefits and perquisites.
In
establishing overall executive compensation levels and making specific compensation decisions for our NEOs in fiscal 2020, the
Compensation Committee considered a number of criteria, including the executive’s position, scope of responsibilities, prior
base salary and annual incentive awards and expected contribution.
Generally,
our Compensation Committee reviews and, as appropriate, approves compensation arrangements for the NEOs from time to time but
not less than once each year. The Compensation Committee also takes into consideration the CEO’s recommendations for executive
compensation of the other NEOs. The CEO generally presents these recommendations at the time of our Compensation Committee’s
review of executive compensation arrangements.
Base
Salary
The
Compensation Committee performs a review of base salaries and monthly compensation for our NEOs from time to time as appropriate.
In determining salaries, the Compensation Committee members also take into consideration the scope of the NEOs’ responsibilities
and independent third-party market data, such as compensation surveys to industry, individual experience and performance and contribution
to our clinical, regulatory, commercial and operational performance. None of the factors above has a dominant weight in determining
the compensation of our named executive officers, and our Compensation Committee considers the factors as a whole when considering
such compensation. In addition, our Compensation Committee uses comparative data regarding compensation paid by peer companies
in order to obtain a general understanding of current trends in compensation practices and ranges of amounts being awarded by
other public companies, and not as part of an analysis or a formula.
We
believe that a competitive base salary and monthly compensation is a necessary element of any compensation program that is designed
to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward
executives for their overall performance. Base salary and monthly compensation are established in part based on the individual
experience, skills and expected contributions to our performance, as well as such executive’s performance during the prior
year. Generally, we believe that executives’ base salaries should be targeted near the median of the range of salaries for
executives in similar positions with similar responsibilities, experience and performance at comparable companies. Compensation
adjustments are made occasionally based on changes in an executive’s level of responsibility, company progress or on changed
local and specific executive employment market conditions.
In
fiscal 2020, our Compensation Committee increased the base salaries of two of our NEOs by 10% and 15% as it deemed this to be
a reasonable rate based on, among other factors, such NEO’s increased responsibilities and time passed since the last salary
increase.
Performance
Based Bonus
Our
NEOs are eligible to receive discretionary annual bonuses based upon performance. The amount of annual bonus to our NEOs is based
on various factors, including, among others, the achievement of scientific and business goals and our financial and operational
performance. The Compensation Committee takes into account the overall performance of the individuals, as well as the overall
performance of the Company over the period being reviewed and the recommendation of management. For any given year, the compensation
objectives vary, but relate generally to strategic factors such as developments in our clinical path, the execution of a license
agreement for the commercialization of product candidates, the establishment of key strategic collaborations, the build-up of
our pipeline and financial factors such as capital raising. Bonuses are awarded generally based on corporate performance, with
adjustments made within a range for individual performance, at the discretion of the Compensation Committee. The Compensation
Committee determines, on a discretionary basis, the size of the entire bonus pool and the amount of the actual award to each NEO.
The overall payment is also based on historic compensation of the NEOs.
We
believe that annual bonuses payable based on the achievement of short-term corporate goals incentivize our NEOs to create stockholder
value and attain short-term performance objectives.
Long-Term
Equity Incentive Compensation
Long-term
incentive compensation allows the NEOs to share in any appreciation in the value of our common stock. The Compensation Committee
believes that stock participation aligns executive officers’ interests with those of our stockholders. Equity incentive
awards are generally made at the commencement of employment and following a significant change in job responsibilities, or to
meet other special retention or performance objectives. The amounts of the awards are designed to reward past performance and
create incentives to meet long-term objectives. Awards are made at a level expected to be competitive within the biotechnology
industry, as well as with Israeli-based companies. Awards are made on a discretionary basis and not pursuant to specific criteria
set out in advance. In determining the amount of each grant, the Compensation Committee also takes into account the number of
shares held by the executive prior to the grant. The vesting schedule for NEOs generally provides for annual installments for
new grants, though the Compensation Committee also utilizes quarterly vesting from time to time, as well as performance-based
vesting. The Compensation Committee believes that time-based vesting encourages recipients to build stockholder value over a long
period of time and that performance-based vesting encourages recipients to achieve goals that benefit the Company.
Benefits
and Perquisites
Generally,
benefits available to NEOs are available to all employees on similar terms and include welfare benefits, paid time-off, life and
disability insurance and other customary or mandatory social benefits in Israel. We provide our NEOs with a phone and a company
car, which are customary benefits in Israel to managers and officers.
We
do not believe that the benefits and perquisites described above deviate materially from the customary practice for compensation
of executive officers by other companies similar in size and stage of development in Israel. These benefits represent a relatively
small portion of the executive officers’ total compensation.
The Company pays for
certain direct costs, related taxes and expenses incurred in connection with the relocation of our CEO to United States. During
fiscal 2020, such relocation expenses totaled approximately $515,693, and included mainly payments intended to reflect the difference
in the cost of living between Israel and the United States, relocation expenses, accommodation allowances, education allowances,
health insurance and related taxes.
Say-on-Pay
Vote
Our
stockholders approved, on an advisory basis, our executive compensation program at our annual meeting of stockholders held on
August 3, 2020. We did not seek or receive any specific feedback from our stockholders concerning our executive compensation program
during the past fiscal year. The Compensation Committee did not specifically rely on the results of the prior vote in making any
compensation-related decisions during fiscal 2020.
REPORT
OF THE COMPENSATION COMMITTEE
The
Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K with our management and, based on such review and discussions, the Compensation Committee recommended to our Board
that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K and in our proxy statement relating
to our next annual meeting of stockholders.
|
Compensation
Committee Members:
|
|
|
|
Aviad
Friedman
|
|
Kevin
Rakin
|
|
Leonard
Sank
|
SUMMARY
COMPENSATION TABLE
The
following table sets forth the compensation earned by our NEOs for fiscals 2020, 2019 and 2018.
Name and Principal Position
|
|
Year
(1)
|
|
Salary
($)
(2)
|
|
|
Bonus
($)
(2)(3)
|
|
|
Option
Awards
($)
(4)(5)
|
|
|
All Other
Compensation
($)
(2)(6)
|
|
|
Total
($)
|
|
Nadav Kidron
|
|
|
2020
|
|
439,076
|
|
|
|
220,582
|
|
|
|
569,062
|
|
|
|
539,131
|
|
|
|
1,767,851
|
|
President and CEO and director(7)
|
|
|
2019
|
|
419,460
|
|
|
|
224,975
|
|
|
|
398,910
|
|
|
|
507,750
|
|
|
|
1,551,095
|
|
|
|
|
2018
|
|
436,310
|
|
|
|
148,795
|
|
|
|
522,569
|
|
|
|
442,326
|
|
|
|
1,550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miriam Kidron
|
|
|
2020
|
|
305,840
|
|
|
|
70,000
|
|
|
|
299,506
|
|
|
|
13,354
|
|
|
|
688,700
|
|
Chief Scientific Officer and director(8)
|
|
|
2019
|
|
267,386
|
|
|
|
123,149
|
|
|
|
211,128
|
|
|
|
14,503
|
|
|
|
616,166
|
|
|
|
|
2018
|
|
273,595
|
|
|
|
46,614
|
|
|
|
253,204
|
|
|
|
13,643
|
|
|
|
587,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avraham Gabay
|
|
|
2020
|
|
130,554
|
|
|
|
15,591
|
|
|
|
-
|
|
|
|
44,912
|
|
|
|
191,418
|
|
Chief Financial Officer(9)
|
|
|
2019
|
|
32,122
|
|
|
|
-
|
|
|
|
73,928
|
|
|
|
9,441
|
|
|
|
115,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua Hexter
|
|
|
2020
|
|
190,801
|
|
|
|
12,169
|
|
|
|
351,128
|
|
|
|
54,735
|
|
|
|
608,833
|
|
Chief Operating & Business Officer(10)
|
|
|
2019
|
|
52,848
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,022
|
|
|
|
61,870
|
|
|
|
|
2018
|
|
161,002
|
|
|
|
26,895
|
|
|
|
269,196
|
|
|
|
50,505
|
|
|
|
507,598
|
|
|
(1)
|
The
information is provided for each fiscal year, which begins on September 1 and ends on
August 31.
|
|
(2)
|
Amounts
paid for Salary, Bonus and All Other Compensation were originally denominated in NIS
and were translated into U.S. Dollars at the then current exchange rate for each payment.
|
|
(3)
|
Bonuses
were granted at the discretion of the Compensation Committee.
|
|
(4)
|
The
amounts reflect the grant date fair value, as calculated pursuant to FASB ASC Topic 718,
of these option awards. The assumptions used to determine the fair value of the option
awards are set forth in Note 8 to our audited consolidated financial statements included
in this Annual Report on Form 10-K. Our NEOs will not realize the value of these awards
in cash unless and until these awards are exercised and the underlying shares subsequently
sold.
|
|
(5)
|
Amounts
exclude the fair market value of the options that were re-granted on September 11, 2020,
as it was offset by the negative amount created by the cancelled options (that is, it
was accounted for as a modification under FASB ASC Topic 718, and no incremental compensation
expense was recorded). For more information about the regrant see Note 7(a) to our audited
consolidated financial statements included in this Annual Report on Form 10-K. For more
information about the regrant fair market value see “Grants of Plan-Based Awards”
below.
|
|
(6)
|
See
“All Other Compensation Table” below.
|
|
(7)
|
Mr.
Kidron receives certain compensation from Oramed Ltd. through KNRY, Ltd., an Israeli
entity owned by Dr. Miriam Kidron, or KNRY. See “—Employment and Consulting
Agreements” below.
|
|
(8)
|
Dr.
Kidron receives compensation from Oramed Ltd. through KNRY. See “—Employment
and Consulting Agreements” below.
|
|
(9)
|
Mr.
Gabay was appointed as Chief Financial Officer, effective June 1, 2019.
|
|
(10)
|
Mr.
Hexter was appointed Chief Operating & Business Officer, effective September 19,
2019. From 2013 to 2018, Mr. Hexter served as Chief Operating Officer and VP Business
Development of the Company.
|
All
Other Compensation Table
The
“All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:
Name
|
|
Year
|
|
Automobile-
Related Expenses
($)
|
|
|
Manager’s
Insurance*
($)
|
|
|
Education
Fund*
($)
|
|
|
Relocation Expenses**
($)
|
|
|
Total
($)
|
|
Nadav Kidron
|
|
2020
|
|
|
23,438
|
|
|
|
--
|
|
|
|
--
|
|
|
|
515,693
|
|
|
|
539,131
|
|
|
|
2019
|
|
|
21,090
|
|
|
|
--
|
|
|
|
--
|
|
|
|
486,660
|
|
|
|
507,750
|
|
|
|
2018
|
|
|
12,596
|
|
|
|
--
|
|
|
|
--
|
|
|
|
429,730
|
|
|
|
442,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miriam Kidron
|
|
2020
|
|
|
13,354
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
13,354
|
|
|
|
2019
|
|
|
14,503
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
14,503
|
|
|
|
2018
|
|
|
13,643
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
13,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avraham Gabay
|
|
2020
|
|
|
16,625
|
|
|
|
18,606
|
|
|
|
9,681
|
|
|
|
--
|
|
|
|
44,912
|
|
|
|
2019
|
|
|
2,808
|
|
|
|
4,405
|
|
|
|
2,228
|
|
|
|
--
|
|
|
|
9,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua Hexter
|
|
2020
|
|
|
13,685
|
|
|
|
26,820
|
|
|
|
14,230
|
|
|
|
--
|
|
|
|
54,735
|
|
|
|
2019
|
|
|
4,409
|
|
|
|
1,985
|
|
|
|
2,628
|
|
|
|
--
|
|
|
|
9,022
|
|
|
|
2018
|
|
|
13,909
|
|
|
|
24,623
|
|
|
|
11,973
|
|
|
|
--
|
|
|
|
50,505
|
|
|
*
|
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.
|
|
**
|
Relocation
expenses represents additional compensation for the period during which Mr. Kidron was
in the United States. These expenses mainly include relocation expenses, supplemental
living expenses, accommodation allowances, education allowances, health insurance and
related costs.
|
Employment
and Consulting Agreements
On
July 1, 2008, Oramed Ltd. 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., or 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 Scientific Officer of both the Company and Oramed Ltd., or the Miriam Kidron Consulting Agreement. We refer to the Miriam
Kidron Consulting Agreement and Nadav Kidron Consulting Agreement collectively as the Consulting Agreements.
The
Consulting Agreements are both terminable by either party upon 140 days prior written notice. The Consulting Agreements, as amended,
provide that KNRY will be reimbursed for reasonable expenses incurred in connection with performance of the Consulting Agreements
and that Nadav Kidron receives a monthly consulting fee of NIS 127,570 and Miriam Kidron receives a monthly consulting fee of
NIS 92,522. 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.
We,
through Oramed Ltd., have entered into an employment agreement with Avraham Gabay as of May 16, 2019, pursuant to which Mr. Gabay
was appointed as Chief Financial Officer, Treasurer and Secretary of the Company and Oramed Ltd., effective June 1, 2019. In accordance
with the employment agreement, as amended, Mr. Gabay’s current gross monthly salary is NIS 38,500. In addition, Mr. Gabay
is provided with a cellular phone and a company car pursuant to the terms of his agreement.
We,
through Oramed Ltd., have entered into an employment agreement with Joshua Hexter as of August 5, 2019, pursuant to which Mr.
Hexter was appointed as Chief Operating & Business Officer of the Company and Oramed Ltd., effective September 19, 2019. In
accordance with the employment agreement, as amended, Mr. Hexter’s current gross monthly salary is NIS 56,000. In addition,
Mr. Hexter is provided with a cellular phone and a company car pursuant to the terms of his agreement.
We
have entered into indemnification agreements with our directors and officers pursuant to which we agreed to indemnify each director
and officer for any liability he or she may incur by reason of the fact that he or she serves as our director or officer, to the
maximum extent permitted by law.
Potential
Payments upon Termination or Change-in-Control
We
have no plans or arrangements in respect of remuneration received or that may be received by our named executive officers to compensate
such officers in the event of termination of employment (as a result of resignation, retirement, change-in- control) or a change
of responsibilities following a change-in-control.
Pension,
Retirement or Similar Benefit Plans
We
have no arrangements or plans under which we provide pension, retirement or similar benefits for directors or executive officers.
Our directors and executive officers may receive stock options, RSUs or restricted shares at the discretion of our Compensation
Committee in the future.
GRANTS
OF PLAN-BASED AWARDS
The
following table shows grants of plan-based equity awards made to our NEOs during fiscal 2020:
Name
|
|
Grant Date
|
|
Options Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Grant Date
Fair Value of
Stock Awards
($)
|
|
Avraham
Gabay(1)
|
|
9/11/2019
|
|
|
33,146
|
|
|
|
61,893
|
|
Joshua
Hexter(2)
|
|
9/11/2019
|
|
|
100,000
|
|
|
|
224,123
|
|
Joshua
Hexter(3)
|
|
9/11/2019
|
|
|
100,000
|
|
|
|
127,005
|
|
Miriam
Kidron(4)
|
|
9/11/2019
|
|
|
104,000
|
|
|
|
211,128
|
|
Nadav
Kidron(5)
|
|
9/11/2019
|
|
|
196,500
|
|
|
|
398,910
|
|
Miriam
Kidron(6)
|
|
1/8/2020
|
|
|
100,000
|
|
|
|
299,506
|
|
Nadav
Kidron(7)
|
|
1/8/2020
|
|
|
190,000
|
|
|
|
569,062
|
|
(1)
|
These options were canceled
and re-granted under our 2019 Plan, in the same amounts and under the same terms as the original grants. These options were
originally granted on June 17, 2019. 5,396 vested on December 31, 2019, and the balance vests in 3 equal installments of 9,250
on each of December 31, 2020, December 31, 2021 and December 31, 2022.
|
(2)
|
These options were granted under our 2019 Plan
and vest in 16 equal installments of 6,250 on the first day of each three months period beginning November 1, 2019. 25,000
of the options vested as of August 31, 2020.
|
(3)
|
These options were granted under the 2019 Plan
and vest upon achievement of certain performance conditions, such as consummating licensing agreements and entering into R&D
collaboration agreements.
|
(4)
|
These options were canceled and re-granted under
the 2019 Plan in the same amounts and under the same terms as the original grants. These options were originally granted on
February 26, 2019. 26,000 vested on December 31, 2019, and the balance vests in 3 equal installments of 26,000 on each of
December 31, 2020, December 31, 2021 and December 31, 2022.
|
(5)
|
These options were canceled and re-granted under
the 2019 Plan in the same amounts and under the same terms as the original grants. These options were originally granted on
February 26, 2019. 49,125 vested on December 31, 2019, and the balance vests in 3 equal installments of 49,125 on each of
December 31, 2020, December 31, 2021 and December 31, 2022.
|
(6)
|
These options were granted under our 2019 Plan
and vest in 4 equal installments of 25,000 on each of December 31, 2020, December 31, 2021, December 31, 2022 and December
31, 2023.
|
(7)
|
These options were granted under our 2019 Plan
and vest in 4 equal installments of 47,500 on each of December 31, 2020, December 31, 2021, December 31, 2022 and December
31, 2023.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table sets forth information concerning stock options and stock awards held by the NEOs as of August 31, 2020.
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
shares that
have not
vested
(#)
|
|
Market
value of
shares that
have not
vested
($)
|
|
Nadav
Kidron
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000
|
(1)
|
-
|
|
|
4.08
|
|
8/8/22
|
|
|
|
|
|
|
|
47,134
|
(2)
|
-
|
|
|
12.45
|
|
4/9/24
|
|
|
|
|
|
|
|
49,000
|
(3)
|
-
|
|
|
7.77
|
|
6/30/27
|
|
|
|
|
|
|
|
48,500
|
(4)
|
48,500
|
(4)
|
|
8.14
|
|
1/31/28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
(7)(8)
|
0
|
|
|
|
49,125
|
(10)
|
147,375
|
(10)(13)
|
|
3.16
|
|
2/26/29
|
|
|
|
|
|
|
|
|
|
190,000
|
(15)
|
|
4.80
|
|
1/8/30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miriam Kidron
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000
|
(1)
|
-
|
|
|
4.08
|
|
8/8/22
|
|
|
|
|
|
|
|
47,134
|
(2)
|
-
|
|
|
12.45
|
|
4/9/24
|
|
|
|
|
|
|
|
69,999
|
(5)
|
-
|
|
|
7.77
|
|
6/30/27
|
|
|
|
|
|
|
|
23,500
|
(6)
|
23,500
|
(6)
|
|
8.14
|
|
1/31/28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
(9)
|
0
|
|
|
|
26,000
|
(11)
|
78,000
|
(11)(13)
|
|
3.16
|
|
2/26/29
|
|
|
|
|
|
|
|
|
|
100,000
|
(16)
|
|
4.80
|
|
1/8/30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avraham Gabay
|
|
5,396
|
(12)
|
27,750
|
(12)(13)
|
|
3.55
|
|
6/17/29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua Hexter
|
|
25,000
|
(14)
|
175,000
|
(14)
|
|
3.69
|
|
9/11/29
|
|
|
|
|
|
|
(1)
|
On
August 8, 2012, 72,000 options were granted to each of Nadav Kidron and Miriam Kidron
under the Second Amended and Restated 2008 Stock Incentive Plan, or the 2008 Plan, at
an exercise price of $4.08 per share; 21,000 of such options vested immediately on the
date of grant and the remainder vested in seventeen equal monthly installments, commencing
on August 31, 2012. The options have an expiration date of August 8, 2022.
|
|
(2)
|
On
April 9, 2014, 47,134 options were granted to each of Nadav Kidron and Miriam Kidron
under the 2008 Plan at an exercise price of $12.45 per share; 15,710 of such options
vested on April 30, 2014 and the remainder vested in eight equal monthly installments,
commencing on May 31, 2014. The options have an expiration date of April 9, 2024.
|
|
(3)
|
On
June 30, 2017, 147,000 options were granted to Nadav Kidron under the 2008 Plan at an
exercise price of $7.77 per share; 49,000 of such options vested on December 31, 2017
and the remainder vest in two equal installments of 49,000 on each of December 31, 2018
and December 31, 2019, subject to the Company share price reaching the target of $9.50
and $12.50 per share, respectively. The options expire on June 30, 2027. As of August
31, 2020, 98,000 options were forfeited.
|
|
(4)
|
On
January 31, 2018, 97,000 options were granted to Nadav Kidron under the 2008 Plan at
an exercise price of $8.14 per share; 48,500 of such options vested on each of January
1, 2019 and January 1, 2020 and the reminder vest in two equal installments of 24,250
on each of January 1, 2021 and January 1, 2022. The options expire on January 31, 2028.
|
|
(5)
|
On
June 30, 2017, 69,999 options were granted to Miriam Kidron under the 2008 Plan at an
exercise price of $7.77 per share; Such options vested in 3 equal installments of 23,333
on each of December 31, 2017, December 31, 2018 and December 31, 2019. The options have
an expiration date of June 30, 2027.
|
|
(6)
|
On
January 31, 2018, 47,000 options were granted to Miriam Kidron under the 2008 Plan at
an exercise price of $8.14 per share; 23,500 of such options vested in 2 equal installments
of 11,750 on each of January 1, 2019 and January 1, 2020 and the reminder shall vest
in 2 equal installments of 11,750 on each of January 1, 2021 and January 1, 2022. The
options expire on January 31, 2028.
|
|
(7)
|
On
November 13, 2014, 9,788 RSUs, representing a right to receive shares of the Company’s
common stock, were granted to Nadav Kidron. The RSUs vested in two equal installments,
each of 4,894 shares, on November 30 and December 31, 2014. The shares of common stock
underlying the RSUs will be issued upon request of the grantee.
|
|
(8)
|
On
February 23, 2015, 79,848 RSUs, representing a right to receive shares of the Company’s
common stock, were granted to Nadav Kidron. The RSUs vested in 23 installments consisting
of one installment of 6,654 shares on February 28, 2015 and 22 equal monthly installments
of 3,327 shares each, commencing March 31, 2015. The shares of common stock underlying
the RSUs will be issued upon request of the grantee.
|
|
(9)
|
On
June 30, 2017, 75,000 RSUs, representing a right to receive shares of the Company’s
common stock, were granted to Miriam Kidron. The RSUs vested immediately, have an exercise
price of $0.012 per share of common stock and expire on June 30, 2027.
|
|
(10)
|
On
February 26, 2019, 196,500 options were granted to Nadav Kidron under the 2008 Plan at
an exercise price of $3.16 per share; 49,125 of such option vested on December 31, 2019
and the reminder shall vest in three equal installments of 49,125 on each of December
31, 2020, December 31, 2021 and December 31, 2022. The options expire on February 26,
2029. For additional information please see note 13 below.
|
|
(11)
|
On
February 26, 2019, 104,000 options were granted to Miriam Kidron under the 2008 Plan
at an exercise price of $3.16 per share; 26,000 of such option vested on December 31,
2019 and the reminder shall vest in three equal installments of 26,000 on each of December
31, 2020, December 31, 2021 and December 31, 2022. The options expire on February 26,
2029. For additional information please see note 13 below.
|
|
(12)
|
On
June 17, 2019, 33,146 options were granted to Avraham Gabay under the 2008 Plan at an
exercise price of $3.55 per share; 5,396 of the options vested on December 31, 2019 and
the remining options shall vest in 3 equal installments of 9,250 on each of December
31, 2020, December 31, 2021 and December 31, 2022. The options expire on June 17, 2029.
For additional information please see note 13 below.
|
|
(13)
|
On
September 11, 2019, the options in this table were canceled and re-granted under the
2019 Plan in the same amounts and under the same terms as the original grants.
|
|
(14)
|
On
September 11, 2019, 200,000 options were granted to Joshua Hexter under the 2019 Plan
at an exercise price of $3.69 per share; 100,000 of such options shall vest in 16 equal
installments of 6,250 on the first day of every three month period beginning November
1, 2019 and the remaining 100,000 shall vest upon achievement of certain performance
conditions, such as consummating licensing agreements and entering into R&D collaboration
agreements. The options expire on November 9, 2029.
|
|
(15)
|
On
January 8, 2020, 190,000 options were granted to Nadav Kidron under the 2019 Plan at
an exercise price of $4.80 per share. Such options will vest in 4 equal installments
of 47,500 on each of December 31, 2020, December 31, 2021, December 31, 2022 and December
31, 2023. The options expire on January 8, 2030.
|
|
(16)
|
On
January 8, 2020, 100,000 options were granted to Miriam Kidron under the 2019 Plan at
an exercise price of $4.80 per share. Such options will vest in 4 equal installments
of 25,000 on each of December 31, 2020, December 31, 2021, December 31, 2022 and December
31, 2023. The options expire on January 8, 2030.
|
Compensation
Committee Interlocks and Insider Participation
During
fiscal 2020, Mr. Aviad Friedman, Mr. Kevin Rakin and Mr. Leonard Sank served as the members of our Compensation Committee. None
of the members of our Compensation Committee is, or has been, an officer or employee of ours.
During
the last year, none of our NEOs served as: (1) a member of the compensation committee (or other committee of the Board performing
equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose
executive officers served on the compensation committee; (2) a director of another entity, one of whose executive officers served
on the compensation committee; or (3) a member of the compensation committee (or other committee of the board of directors performing
equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose
executive officers served as a director on our Board.
DIRECTOR
COMPENSATION
The
following table provides information regarding compensation earned by, awarded or paid to each person for serving as a director
who is not an executive officer during fiscal 2020:
Name of Director
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
Stock
Awards
(2)
($)
|
|
|
Option
Awards
(3) ($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Nadav Kidron(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Miriam Kidron(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Aviad Friedman
|
|
|
20,000
|
|
|
|
-
|
|
|
|
55,505
|
|
|
|
-
|
|
|
|
75,505
|
|
Arie
Mayer(4)
|
|
|
15,000
|
|
|
|
-
|
|
|
|
55,505
|
|
|
|
-
|
|
|
|
70,505
|
|
Kevin Rakin
|
|
|
20,000
|
|
|
|
-
|
|
|
|
55,505
|
|
|
|
-
|
|
|
|
75,505
|
|
Leonard Sank
|
|
|
20,000
|
|
|
|
-
|
|
|
|
55,505
|
|
|
|
-
|
|
|
|
75,505
|
|
Gao Xiaoming
|
|
|
20,000
|
|
|
|
-
|
|
|
|
55,505
|
|
|
|
-
|
|
|
|
75,505
|
|
|
(1)
|
Please
refer to the Summary Compensation Table for executive compensation with respect to the named individual.
|
|
(2)
|
As
of August 31, 2020, our non-employee directors then in office held options to purchase shares of our common stock as follows:
|
Name of Director
|
|
Aggregate Number
of Shares
Underlying
Stock
Awards
|
Aviad Friedman
|
|
40,857
|
Arie Mayer
|
|
20,000
|
Kevin Rakin
|
|
92,470
|
Leonard Sank
|
|
69,867
|
Gao Xiaoming
|
|
20,000
|
|
(3)
|
The
amounts reflect the grant date fair value, as calculated pursuant to FASB ASC Topic 718, of these option awards. The assumptions
used to determine the fair value of the option awards are set forth in Note 8 to our audited consolidated financial statements
included in this Annual Report on Form 10-K. 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.
|
|
(4)
|
Mr.
Mayer joined the Board as of December 5, 2019.
|
Our
directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our Board. Each independent director is entitled to receive as remuneration for his or her service as a member
of the Board a sum equal to $20,000 per annum, to be paid quarterly after the close of each quarter. Our executive officers did
not receive additional compensation for service as directors. The Board 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 as described above, we have no present formal plan for compensating our directors for their service in their capacity as
directors. Other than indicated above, no director received and/or accrued any compensation for his services as a director, including
committee participation and/or special assignments during fiscal 2020.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Stock
Option Plans
Our
Board adopted the 2008 Plan and the 2019 Plan in order to attract and retain quality personnel.
The
2008 Plan, which is no longer utilized for new grants, provided for the grant of stock options, restricted stock, RSUs, and stock
appreciation rights, collectively referred to as “awards.” Under the 2008 Plan, as amended, 2,400,000 shares were
reserved for the grant of awards. As of August 31, 2020, options with respect to 2,287,989 shares had been granted, of which 563,804
had been forfeited, 182,227 had been exercised and 841,303 have expired. As of August 31, 2020, 525,824 RSUs had been granted,
of which 164,636 have vested and the shares of common stock underlying those RSUs have been issued and 33,248 have been forfeited.
In
August 2019, the Company became aware of a shareholder derivative claim and putative class action alleging, among other things,
that the 2008 Plan may have terminated in 2018. However, the Company disputes these claims and believes that the 2008 Plan does
not terminate until 2026, and any suggestion to the contrary is not well-founded. For the sake of clarity and out of an abundance
of caution, the Company adopted the 2019 Plan, which was approved on August 29, 2019, at the Company’s 2019 shareholders
meeting.
The
2019 Plan provides for the grant of stock options, restricted stock, RSUs, and stock appreciation rights, collectively referred
to as “awards.” Under the 2019 Plan, 1,000,000 shares were initially reserved for the grant of awards. On June 29,
2020, and August 3, 2020, respectively, our Board and stockholders approved to amend and restate the 2019 Plan, the principal
change being an increase in the number of shares of common stock available under the 2019 Plan from 1,000,000 shares to 3,000,000
shares. Stock options granted under the 2019 Plan may be either incentive stock options under the provisions of Section 422 of
the Code, or non-qualified stock options. Under the 2019 Plan, as amended, 3,000,000 shares are reserved for the grant of awards,
which may be issued at the discretion of our Board from time to time. As of August 31, 2020, options with respect to 999,646 shares
have been granted, of which 20,000 have expired and none of them were exercised or forfeited. No RSUs have been granted under
the 2019 Plan. Since the Company had granted options during the time after the 2008 Plan allegedly terminated, and out of an abundance
of caution, the Company canceled these grants and re-granted certain of the options under 2019 Plan in the same amounts and under
the same terms as the original grants.
The
following table sets forth additional information with respect to our equity compensation plans as of August 31, 2020:
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of
securities to
be issued
upon
exercise of
outstanding
options, RSUs
and rights
(a)
|
|
|
Weight-
average
exercise
price of
outstanding
options, RSUs
and rights
(b)
|
|
|
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
1,864,664
|
|
|
$
|
4.97
|
|
|
|
2,000,354
|
|
Equity compensation plans not approved by security holders
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Total
|
|
|
1,864,664
|
|
|
$
|
4.97
|
|
|
|
2,000,354
|
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of November 24, 2020
by: (1) each person who is known by us to own beneficially more than 5% of our common stock; (2) each director; (3) each of our
NEOs listed above under “Summary Compensation Table”; and (4) all of our directors and current executive officers
as a group. On such date, we had 23,675,530 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 November 24, 2020. Inclusion
of shares in the table does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial
owner of those shares. Unless otherwise indicated, (1) each person or entity named in the table has sole voting power and investment
power (or shares that power with that person’s spouse) with respect to all shares of common stock listed as owned by that
person or entity and (2) the address of each of the individuals named below is: c/o Oramed Pharmaceuticals Inc., 1185 Avenue of
the Americas, Third Floor, New York, NY 10036.
Name and Address of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percentage
of Shares
Beneficially
Owned
|
|
Regals Fund LP
|
|
|
|
|
|
|
|
|
152 West 57th Street, 9th Floor
|
|
|
|
|
|
|
|
|
New York, NY 10019
|
|
|
1,317,123
|
(1)
|
|
|
5.6
|
%
|
Nadav Kidron #+
|
|
|
2,718,813
|
(2)
|
|
|
11.4
|
%
|
Miriam Kidron #+
|
|
|
376,383
|
(3)
|
|
|
1.6
|
%
|
Aviad Friedman #
|
|
|
49,714
|
(4)
|
|
|
*
|
|
Avraham Gabay+
|
|
|
14,646
|
(5)
|
|
|
*
|
|
Joshua Hexter+
|
|
|
101,250
|
(6)
|
|
|
*
|
|
Arie Mayer #
|
|
|
9,666
|
(7)
|
|
|
*
|
|
Kevin Rakin #
|
|
|
79,136
|
(8)
|
|
|
*
|
|
Leonard Sank #
|
|
|
628,546
|
(9)
|
|
|
2.7
|
%
|
Gao Xiaoming #
|
|
|
1,162,033
|
(10)
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
All current executive officers and directors, as a group (nine persons)
|
|
|
3,999,881
|
(11)
|
|
|
16.7
|
%
|
|
(1)
|
Regals
Management is the investment manager of Regals Fund LP, the owner of record of these
shares of common stock. David Slager is the managing member of the general partner of
Regals Management. All investment decisions are made by Mr. Slager, and thus the power
to vote or direct the votes of these shares of common stock, as well as the power to
dispose or direct the disposition of such shares of common stock is held by Mr. Slager
through Regals Management.
|
|
(2)
|
Includes
386,634 shares of common stock issuable upon the exercise of outstanding stock options
and 89,636 shares of Common Stock underlying vested RSUs that are issuable upon request.
On November 30, 2015, we entered into a securities purchase agreement with HTIT pursuant
to which, among other things, Nadav Kidron will serve as proxy and attorney in fact of
HTIT, with full power of substitution, to cast on behalf of HTIT all votes that HTIT
is entitled to cast with respect to 1,155,367 shares of common stock, or the Purchased
Shares, at any and all meetings of our stockholders, to consent or dissent to any action
taken without a meeting and to vote all the Purchased Shares held by HTIT in any manner
Mr. Kidron deems appropriate except for matters related to our activities in the People’s
Republic of China, on which Mr. Kidron will consult with HTIT before taking any action
as proxy. Mr. Nadav’s beneficial ownership includes the 1,155,367 shares of common
stock held by HTIT, as well as 218,603 shares of common stock held by Xiaopeng Li, a
former director of the Company, over which he holds a similar proxy.
|
|
(3)
|
Includes
301,383 shares of common stock issuable upon the exercise of outstanding stock options
and 75,000 shares of Common Stock underlying vested RSUs that are issuable upon request.
|
|
(4)
|
Includes
27,523 shares of common stock issuable upon the exercise of outstanding stock options
and 12,191 shares of common stock owned by Shikma, of which Mr. Friedman is the sole
owner and chief executive officer. All investment decisions are made by Mr. Friedman,
and thus the power to vote or direct the votes of these shares of common stock, as well
as the power to dispose or direct the disposition of such shares of common stock is held
by Mr. Friedman through Shikma.
|
|
(5)
|
Includes
14,646 shares of common stock issuable upon the exercise of outstanding stock options.
|
|
(6)
|
Includes
31,250 shares of common stock issuable upon the exercise of outstanding stock options.
|
|
(7)
|
Includes
6,666 shares of common stock issuable upon the exercise of outstanding stock options.
|
|
(8)
|
Includes
79,136 shares of common stock issuable upon the exercise of outstanding stock options
|
|
(9)
|
Includes:
(a) 374,999 shares of common stock held by Mr. Sank; (b) 78,125 shares of common stock
held by Mr. Sank’s wife; (c) 36,533 shares of common stock issuable to Mr. Sank
upon the exercise of outstanding stock options; and (d) 138,889 shares of common stock
owned by a company wholly owned by a trust of which Mr. Sank is a trustee. Mr. Sank disclaims
beneficial ownership of the securities referenced in (b) and (d) above.
|
|
(10)
|
Includes
6,666 shares of common stock issuable upon the exercise of outstanding stock options
and 1,155,367 shares of Common Stock held by HTIT. Mr. Gao is the chairman of HTIT.
|
|
(11)
|
Includes
890,467 shares of Common Stock issuable upon the exercise of options beneficially owned
by the referenced persons and 164,636 shares of Common Stock underlying vested RSUs that
are issuable upon request.
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
During
fiscals 2020 and 2019, except for compensation arrangements described elsewhere herein, we did not participate in any transaction,
and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded
the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years,
and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders, or any member of the
immediate family of the foregoing persons had, or will have, a direct or indirect material interest.
Our
policy is to enter into transactions with related persons 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. All related person transactions are approved by our Board.
On
November 30, 2015, we, our Israeli subsidiary and HTIT entered into a Technology License Agreement, which was further amended,
according to which we granted HTIT an exclusive commercialization license in the Territory related to our oral insulin capsule,
ORMD-0801. Pursuant to this license agreement, HTIT will conduct certain pre-commercialization and regulatory activities with
respect to our subsidiary’s technology related to the ORMD-0801 capsule, and will pay certain royalties and an aggregate
of approximately $37.5 million. On November 30, 2015, we also entered into a securities purchase agreement with HTIT, pursuant
to which, among other things, Mr. Kidron will serve as proxy and attorney in fact of HTIT, with full power of substitution, to
cast on behalf of HTIT all votes that HTIT is entitled to cast with respect to the Purchased Shares at any and all meetings of
our stockholders to consent or dissent to any action taken without a meeting and to vote all the Purchased Shares held by HTIT
in any manner Mr. Kidron deems appropriate except for matters related to our activities in the People’s Republic of China,
on which Mr. Kidron will consult with HTIT before taking any action as proxy.
The
Board has determined that Aviad Friedman, Arie Mayer, Kevin Rakin, Leonard Sank and Gao Xiaoming are independent as defined under
the rules promulgated by Nasdaq.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The
aggregate fees billed by Kesselman & Kesselman, independent registered public accounting firm, and member firm of PricewaterhouseCoopers
International Limited, for services rendered to us during fiscals 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Audit
Fees(1)
|
|
$
|
95,000
|
|
|
$
|
96,000
|
|
Audit-Related
Fees(2)
|
|
|
101,000
|
|
|
|
-
|
|
Tax
Fees(3)
|
|
|
2,000
|
|
|
|
1,000
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
Total Fees
|
|
$
|
198,000
|
|
|
$
|
97,000
|
|
|
(1)
|
Amount
represents fees paid for professional services for the audit of our consolidated annual
financial statements, review of our interim condensed consolidated financial statements
included in quarterly reports and services that are normally provided by our independent
registered public accounting firm in connection with statutory and regulatory filings
or engagements.
|
|
(2)
|
Represents
fees paid for services rendered in connection with our Offering.
|
|
(3)
|
Represents
fees paid for tax consulting services.
|
SEC
rules require that before the independent registered public accounting firm are engaged by us to render any auditing or permitted
non-audit related service, the engagement be: (1) pre-approved by our Audit Committee; or (2) entered into pursuant to pre-approval
policies and procedures established by the Audit Committee, provided the policies and procedures are detailed as to the particular
service, the Audit Committee is informed of each service, and such policies and procedures do not include delegation of the Audit
Committee’s responsibilities to management.
The
Audit Committee pre-approves all services provided by our independent registered public accounting firm. All of the above services
and fees were reviewed and approved by the Audit Committee before the services were rendered.
ORAMED
PHARMACEUTICALS INC.
CONSOLIDATED BALANCE SHEETS
In thousands (except share and per share
data)
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
19,296
|
|
|
$
|
3,329
|
|
Short-term deposits (note 2)
|
|
|
11,060
|
|
|
|
25,252
|
|
Marketable securities (note 3)
|
|
|
9,544
|
|
|
|
3,701
|
|
Prepaid expenses and other current assets
|
|
|
611
|
|
|
|
1,042
|
|
Total current assets
|
|
|
40,511
|
|
|
|
33,324
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS:
|
|
|
|
|
|
|
|
|
Long-term deposits and investment (note 4)
|
|
|
2
|
|
|
|
1
|
|
Marketable securities (note 3)
|
|
|
3,928
|
|
|
|
1,295
|
|
Amounts funded in respect of employee rights upon retirement
|
|
|
18
|
|
|
|
19
|
|
Property and equipment, net
|
|
|
99
|
|
|
|
24
|
|
Operating lease right of use assets
|
|
|
75
|
|
|
|
-
|
|
Total long-term assets
|
|
|
4,122
|
|
|
|
1,339
|
|
Total assets
|
|
$
|
44,633
|
|
|
$
|
34,663
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses (note 5)
|
|
$
|
1,699
|
|
|
$
|
2,541
|
|
Deferred revenues
|
|
|
2,703
|
|
|
|
2,703
|
|
Payable to related parties (note 11c)
|
|
|
90
|
|
|
|
64
|
|
Operating lease liabilities
|
|
|
44
|
|
|
|
-
|
|
Total current liabilities
|
|
|
4,536
|
|
|
|
5,308
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Deferred revenues
|
|
|
6,947
|
|
|
|
9,658
|
|
Employee rights upon retirement
|
|
|
18
|
|
|
|
22
|
|
Provision for uncertain tax position (note 10f)
|
|
|
11
|
|
|
|
11
|
|
Operating lease liabilities
|
|
|
31
|
|
|
|
-
|
|
Other liabilities
|
|
|
211
|
|
|
|
271
|
|
Total long-term liabilities
|
|
|
7,218
|
|
|
|
9,962
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS (note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
Common stock, $ 0.012 par value (60,000,000 authorized shares as of August 31, 2020 and 30,000,000 authorized shares as of August 31, 2019; 23,675,530 and 17,383,359 shares issued and outstanding as of August 31, 2020 and 2019, respectively)
|
|
|
284
|
|
|
|
208
|
|
Additional paid-in capital
|
|
|
125,209
|
|
|
|
100,288
|
|
Accumulated deficit
|
|
|
(92,614
|
)
|
|
|
(81,103
|
)
|
Total stockholders’ equity
|
|
|
32,879
|
|
|
|
19,393
|
|
Total liabilities and stockholders’ equity
|
|
$
|
44,633
|
|
|
$
|
34,663
|
|
The
accompanying notes are an integral part of the financial statements.
ORAMED
PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
In
thousands (except share and per share data)
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
REVENUES
|
|
$
|
2,710
|
|
|
$
|
2,703
|
|
COST OF REVENUES (INCOME) (note 6f)
|
|
|
-
|
|
|
|
90
|
|
RESEARCH AND DEVELOPMENT EXPENSES
|
|
|
10,235
|
|
|
|
13,522
|
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
4,232
|
|
|
|
3,722
|
|
OPERATING LOSS
|
|
|
11,757
|
|
|
|
14,631
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL INCOME (note 9a)
|
|
|
690
|
|
|
|
1,061
|
|
FINANCIAL EXPENSES
(note 9b)
|
|
|
444
|
|
|
|
485
|
|
LOSS BEFORE TAXES ON INCOME
|
|
|
11,511
|
|
|
|
14,055
|
|
|
|
|
|
|
|
|
|
|
TAXES ON INCOME (note
10d)
|
|
|
-
|
|
|
|
300
|
|
NET LOSS FOR THE YEAR
|
|
$
|
11,511
|
|
|
$
|
14,355
|
|
|
|
|
|
|
|
|
|
|
UNREALIZED INCOME ON AVAILABLE FOR SALE SECURITIES
|
|
|
-
|
|
|
|
-
|
|
TOTAL OTHER COMPREHENSIVE INCOME
|
|
|
-
|
|
|
|
-
|
|
TOTAL
COMPREHENSIVE LOSS FOR THE PERIOD
|
|
$
|
11,511
|
|
|
$
|
14,355
|
|
|
|
|
|
|
|
|
|
|
LOSS PER SHARE OF COMMON STOCK:
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK
|
|
$
|
0.56
|
|
|
$
|
0.82
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK
|
|
|
20,532,347
|
|
|
|
17,454,489
|
|
The
accompanying notes are an integral part of the financial statements.
ORAMED
PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
in
thousands
|
|
Common Stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total stockholders’
|
|
|
|
Shares
|
|
|
$
|
|
|
capital
|
|
|
income
|
|
|
deficit
|
|
|
equity
|
|
|
|
In thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF SEPTEMBER 1, 2018
|
|
|
17,369
|
|
|
$
|
207
|
|
|
$
|
99,426
|
|
|
$
|
702
|
|
|
$
|
(69,223
|
)
|
|
$
|
31,112
|
|
INITIAL ADOPTION OF ASU 2016-01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(702
|
)
|
|
|
702
|
|
|
|
0
|
|
INITIAL ADOPTION OF ASC 606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,773
|
|
|
|
1,773
|
|
SHARES ISSUED FOR SERVICES
|
|
|
14
|
|
|
|
1
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
STOCK-BASED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
808
|
|
|
|
|
|
|
|
|
|
|
|
808
|
|
NET LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,355
|
)
|
|
|
(14,355
|
)
|
BALANCE AS OF AUGUST 31, 2019
|
|
|
17,383
|
|
|
|
208
|
|
|
|
100,288
|
|
|
|
-
|
|
|
|
(81,103
|
)
|
|
|
19,393
|
|
SHARES ISSUED FOR SERVICES
|
|
|
10
|
|
|
|
*
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
ISSUANCE OF COMMON STOCK, NET
|
|
|
6,270
|
|
|
|
75
|
|
|
|
23,698
|
|
|
|
|
|
|
|
|
|
|
|
23,773
|
|
EXERCISE OF WARRANTS AND OPTIONS
|
|
|
12
|
|
|
|
1
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
STOCK-BASED COMPENSATION
|
|
|
-
|
|
|
|
-
|
|
|
|
1,173
|
|
|
|
|
|
|
|
|
|
|
|
1,173
|
|
NET LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,511
|
)
|
|
|
(11,511
|
)
|
BALANCE AS OF AUGUST 31, 2020
|
|
|
23,675
|
|
|
|
284
|
|
|
|
125,209
|
|
|
|
-
|
|
|
|
(92,614
|
)
|
|
|
32,879
|
|
*
Represents an amount of less than $1.
The
accompanying notes are an integral part of the financial statements
ORAMED
PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,511
|
)
|
|
$
|
(14,355
|
)
|
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
7
|
|
|
|
8
|
|
Exchange differences and interest on deposits and held to maturity bonds
|
|
|
546
|
|
|
|
(183
|
)
|
Stock-based compensation
|
|
|
1,173
|
|
|
|
808
|
|
Change at fair value of investments
|
|
|
465
|
|
|
|
437
|
|
Shares issued for services
|
|
|
38
|
|
|
|
55
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
431
|
|
|
|
(468
|
)
|
Accounts payable, accrued expenses and related parties
|
|
|
(816
|
)
|
|
|
501
|
|
Deferred revenue
|
|
|
(2,710
|
)
|
|
|
297
|
|
Liability for employee rights upon retirement
|
|
|
(4
|
)
|
|
|
2
|
|
Other liabilities
|
|
|
(59
|
)
|
|
|
(42
|
)
|
Total net cash used in operating activities
|
|
|
(12,440
|
)
|
|
|
(12,940
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(82
|
)
|
|
|
(15
|
)
|
Purchase of short-term deposits
|
|
|
(27,204
|
)
|
|
|
(24,990
|
)
|
Purchase of mutual funds
|
|
|
(3,750
|
)
|
|
|
-
|
|
Purchase of long-term deposits
|
|
|
-
|
|
|
|
(4,237
|
)
|
Purchase of held to maturity securities
|
|
|
(8,428
|
)
|
|
|
(1,357
|
)
|
Proceeds from sale of short-term deposits
|
|
|
40,891
|
|
|
|
38,611
|
|
Proceeds from maturity of held to maturity securities
|
|
|
3,200
|
|
|
|
3,250
|
|
Funds in respect of employee rights upon retirement
|
|
|
(1
|
)
|
|
|
(3
|
)
|
Total net cash provided by (used in) investing activities
|
|
|
4,626
|
|
|
|
11,259
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of issuance costs
|
|
|
23,773
|
|
|
|
-
|
|
Proceeds from exercise of warrants and options
|
|
|
13
|
|
|
|
-
|
|
Total net cash provided by financing activities
|
|
|
23,786
|
|
|
|
-
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
(5
|
)
|
|
|
14
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
15,967
|
|
|
|
(1,667
|
)
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
3,329
|
|
|
|
4,996
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
19,296
|
|
|
$
|
3,329
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE ON CASH FLOWS
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
|
-
|
|
|
|
300
|
|
Interest received
|
|
$
|
1,313
|
|
|
$
|
929
|
|
The
accompanying notes are an integral part of the financial statements
ORAMED PHARMACEUTICALS
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
|
1)
|
Incorporation and operations
|
Oramed Pharmaceuticals Inc. (collectively
with its subsidiaries, the “Company”, unless the context indicates otherwise) 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 capsule to be used
for the treatment of individuals with diabetes.
On May 14, 2007, the Company incorporated
a wholly-owned subsidiary in Israel, Oramed Ltd. (the “Subsidiary”), which is engaged in research and development.
On March 11, 2011, the Company was reincorporated
from the State of Nevada to the State of Delaware.
On July 30, 2019, the Company’s subsidiary
incorporated a wholly-owned subsidiary in Hong Kong, Oramed HK Limited (the “Hong Kong Subsidiary”). As of August 31,
2020, the Hong Kong Subsidiary has no operation.
On November 30, 2015, the Company entered
into a Technology License Agreement (the “TLA”), with Hefei Tianhui Incubation of Technologies Co. Ltd. (“HTIT”)
and on December 21, 2015, the parties entered into an Amended and Restated Technology License Agreement that was further amended
by the parties on June 3, 2016 and July 24, 2016 (the “License Agreement”). According to the License Agreement, the
Company granted HTIT an exclusive commercialization license in the territory of the People’s Republic of China, Macau and
Hong Kong (the “Territory”), related to the Company’s oral insulin capsule, ORMD-0801 (the “Product”).
Pursuant to the License Agreement, HTIT will conduct, at its own expense, certain pre-commercialization and regulatory activities
with respect to the Subsidiary’s technology and ORMD-0801 capsule, and will pay to the Subsidiary (i) royalties of 10% on
net sales of the related commercialized products to be sold by HTIT in the Territory (“Royalties”), and (ii) an aggregate
of $37,500, of which $3,000 was payable immediately, $8,000 will be paid subject to the Company entering into certain agreements
with certain third parties, and $26,500 will be paid upon achievement of certain milestones and conditions. In the event that the
Company does not meet certain conditions, the Royalties rate may be reduced to a minimum of 8%. Following the final expiration
of the Company’s patents covering the technology in the Territory in 2033, the Royalties rate may be reduced, under certain
circumstances, to 5%.
The royalty payment obligation shall apply
during the period of time beginning upon the first commercial sale of the Product in the Territory, and ending upon the later of
(i) the expiration of the last-to-expire licensed patents in the Territory; and (ii) 15 years after the first commercial sale of
the Product in the Territory (the “Royalty Term”).
The License Agreement shall remain in effect
until the expiration of the Royalty Term. The License Agreement contains customary termination provisions.
Among others, the Company’s involvement
through the product submission date will include consultancy for the pre-commercialization activities in the Territory, as well
as advisory services to HTIT on an ongoing basis.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
As of August 31, 2020, the Company has
received milestone payments in an aggregate amount of $20,500 as follows: the initial payment of $3,000 was received in January
2016. Following the achievement of certain milestones, the second and third payments of $6,500 and $4,000, respectively, were received
in July 2016, the fourth milestone payment of $4,000 was received in October 2016 and the fifth milestone payment of $3,000 was
received in January 2019.
On August 21, 2020, the Company
received a letter from HTIT, disputing certain pending payment obligations of HTIT under the TLA. The payment obligation being
disputed is $4,000, out of which only an amount of $2,000 has been received and has been included in Deferred revenue in each of
the consolidated balance sheets as of the fiscal years ended August 31, 2020, and 2019. In addition, the dispute includes a payment
obligation of $2,000 for certain milestones that the Company asserts it met under the TLA subsequent to the fiscal year ended August
31, 2020. The Company wholly disputes the claims made by HTIT and has been engaged in discussions and exchanges with HTIT in an
attempt to clarify and resolve disagreements between the parties regarding milestone payments and work plan implementation.
In addition, on November 30, 2015, the
Company entered into a Stock Purchase Agreement with HTIT (the “SPA”). According to the SPA, the Company issued 1,155,367
shares of common stock to HTIT for $12,000. The transaction closed on December 28, 2015.
The License Agreement and the SPA were
considered a single arrangement with multiple deliverables. The Company allocated the total consideration of $49,500 between the
License Agreement and the SPA according to their fair value, as follows: $10,617 was allocated to the issuance of common stock
(less issuance expenses of $23), based on the quoted price of the Company’s shares on the closing date of the SPA on December
28, 2015, and $38,883 was allocated to the License Agreement. Given the Company’s continuing involvement through the expected
product submission (June 2023), amounts received relating to the License Agreement are recognized over the period from which the
Company is entitled to the respective payment, and the expected product submission date using a time-based model approach over
the periods that the fees are earned.
In July 2015, according to the letter of
intent signed between the parties or their affiliates, HTIT’s affiliate paid the Subsidiary a non-refundable amount of $500
as a no-shop fee. The no-shop fee was deferred and the related revenue is recognized over the estimated term of the License Agreement.
For the Company’s revenue recognition policy see note 1k.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
|
2)
|
Development and liquidity risks
|
The Company is engaged in research and
development in the biotechnology field for innovative pharmaceutical solutions, including an orally ingestible insulin capsule
to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules for delivery of other polypeptides,
and has not generated significant revenues from its operations. Based on the Company’s current cash resources and commitments,
the Company believes it will be able to maintain its current planned development activities and the corresponding level of expenditures
for at least the next 12 months, although no assurance can be given that the Company will not need additional funds prior to such
time. If there are unexpected increases in its operating expenses, the Company may need to seek additional financing during the
next 12 months. Successful completion of the Company’s development programs and its transition to normal operations is dependent
upon obtaining necessary regulatory approvals from the U.S. Food and Drug Administration prior to selling its products within the
United States, obtaining foreign regulatory approvals to sell its products internationally, or entering into licensing agreements
with third parties. There can be no assurance that the Company will receive regulatory approval of any of its product candidates,
and a substantial amount of time may pass before the Company achieves a level of revenues adequate to support its operations, if
at all. The Company also expects to incur substantial expenditures in connection with the regulatory approval process for each
of its product candidates during their respective developmental periods. Obtaining marketing approval will be directly dependent
on the Company’s ability to implement the necessary regulatory steps required to obtain marketing approval in the United
States and in other countries. The Company cannot predict the outcome of these activities.
In addition to the foregoing, based on
the Company’s current assessment, the Company does not expect any material impact on its development timeline and its liquidity
due to the worldwide spread of the COVID-19 virus. However, the Company is continuing to assess the effect on its operation by
monitoring the spread of COVID-19 and the actions implemented by the governments to combat the virus throughout the world.
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 statements date and the reported
expenses during the reporting periods. Actual results could differ from those estimates.
As applicable to these consolidated financial
statements, the most significant estimates and assumptions relate to stock-based compensation, expectation of milestone payments
and to the expected product submission date for revenue recognition purposes.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
The currency of the primary economic environment
in which the operations of the Company and its Subsidiaries are conducted is the U.S. dollar (“$” or “dollar”).
Therefore, the functional currency of the Company and its Subsidiaries 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 the Company and its Subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.
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.
|
g.
|
Fair value measurement:
|
The Company measures fair value and discloses
fair value measurements for financial assets. Fair value is based on the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value
measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure
fair value into three broad levels, which are described as follows:
|
Level 1:
|
Quoted prices (unadjusted) in active markets that
are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level
1 inputs.
|
|
Level 2:
|
Observable prices that are based on inputs other than
quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
|
Level 3:
|
Unobservable inputs are used when little or no market
data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
|
As of August 31, 2020, the assets measured
at fair value are comprised of equity securities (Level 1). The fair value of held to maturity bonds as presented in note 3 was
based on a Level 2 measurement.
As of August 31, 2020, the carrying amounts
of cash equivalents, short-term deposits and accounts payable approximate their fair values due to the short-term maturities of
these instruments.
As of August 31, 2020, the carrying amounts
of long-term deposits approximate their fair values due to the stated interest rates which approximate market rates.
The amounts funded in respect of employee
rights are stated at cash surrender value which approximates its fair value.
There were no Level 3 items for the years
ended August 31, 2020 and 2019.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
In January 2016,
the Financial Accounting Standards Board (“FASB”) issued guidance which updates certain aspects of recognition, measurement,
presentation and disclosure of financial assets and financial liabilities (“ASU 2016-01”). The guidance requires entities
to recognize changes in fair value in net income rather than in accumulated other comprehensive income. The Company adopted the
provisions of this update in the first quarter of fiscal year 2019. Following the adoption, as of September 1, 2018, the Company
classified the available for sale securities (investments in equity securities of D.N.A Biomedical Solutions Ltd. (“D.N.A”),
Entera Bio Ltd. (“Entera”) and other mutual funds) to financial assets measured at fair value through profit or loss.
The Company adopted the standard using the modified retrospective method and, accordingly, reclassified the cumulative unrealized
gain from accumulated other comprehensive income to a reduction of its accumulated deficit in an amount of $702.
|
2)
|
Held to maturity securities
|
All debt securities are classified as held-to-maturity
because the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated
at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. On a continuous basis, management
assesses whether there are any indicators that the value of the Company’s marketable securities may be impaired, which includes
reviewing the underlying cause of any decline in value and the estimated recovery period, as well as the severity and duration
of the decline. In the Company’s evaluation, the Company considers its ability and intent to hold these investments for a
reasonable period of time sufficient for the Company to recover its cost basis. A marketable security is impaired if the fair value
of the security is less than the carrying value of the security and such difference is deemed to be other-than temporary. To the
extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the security over the estimated
fair value of the security.
|
i.
|
Concentration of credit risks
|
Financial instruments that subject the
Company to credit risk consist primarily of cash and cash equivalents, short and long-term deposits and marketable securities which
are deposited in major financial institutions. The Company is of the opinion that the credit risk in respect of these balances
is remote.
As of the date of
issuing these financial statements, all amounts due from HTIT with regard to the License Agreement have been received, as described
in note 1 above. However, the balance of prepaid expenses and other current assets composed of $290 was due as an expenses reimbursement
from HTIT.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
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. See note 10.
Regarding the Subsidiary, the recognition
is prohibited for 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.
Taxes that would apply in the event of
disposal of investments in the Subsidiary have not been taken into account in computing deferred taxes, as it is the Company’s
intention to hold this investment, not to realize it.
|
2.
|
Uncertainty in income tax
|
The Company follows a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The
second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance
sheet date. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within income
tax expenses.
The License Agreement and the SPA were
considered a single arrangement with multiple deliverables. The Company allocated the total consideration of $49,500 between the
License Agreement and the SPA according to their fair value, as follows: $10,617 was allocated to the issuance of common stock
(less issuance expenses of $23), based on the quoted price of the Company’s shares on the closing date of the SPA on December
28, 2015, and $38,883 was allocated to the License Agreement.
Under Accounting Standards Codification
(“ASC”) 605 (which was the authoritative revenue recognition guidance applied for all periods prior to September 1,
2018) given the Company’s continuing involvement through the expected product submission in June 2023, amounts received relating
to the License Agreement were recognized over the period from which the Company was entitled to the respective payment, and the
expected product submission date using a time-based model approach over the periods that the fees were earned.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
On September 1, 2018, the Company adopted
Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASC
606”), using the modified retrospective method of adoption. Under this method, the Company applied ASC 606 to the License
Agreement at the adoption date and was required to make an adjustment to the September 1, 2018 opening accumulated deficit balance.
All prior periods continue to be presented under ASC 605. The most significant impact from adopting ASC 606 was the impact of the
timing of recognition of revenue associated with the milestone payment. Under ASC 605, which was the authoritative revenue recognition
guidance applied for all periods prior to September 1, 2018, given the Company’s continuing involvement through the expected
product submission in June 2023, amounts received relating to the License Agreement were recognized over the period from which
the Company was entitled to the respective payment and the expected product submission date using a time-based model approach over
the periods that the fees were earned. However, under ASC 606, the Company is required to recognize the total transaction price
(which includes consideration related to milestones once the criteria for recognition have been satisfied) using the input method
over the period the performance obligation is fulfilled. Accordingly, once the consideration associated with a milestone is included
in the transaction price, incremental revenue is recognized immediately based on the period of time that has elapsed towards complete
satisfaction of the performance obligation. This method results in the recognition of revenue earlier than under ASC 605, and the
resulting impact was recorded as a reduction of the opening balance of accumulated deficit at September 1, 2018, as further described
below.
Under ASC 606, the Company identified a
single performance obligation in the agreement and determined that the license and services are not distinct as the license and
services are highly dependent on each other. In other words, HTIT cannot benefit from the license without the related services,
and vice versa.
Since the customer benefits from the services
as the entity performs, revenue is recognized over time through the expected product submission date in June 2023, using the input
method. The Company used the input method to measure the process for the purpose of recognizing revenue, which approximates the
straight-line attribution. The Company used significant judgment when it determined the product submission date.
Under ASC 606, the consideration that the
Company would be entitled to upon the achievement of contractual milestones, which are contingent upon the occurrence of future
events, are a form of variable consideration. When assessing the portion, if any, of such milestones-related consideration to be
included in the transaction price, the Company first assesses the most likely outcome for each milestone and excludes the consideration
related to milestones of which the occurrence is not considered the most likely outcome.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
The Company then evaluates if any of the
variable consideration determined in the first step is constrained by including in the transaction price variable consideration
to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when
the uncertainty associated with the variable consideration is subsequently resolved. The Company used significant judgment
when it determined the first step of variable consideration.
The potential future royalty consideration
is also considered a form of variable consideration under ASC 606 as it is based on a percentage of potential future sales of the
Company’s products. However, the Company applies the sales-based royalty exception and accordingly will recognize the sales-based
royalty amounts at the earlier of the time (a) when the related sale has occurred and (b) the Company has fulfilled the related
performance obligation. To date, the Company has not recognized any royalty-related revenue.
As of the adoption date, the Company adjusted
its accumulated deficit by $1,773 against contract liabilities due to the effect of variable consideration.
Amounts that were allocated to the License
Agreement as of August 31, 2020 aggregated $22,383, all of which was received through the balance sheet date. Through August 31,
2020, the Company recognized revenue associated with this agreement in the aggregate amount of $12,732 (of which $2,710 was recognized
in the twelve-months period ended August 31, 2020), and deferred the remaining amount of $9,650, which is presented as a contract
liability on the condensed consolidated balance sheet.
Cost of revenues consists of royalties
to the IIA related to the License Agreement with HTIT. The royalties are recognized when proceeds related to the License Agreement
are received.
|
m.
|
Research and development
|
Research and development expenses include
costs directly attributable to the conduct of research and development programs, including the cost of salaries, employee benefits,
the cost of supplies, the cost of services provided by outside contractors, including services related to the Company’s clinical
trials, clinical trial expenses and the full cost of manufacturing drug for use in research and 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 outsources
a substantial portion of its clinical trial activities, utilizing external entities such as Clinical Research Organizations (“CROs”),
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, clinical trial costs are expensed immediately.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
|
n.
|
Stock-based compensation
|
Equity awards granted to employees are
accounted for using the grant date fair value method. The grant date fair value is determined as follows: for stock options and
restricted stock units (“RSUs”) with an exercise price using the Black Scholes pricing model, for stock options with
market conditions using a Monte Carlo model and for RSUs with service conditions based on the grant date share price. The fair
value of share based payment awards is recognized as an expense over the requisite service period. The expected term is the length
of time until the expected dates of exercising the award and is estimated using the simplified method due to insufficient specific
historical information of employees’ exercise behavior, unless the award includes a market condition, in which case the contractual
term is used. The volatility is based on a historical volatility, by statistical analysis of the weekly share price for past periods.
The Company elected to recognize compensation cost for awards granted to employees that have a graded vesting schedule using the
accelerated method based on the multiple-option award approach. For awards with only market conditions, compensation expense is
not reversed if the market conditions are not satisfied.
When stock options are granted as consideration
for services provided by consultants and other non-employees, the transaction is accounted for based on the fair value of the consideration
received or the fair value of the stock options issued, whichever is more reliably measurable. The fair value of the options granted
to consultants and other non-employees is measured on a final basis at the end of the related service period using the Black Scholes
pricing model and is recognized over the related service period using the straight-line method.
The Company elects to account for forfeitures
as they occur.
On
September 1, 2019 the Company adopted the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718) Improvements
to Nonemployee Share-based Payments. This ASU was issued to simplify the accounting for share-based transactions by expanding the
scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions
for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions are being measured by estimating
the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance
conditions.
Basic and diluted net loss per common share
are computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding for each
period. Outstanding stock options, warrants and RSUs have been excluded from the calculation of the diluted loss per share because
all such securities are anti-dilutive for all periods presented. The weighted average number of stock options, warrants and RSUs
excluded from the calculation of diluted net loss was 5,025,723 and 4,423,325 for the years ended August 31, 2020 and 2019, respectively.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(continued):
|
p.
|
Newly issued and recently adopted Accounting Pronouncements
|
|
1.
|
In February 2016, the FASB issued ASU No. 2016-02,
“Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, Leases (Topic 840). The new standard
requires a lessee to record assets and liabilities on its balance sheet for all leases with terms longer than 12 months. Leases
will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the lessee’s
income statement. The Company adopted this standard as of September 1, 2019 on a modified retrospective basis and will not
restate comparative periods. The Company elected the package of practical expedients permitted under the transition guidance within
the new standard which, among other things, allows the Company to carryforward the historical lease classification. The Company
made an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet. The Company
recognized those lease payments in its statements of operations on a straight-line basis over the lease period. As of the adoption
date, the Company recognized an operating lease asset and liability of $168 and $168, respectively, as of September 1, 2019 on
its balance sheet.
|
|
2.
|
On September 1,
2019 the Company adopted the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718) Improvements to Nonemployee
Share-based Payments. This ASU was issued to simplify the accounting for share-based transactions by expanding the scope of Topic
718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring
goods and services from nonemployees. As a result, nonemployee share-based transactions are being measured by estimating the fair
value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions.
The adoption of this slandered had no material impact on the Company’s consolidated financial statements.
|
|
q.
|
Recently issued Accounting Pronouncements, not
yet adopted
|
In
June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit
Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment
methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable
and supportable information to inform credit loss estimates. The guidance will be effective for the fiscal year beginning after
December 15, 2022, including interim periods within that year. The adoption of this guidance will not have a significant impact
on the Company’s consolidated financial statements.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 2 - SHORT-TERM DEPOSITS:
Composition:
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Annual interest rate
|
|
|
Amount
|
|
|
Annual
interest rate
|
|
|
Amount
|
|
Dollar deposits
|
|
|
0.85-1.60
|
%
|
|
$
|
11,060
|
|
|
|
1.80-3.44
|
%
|
|
$
|
25,252
|
|
NOTE 3 - MARKETABLE SECURITIES:
The Company’s marketable securities
include investments in equity securities of D.N.A, Entera, mutual funds and in held to maturity bonds.
Composition:
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Short-term:
|
|
|
|
|
|
|
D.N.A (see b below)
|
|
$
|
246
|
|
|
$
|
557
|
|
Entera (see c below)
|
|
|
150
|
|
|
|
304
|
|
Held to maturity bonds (see d below)
|
|
|
5,369
|
|
|
|
2,840
|
|
Preferred equity
|
|
|
481
|
|
|
|
-
|
|
Mutual funds*
|
|
|
3,298
|
|
|
|
-
|
|
|
|
$
|
9,544
|
|
|
$
|
3,701
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
Held to maturity bonds (see d below)
|
|
$
|
3,928
|
|
|
$
|
1,295
|
|
|
|
$
|
13,472
|
|
|
$
|
4,996
|
|
|
*
|
Mutual funds include equity funds only
|
The D.N.A ordinary shares are traded on the Tel Aviv Stock Exchange. The fair value of those securities is measured at the
quoted prices of the securities on the measurement date.
During the years ended August 31, 2020
and 2019, the Company did not sell any of the D.N.A ordinary shares. As of August 31, 2020, the Company owns approximately 5.6%
of D.N.A’s outstanding ordinary shares.
The cost of the securities as of August
31, 2020 and 2019 is $595.
Entera ordinary shares have been traded
on The Nasdaq Capital Market since June 28, 2018. The Company measures the investment at fair value from such date, since it has
a readily determinable fair value (prior to such date the investment was accounted for as a cost method investment (amounting to
$1)).
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 3 - MARKETABLE SECURITIES (continued):
|
d.
|
Held to maturity bonds
|
The amortized cost and estimated fair value
of held-to-maturity securities at August 31, 2020, are as follows:
|
|
August 31, 2020
|
|
|
|
Amortized cost
|
|
|
Gross unrealized gains (losses)
|
|
|
Estimated fair value
|
|
|
Average
yield to maturity rate
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial bonds
|
|
$
|
5,295
|
|
|
$
|
(29
|
)
|
|
$
|
5,266
|
|
|
|
2.26
|
%
|
Accrued interest
|
|
|
74
|
|
|
|
-
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
3,928
|
|
|
|
56
|
|
|
|
3,984
|
|
|
|
2.20
|
%
|
|
|
$
|
9,297
|
|
|
$
|
27
|
|
|
$
|
9,324
|
|
|
|
|
|
The amortized cost and estimated fair value
of held-to-maturity securities at August 31, 2019, are as follows:
|
|
August 31, 2019
|
|
|
|
Amortized cost
|
|
|
Gross unrealized gains (losses)
|
|
|
Estimated fair value
|
|
|
Average
yield to maturity rate
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial bonds
|
|
$
|
2,808
|
|
|
$
|
6
|
|
|
$
|
2,814
|
|
|
|
2.90
|
%
|
Accrued interest
|
|
|
32
|
|
|
|
-
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
1,295
|
|
|
|
4
|
|
|
|
1,299
|
|
|
|
2.47
|
%
|
|
|
$
|
4,135
|
|
|
$
|
10
|
|
|
$
|
4,145
|
|
|
|
|
|
Held to maturity securities which will
mature during the 12 months from the balance sheet date are included in short-term marketable securities. Held to maturity securities
with maturity dates of more than one year are considered long-term marketable securities.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 4 - LONG-TERM DEPOSITS AND INVESTMENT:
Composition:
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Lease car deposits
|
|
|
2
|
|
|
|
1
|
|
|
|
$
|
2
|
|
|
$
|
1
|
|
NOTE
5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Composition:
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accounts payable
|
|
$
|
594
|
|
|
$
|
1,337
|
|
Payroll and related accruals
|
|
|
54
|
|
|
|
25
|
|
Institutions
|
|
|
19
|
|
|
|
33
|
|
Accrued liabilities
|
|
|
1,032
|
|
|
|
1,146
|
|
|
|
$
|
1,699
|
|
|
$
|
2,541
|
|
NOTE 6 - COMMITMENTS:
|
a.
|
In March 2011, the Subsidiary sold shares of its investee
company, Entera, to D.N.A, retaining 117,000 ordinary shares (after giving effect to a stock split by Entera in July 2018). In
consideration for the shares sold to D.N.A, the Company received, among other payments, ordinary shares of D.N.A (see also note
3).
|
As part of this agreement, the Subsidiary
entered into a patent transfer agreement (the “Patent Transfer Agreement”) according to which the Subsidiary assigned
to Entera all of its right, title and interest in and to a certain patent application related to the oral administration of proteins
that it has licensed to Entera since August 2010. Under this agreement, the Subsidiary is entitled to receive from Entera royalties
of 3% of Entera’s net revenues (as defined in the agreement) and a license back of that patent application for use in respect
of diabetes and influenza. As of August 31, 2020, Entera had not yet realized any revenues and had not paid any royalties to the
Subsidiary. On December 11, 2018, Entera announced that it had entered into a research collaboration and license agreement (the
“Amgen License”) with Amgen related to research of inflammatory disease and other serious illnesses. As reported by
Entera, under the terms of the Amgen License, Entera will receive a modest initial technology access fee from Amgen and will be
responsible for preclinical development at Amgen’s expense. Entera will be eligible to receive up to $270,000 in aggregate
payments, as well as tiered royalties up to mid-single digits, upon achievement of various clinical and commercial milestones if
Amgen decides to move all of these programs forward. Amgen is responsible for clinical development, manufacturing and commercialization
of any of the resulting programs. To the extent the Amgen License results in net revenues as defined in the Patent Transfer Agreement,
the Subsidiary will be entitled to the aforementioned royalties.
In addition, as part of a consulting agreement
with a third party, dated February 15, 2011, the Subsidiary is obliged to pay this third party royalties of 8% of the net royalties
received in respect of the patent that was sold to Entera in March 2011.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 6 - COMMITMENTS (continued):
|
b.
|
On January 3, 2017, the Subsidiary entered into a
lease agreement for its office facilities in Israel. The lease agreement is for a period of 60 months commencing October 1, 2016.
|
The annual lease payment was New Israeli
Shekel (“NIS”) 119,000 ($35) from October 2016 through September 2018 and NIS 132,000 ($39) from October 2018 through
September 2021, and is linked to the increase in the Israeli consumer price index (“CPI”).
On August 2, 2020, the Subsidiary entered
into a new lease agreement for its facilities in Israel. The new lease agreement is for a period of 60 months commencing September
1, 2020. The Company has the option to extend the period in another 60 months. The annual lease payment, including management fees,
is NIS 435,000 ($130). The Company intends to terminate its current lease agreement before moving to the new office.
As security for its obligation under these
lease agreements, the Company provided a bank guarantee in an amount equal to three monthly lease payments.
|
c.
|
On December 18, 2017, the Subsidiary entered into
an agreement with a vendor for the process development and production of one of its oral capsule ingredients in the amount of
$2,905 that will be paid over the term of the engagement and based on the achievement of certain development milestones, of which
$1,542 was recognized in research and development expenses through August 31, 2020.
|
|
d.
|
On September 2, 2020 (effective as of January 15,
2020), the Subsidiary entered into a CRO Services Agreement with a third party to retain it as a CRO for the Subsidiary’s
phase 3 clinical trial for its oral insulin. As consideration for its services, the Subsidiary will pay the CRO a total amount
of $21,589 during the term of the engagement and based on achievement of certain milestones, of which $178 was recognized in research
and development expenses through August 31, 2020.
|
|
e.
|
On September 16, 2020 (effective as of January 15,
2020), the Subsidiary entered into a CRO Services Agreement with a third party to retain it as a CRO for the Subsidiary’s
phase 3 clinical trial for its oral insulin. As consideration for its services, the Subsidiary will pay the CRO a total amount
of $12,343 during the term of the engagement and based on achievement of certain milestones, of which $400 was recognized in research
and development expenses through August 31, 2020.
|
|
f.
|
Grants from the Israel Innovation Authority (“IIA”)
|
Under the terms of the Company’s
funding from the IIA, royalties of 3% are payable on sales of products developed from a project so funded, up to a maximum amount
equaling 100%-150% of the grants received (dollar linked) with the addition of interest at an annual rate based on LIBOR.
At the time the grants were received, successful
development of the related projects was not assured. The total amount that was received through August 31, 2020 was $2,207. All
grants were received before fiscal year 2020 and recorded as a reduction of Research and development expenses at that time.
The royalty expenses which are related
to the funded project were recognized in cost of revenues in the year ended August 31, 2020 and in prior periods.
|
g.
|
Grants from the European Commission (“EC”)
|
During fiscal year 2020, the Company received
an aggregate payment of €50 from the EC under The European Innovation Council Accelerator (previously known as SME Instrument)
of the European Innovation Programme Horizon 2020.
As part of the grant terms, the Company
is required to use the proceeds from the grant in Europe. The Company intends on using the grant to explore the possibility of
running clinical trials in Europe.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 7 - STOCKHOLDERS’ EQUITY:
The following are the significant capital
stock transactions that took place during the years ended August 31, 2020 and 2019:
|
a.
|
In August 2019, the Company became aware of a shareholder
derivative claim and putative class action alleging, among other things, that the Second Amended and Restated 2008 Stock Incentive
Plan (the “2008 Plan”) may have terminated in 2018. However, the Company disputed these claims and believes that
the 2008 Plan does not terminate until 2026 and any suggestion to the contrary is not well-founded. For the sake of clarity and
out of an abundance of caution, the Company adopted a new option plan, which was approved at its 2019 shareholder meeting. Such
2019 Stock Incentive Plan, as amended and restated (the “2019 Plan”) originally allowed the Company to grant up to
1,000,000 options. Since the Company had granted options during the time after the old plan allegedly terminated, and out of an
abundance of caution, the Company canceled these grants and reissued the options under the new option plan in the same amounts
and under the same terms as the original grants. The cancelation and grants were approved by the Company’s board on September
11, 2019. Out of the available options under the 2019 Plan, the Company have been granted 563,646 to replace the options under
dispute as mentioned above. The cancellation of the award accompanied by the concurrent grant of a replacement award was accounted
for as modification of the terms of the cancelled award. Since the replacement award was given under the same terms as the cancelled
award, no incremental compensation cost was recognized. On August 3, 2020, the stockholders of the Company adopted the amended
and restated 2019 Plan which increased the shares available to grant under the plan by an additional 2,000,000 to 3,000,000 options.
|
|
b.
|
On September 5, 2019, the Company entered into an
Equity Distribution Agreement (the “Sales Agreement”), pursuant to which the Company may, from time to time and at
the Company’s option, issue and sell shares of Company common stock having an aggregate offering price of up to $15,000,
through a sales agent, subject to certain terms and conditions. Any shares sold will be sold pursuant to the Company’s effective
shelf registration statement on Form S-3 including a prospectus and prospectus supplement, each dated February 10, 2020 (which
superseded a prior registration statement, prospectus and prospectus supplement that related to shares sold under the Sales Agreement).
The Company will pay the sales agent a cash commission of 3.0% of the gross proceeds of the sale of any shares sold through the
sales agent under the Sales Agreement. As of August 31, 2020, 839,357 shares were issued under the Sales Agreement for aggregate
net proceeds of $3,879.
|
|
c.
|
On February 27, 2020, the Company entered into an
underwriting agreement (“Agreement”) with National Securities Corporation (“Underwriter”), in connection
with a public offering (“Offering”) of 5,250,000 shares of the Company’s common stock, at an offering price
of $4.00 per share. Under the terms of the Agreement, the Company granted the Underwriter a 45-day option to purchase from the
Company up to an additional 787,500 shares of common stock at the public offering price (“Over-Allotment Option”).
In connection with the Offering, the Company also agreed to issue to the Underwriter, or its designees, warrants (“Underwriter’s
Warrants”), to purchase up to an aggregate of 7% of the shares of common stock sold in the Offering (including any additional
shares sold during the 45-day option period), at an exercise price of $4.80 per share. The Underwriter’s Warrants issued
in the Offering will be exercisable at any time and from time to time, in whole or in part, commencing six months from issuance
for a period of three years from the date of issuance. The closing of the sale of the Offering occurred on March 2, 2020. On April
9, 2020, the Company issued 180,561 shares of Common Stock and 12,640 Underwriter’s Warrants pursuant to a partial exercise
by the Underwriter of the Over-Allotment Option (“Partial Over-Allotment Option Exercise”). The net proceeds to the
Company from the Offering, including from the Partial Over-Allotment Option Exercise, after deducting the underwriting discount
and the Company’s estimated Offering expenses were $19,894.
|
|
d.
|
As of August 31, 2020, the Company had outstanding
warrants exercisable commencing January 6, 2019 for 3,407,820 shares of common stock at exercise prices ranging from $4.80 to
$7.8125 per share and expiring from January 6, 2022 to April 10, 2029.
|
The following table presents the warrant
activity for the years ended August 31, 2020 and 2019:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Warrants
|
|
|
Weighted-
Average Exercise Price
|
|
|
Warrants
|
|
|
Weighted-
Average Exercise Price
|
|
Warrants outstanding at beginning of year
|
|
|
3,007,680
|
|
|
$
|
7.27
|
|
|
|
3,007,680
|
|
|
$
|
7.27
|
|
Issued
|
|
|
400,140
|
|
|
$
|
4.77
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Warrants outstanding at end of year
|
|
|
3,407,820
|
|
|
$
|
6.98
|
|
|
|
3,007,680
|
|
|
$
|
7.27
|
|
Warrants exercisable at end of year
|
|
|
3,407,820
|
|
|
$
|
6.98
|
|
|
|
3,007,680
|
|
|
$
|
7.27
|
|
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 8 - STOCK-BASED COMPENSATION:
The Company makes awards only under the
2019 Plan, under which, the Company had reserved a pool of 3,000,000 shares of the Company’s common stock which may be issued
at the discretion of the Company’s Board of Directors from time to time. Under this 2019 Plan, 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 following are the significant stock
options transactions with employees, board members and non-employees made during the years ended August 31, 2020 and 2019:
|
a.
|
On February 26, 2019, the Company granted options
to purchase an aggregate of 360,000 shares of common stock of the Company at an exercise price of $3.16 per share (equivalent
to the closing price of the Company’s common stock on the date of grant) as follows: 196,500 to the CEO; 104,000 to the
CSO; and 59,500 to employees of the Subsidiary. 49,125, 26,000 and 14,875 options of the CEO, CSO and the employees, respectively,
were vested and the remainder will vest in three equal annual installments on each of December 31, 2020, 2021 and 2022. These
options expire on February 26, 2029. The fair value of all these options on the date of grant was $731, using the Black Scholes
option-pricing model and was based on the following assumptions: stock price of $3.16; dividend yield of 0% for all years; expected
volatility of 69.05%; risk-free interest rates of 2.54%; and expected term of 6.25 years.
|
|
b.
|
On April 10, 2019 and April 15, 2019, the Company granted options to its directors to purchase an aggregate of 30,000 shares of common stock of the Company at an exercise price of $4.17 and $4.13 per share, respectively (equivalent to the closing price of the Company’s common stock on the date of grant). 20,000 of such options vested immediately and the remaining 10,000 options vested on December 31, 2019. The fair value of all these options on the date of grant was $64, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $4.13 and $4.17, respectively; dividend yield of 0% for all years; expected volatility of 54.64% and 66.40%, respectively; risk-free interest rates of 2.37% and 2.28%, respectively; and expected term of 5 and 5.5 years, respectively.
|
|
c.
|
On June 17, 2019, the Company granted options to its
chief financial officer to purchase an aggregate of 33,146 shares of common stock of the Company at an exercise price of $3.55
per share (equivalent to the closing price of the Company’s common stock on the date of grant). 5,396 of such options vested
will vest on December 31, 2019 and the remaining 27,750 will vest in 3 equal installments on each of December 31, 2020, December
31, 2021 and December 31, 2022. The fair value of all these options on the date of grant was $74, using the Black Scholes option-pricing
model and was based on the following assumptions: stock price of $3.55; dividend yield of 0% for all years; expected volatility
of 67.79%; risk-free interest rates of 2.03%; and expected term of 6.25 years.
|
|
d.
|
On September 11, 2019, the Company granted options to its chief business and operation officer to purchase an aggregate of 100,000 shares of common stock of the Company at an exercise price of $3.69 per share (equivalent to the closing price of the Company’s common stock on the date of grant). The options shall vest in 16 equal installments of 6,250 on the first day of every three months period beginning November 1, 2019. As of August 31, 2020, 25,000 of such options are vested. The options expire on September 11, 2029. The fair value of all these options on the date of grant was $224, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $3.69; dividend yield of 0% for all years; expected volatility of 65.60%; risk-free interest rates of 1.89%; and expected term of 6.14 years.
|
|
e.
|
On September 11, 2019, the Company granted options to its chief business and operation officer to purchase an aggregate of 100,000 shares of common stock of the Company at an exercise price of $3.69 per share (equivalent to the closing price of the Company’s common stock on the date of grant). The options shall vest in 4 installments upon achievement of certain performance conditions. As of August 31, 2020, no such options are vested. The options expire on September 11, 2029. The fair value of all these options on the date of grant was $127, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $3.69; dividend yield of 0% for all years; expected volatility of 67.96%; risk-free interest rates of 1.68%; expected term of 6.91 years; and the probability that such performance conditions will occur.
|
|
f.
|
On January 8, 2020, the Company granted options to
its directors to purchase an aggregate of 100,000 shares of common stock of the Company at an exercise price of $4.80 per share
(equivalent to the closing price of the Company’s common stock on the date of grant). The options shall vest in three equal
installments on each of December 31, 2020, December 31, 2021 and December 31, 2022. The options expire on January 8, 2030. The
fair value of all these options on the date of grant was $278, using the Black Scholes option-pricing model and was based on the
following assumptions: stock price of $4.80; dividend yield of 0% for all years; expected volatility of 62.55%; risk-free interest
rates of 1.67%; and expected term of 5.99.
|
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 8 - STOCK-BASED COMPENSATION (continued):
|
g.
|
On January 8, 2020, the Company granted options to
purchase an aggregate of 290,000 shares of common stock of the Company at an exercise price of $4.80 per share (equivalent to
the closing price of the Company’s common stock on the date of grant) as follows: 190,000 to the CEO and 100,000 to the
CSO. The options will vest in four equal annual installments, on each of December 31, 2020, 2021, 2022 and 2023. These options
expire on January 8, 2030. The fair value of all these options on the date of grant was $868, using the Black Scholes option-pricing
model and was based on the following assumptions: stock price of $4.80; dividend yield of 0% for all years; expected volatility
of 67.87%; risk-free interest rates of 1.67%; and expected term of 6.24 years.
|
|
h.
|
Options to employees, directors and non-employees
|
The fair value of each option grant is
estimated on the date of grant using the Black Scholes option-pricing model or Monte Carlo model with the following range of assumptions:
|
|
For options granted
in the year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected option life (years)
|
|
5.74-6.24
|
|
|
5-6.25
|
|
Expected stock price volatility (%)
|
|
57.77-68.14
|
|
|
54.64-69.05
|
|
Risk free interest rate (%)
|
|
1.67-1.89
|
|
|
2.03-2.54
|
|
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, 2020, and 2019, and changes during the years ended on those dates, is presented
below:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
Options outstanding at beginning of year
|
|
|
1,264,645
|
|
|
|
6.11
|
|
|
|
1,208,634
|
|
|
|
7.25
|
|
Changes during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
943,646
|
|
|
|
3.98
|
|
|
|
423,146
|
|
|
|
3.26
|
|
Forfeited
|
|
|
(392,646
|
)
|
|
|
3.79
|
|
|
|
(136,084
|
)
|
|
|
5.79
|
|
Expired
|
|
|
(206,243
|
)
|
|
|
6.02
|
|
|
|
(231,051
|
)
|
|
|
7.07
|
|
Exercised
|
|
|
(12,253
|
)
|
|
|
1.00
|
|
|
|
-
|
|
|
|
|
|
Options outstanding at end of year
|
|
|
1,597,149
|
|
|
|
5.47
|
|
|
|
1,264,645
|
|
|
|
6.11
|
|
Options exercisable at end of year
|
|
|
687,024
|
|
|
|
|
|
|
|
709,383
|
|
|
|
|
|
Weighted average fair value of options granted during the year
|
|
$
|
2.79
|
|
|
|
|
|
|
$
|
2.06
|
|
|
|
|
|
Expenses recognized in respect of stock
options granted to employees and directors, for the years ended August 31, 2020 and 2019 were $1,086 and $791, respectively.
The total intrinsic value of employees’
options exercised during the year ended August 31, 2020 was $27. None of the options were exercised by employees during the year
ended August 31, 2019.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 8 - STOCK-BASED COMPENSATION (continued):
The following table
presents summary information concerning the options granted to employees and directors outstanding as of August 31, 2020:
Exercise
prices
|
|
|
Number outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
average
exercise
price
|
|
$
|
|
|
|
|
|
Years
|
|
|
$
|
|
|
1.00 to 6.00
|
|
|
|
1,117,980
|
|
|
|
8.06
|
|
|
|
3.98
|
|
|
6.23 to 7.88
|
|
|
|
225,251
|
|
|
|
6.82
|
|
|
|
7.73
|
|
|
8.14 to 12.45
|
|
|
|
253,918
|
|
|
|
5.77
|
|
|
|
10.01
|
|
|
|
|
|
|
1,597,149
|
|
|
|
7.52
|
|
|
|
5.47
|
|
687,024 of options granted to employees
and directors that were outstanding as of August 31, 2020, were also exercisable as of August 31, 2020.
As of August 31, 2020, there were $1,167
of unrecognized compensation costs related to non-vested options previously granted to employees and directors. The unrecognized
compensation costs are expected to be recognized over a weighted average period of 2.1 years.
A summary of the status of the stock options
granted to non-employees outstanding as of August 31, 2020 and 2019, and changes during the years ended on those dates, is presented
below:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
Options outstanding at beginning of year
|
|
|
47,152
|
|
|
|
9.51
|
|
|
|
55,486
|
|
|
|
6.71
|
|
Changes during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
56,000
|
|
|
|
4.21
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,334
|
)
|
|
|
9.12
|
|
Options outstanding at end of year
|
|
|
103,152
|
|
|
|
6.64
|
|
|
|
47,152
|
|
|
|
9.51
|
|
Options exercisable at end of year
|
|
|
65,152
|
|
|
|
5.58
|
|
|
|
41,992
|
|
|
|
6.32
|
|
Weighted average fair value of options granted during the year
|
|
$
|
2.47
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
The Company recorded stock-based compensation
of $87 and $22 during the years ended August 31, 2020 and 2019, respectively, related to non-employees’ awards.
None of the options were exercised by non-employees
during the years ended August 31, 2020 and 2019.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 8 - STOCK-BASED COMPENSATION (continued):
The following table
presents summary information concerning the options granted to non-employees outstanding as of August 31, 2020:
Range of
exercise
prices
|
|
|
Number outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise
Price
|
|
$
|
|
|
|
|
|
Years
|
|
|
$
|
|
|
3.74-5.08
|
|
|
|
56,000
|
|
|
|
9.30
|
|
|
|
4.22
|
|
|
6.00-7.36
|
|
|
|
47,152
|
|
|
|
5.21
|
|
|
|
6.29
|
|
|
|
|
|
|
103,152
|
|
|
|
7.43
|
|
|
|
5.16
|
|
65,152 options granted to non-employees
that were outstanding as of August 31, 2020, were also exercisable as of August 31, 2019.
As of August 31, 2020, there were $51 of
unrecognized compensation costs related to non-vested options previously granted to non-employees. The unrecognized compensation
costs are expected to be recognized over a weighted average period of 1.5 years.
|
i.
|
Restricted stock units
|
The following table summarizes the activities
for unvested RSUs granted to employees and directors for the years ended August 31, 2020 and 2019:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Number of RSUs
|
|
Unvested at the beginning of period
|
|
|
164,636
|
|
|
|
165,796
|
|
Vested and issued
|
|
|
-
|
|
|
|
(290
|
)
|
Forfeited
|
|
|
-
|
|
|
|
(870
|
)
|
Outstanding at the end of the period
|
|
|
164,636
|
|
|
|
164,636
|
|
Vested and unissued
|
|
|
164,636
|
|
|
|
164,636
|
|
The Company recorded compensation income
related to RSUs of $5 for the year ended August 31, 2019, related to RSU awards. During the year ended August 31, 2020, the Company
did not record expense or income related to RSU.
As of August 31, 2020, there are no unrecognized
compensation costs related to RSUs.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 9 - FINANCIAL INCOME AND EXPENSES
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Income from interest on deposits
|
|
$
|
552
|
|
|
$
|
909
|
|
Income from interest on corporate bonds
|
|
|
138
|
|
|
|
152
|
|
|
|
$
|
690
|
|
|
$
|
1,061
|
|
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Exchange rate differences
|
|
$
|
6
|
|
|
$
|
14
|
|
Bank and broker commissions
|
|
|
6
|
|
|
|
4
|
|
Loss (gain) from securities, net
|
|
|
432
|
|
|
|
436
|
|
Other
|
|
|
-
|
|
|
|
31
|
|
|
|
$
|
444
|
|
|
$
|
485
|
|
NOTE 10 - TAXES
ON INCOME:
Taxes on income included in the consolidated
statements of operations represent current taxes due to taxable income of the Company and its Subsidiary.
|
a.
|
Corporate taxation in the U.S.
|
The applicable corporate tax rate for the
Company is 21% following the U.S. Tax Cuts and Jobs Act (the “TCJA”), excluding state tax and local tax. On December
22, 2017, the TCJA was signed into law, which among other changes reduced the federal corporate income tax rate from 35% to 21%,
effective January 1, 2018.
As
of August 31, 2020, the Company has an accumulated tax loss carryforward of approximately $15,880 (as of August 31, 2019, $13,013).
Under U.S. tax laws, subject to certain limitations, carryforward tax losses originating in tax years beginning after January
1, 2018, have no expiration date, but they are limited to 80% of the company's taxable income
in any given tax year. carryforward tax losses originating in tax years beginning prior to January 1, 2018, expire
20 years after the year in which incurred. In the case of the Company, subject to potential limitations in accordance with the
relevant law, the net loss carryforward will expire in the years 2027 through 2039.
|
b.
|
Corporate taxation in Israel:
|
The Subsidiary is taxed in accordance with
Israeli tax laws. The corporate tax rates applicable to 2020 and 2019 is 23%.
As of August 31, 2020, the Subsidiary has
an accumulated tax loss carryforward of approximately $57,900 (as of August 31, 2019, approximately $44,469). Under the Israeli
tax laws, carryforward tax losses have no expiration date.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 10 - TAXES ON INCOME (continued):
|
c.
|
Deferred income taxes:
|
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
In respect of:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
16,652
|
|
|
$
|
13,239
|
|
Research and development expenses
|
|
|
2,740
|
|
|
|
2,999
|
|
Less - valuation allowance
|
|
|
(19,392
|
)
|
|
|
(16,238
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred taxes are determined based on
temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse.
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.
The reduction of the tax rate and TCJA
had no impact on the net deferred taxes of the Company.
|
d.
|
Loss before taxes on income and income taxes included
in the income statements of operations:
|
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Loss before taxes on income:
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
2,868
|
|
|
$
|
2,283
|
|
Outside U.S.
|
|
|
8,643
|
|
|
|
11,772
|
|
|
|
$
|
11,511
|
|
|
$
|
14,055
|
|
Taxes on income (tax benefit):
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
-
|
|
|
|
-
|
|
Outside U.S.
|
|
|
-
|
|
|
|
300
|
|
|
|
$
|
-
|
|
|
$
|
300
|
|
Taxes on income
of $300 in the year ended August 31, 2019 resulted from withholding tax deducted from HTIT milestones payments, which were received
during the year ended August 31, 2019, according to the License Agreement. As of August 31, 2020, the Company did not expect to
reach taxable income in the 5 years following the balance sheet date, and therefore recognized this amount as taxes on income.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 10 - TAXES ON INCOME (continued):
|
e.
|
Reconciliation of the statutory tax benefit to
effective 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 the United States, and the actual
tax expense:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Loss before income taxes as reported in the consolidated statement of comprehensive loss
|
|
$
|
(11,511
|
)
|
|
$
|
(14,055
|
)
|
|
|
|
|
|
|
|
|
|
Statutory tax benefit
|
|
|
(2,417
|
)
|
|
|
(2,952
|
)
|
Increase in income taxes resulting from:
|
|
|
|
|
|
|
|
|
Change in the balance of the valuation allowance for deferred tax
|
|
|
3,154
|
|
|
|
3,356
|
|
Disallowable deductions
|
|
|
135
|
|
|
|
86
|
|
Influence of different tax rate applicable to the Subsidiary and changes in tax rates from previous years
|
|
|
(872
|
)
|
|
|
(490
|
)
|
Withholding tax, see note 10d above
|
|
|
-
|
|
|
|
300
|
|
Uncertain tax position
|
|
|
-
|
|
|
|
-
|
|
Taxes on income for the reported year
|
|
$
|
-
|
|
|
$
|
300
|
|
|
f.
|
Uncertainty in Income Taxes
|
ASC Topic 740, “Income Taxes”
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 recognizes interest and penalties related to
its tax contingencies as income tax expense.
The following table summarizes the activity
of the Company unrecognized tax benefits:
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance at Beginning of Year
|
|
$
|
11
|
|
|
$
|
11
|
|
Decrease in uncertain tax positions for the current year
|
|
|
-
|
|
|
|
-
|
|
Balance at End of Year
|
|
$
|
11
|
|
|
$
|
11
|
|
The Company does not expect unrecognized
tax expenses to change significantly over the next 12 months.
The Company is subject to U.S. Federal
income tax examinations for the tax years of 2016 through 2018.
The Subsidiary is subject to Israeli income
tax examinations for the tax years of 2014 through 2019.
ORAMED PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In thousands (except share and per share
data)
NOTE 10 - TAXES ON INCOME (continued):
|
g.
|
Valuation Allowance Rollforward
|
|
|
Year ended
August 31,
|
|
|
|
Balance at beginning of period
|
|
|
Additions
|
|
|
Balance at end of period
|
|
Allowance in respect of carryforward tax losses:
|
|
|
|
|
|
|
|
|
|
Year ended August 31, 2020
|
|
$
|
16,238
|
|
|
$
|
3,154
|
|
|
$
|
19,392
|
|
Year ended August 31, 2019
|
|
|
12,882
|
|
|
|
3,356
|
|
|
|
16,238
|
|
NOTE
11 - RELATED PARTIES - TRANSACTIONS:
|
a.
|
During each of the fiscal years of 2020 and 2019,
the Company paid to directors $95 and $100, respectively, as directors’ fees.
|
|
b.
|
On July 1, 2008, the Subsidiary entered into two consulting
agreements with KNRY Ltd. (“KNRY”), an Israeli company owned by the CSO, whereby the CEO and the CSO, through KNRY,
provide services to the Company (the “Consulting Agreements”). The Consulting Agreements are both terminable by either
party upon 140 days, prior written notice. The Consulting Agreements, as amended, provide that KNRY will be reimbursed for reasonable
expenses incurred in connection with performance of the Consulting Agreements and that the monthly consulting fee paid to the
CEO and the CSO is NIS 127,570 ($38) and NIS 92,522 ($28), respectively.
|
In addition to the Consulting Agreements,
based on a relocation cost analysis prepared by consulting company ORI - Organizational Resources International Ltd., the Company
pays for certain direct costs, related taxes and expenses incurred in connection with the relocation of the CEO to New York. During
fiscal 2020 and 2019 such relocation expenses totaled $516 and $486, respectively.
|
c.
|
Balances with related parties:
|
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accounts payable and accrued expenses - KNRY
|
|
$
|
90
|
|
|
$
|
64
|
|
|
d.
|
Expenses to related parties:
|
|
|
Year ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
KNRY
|
|
$
|
766
|
|
|
$
|
730
|
|
Nadav Kidron (CEO)
|
|
$
|
801
|
|
|
|
785
|
|
All other schedules for which provision
is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable,
and therefore have been omitted.
3.1*
|
Composite Copy of Certificate of Incorporation, as amended as
of January 22, 2013, corrected February 8, 2013, as amended as of July 25, 2014, corrected September 5, 2017 and as further
amended as of August 3, 2020.
|
|
|
3.2*
|
Composite Copy of Certificate of Incorporation, as amended as
of January 22, 2013, corrected February 8, 2013, as amended as of July 25, 2014, corrected September 5, 2017 and as further
amended as of August 3, 2020 (marked copy).
|
|
|
3.3
|
Amended and Restated By-laws (incorporated by reference from our current report on Form 8-K filed February 1, 2013).
|
|
|
4.1
|
Specimen Common Stock Certificate (incorporated by reference from our registration statement on Form S-1 filed February 1, 2013).
|
|
|
4.2
|
Form of Common Stock Purchase Warrant (incorporated by reference from our current report on Form 8-K filed July 5, 2018).
|
|
|
4.3
|
Form of Underwriter’s Warrant (incorporated by reference from our current report on Form 8-K filed February 28, 2020).
|
|
|
4.4*
|
Description of Securities.
|
|
|
10.1+
|
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 July 2, 2008).
|
|
|
10.2+
|
Amendment, dated July 13, 2013, to 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 annual report on Form 10-K filed November 14, 2014).
|
|
|
10.3+
|
Amendment, dated November 13, 2014, to Consulting Agreements by and between Oramed Ltd. and KNRY, Ltd., entered into as of July 1, 2008, for the services of Nadav Kidron and Miriam Kidron (incorporated by reference from our annual report on Form 10-K filed November 14, 2014).
|
10.4+
|
Amendment, dated July 21, 2015, to Consulting Agreements 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 annual report on Form 10-K filed November 25, 2015).
|
|
|
10.5+
|
Amendment, dated June 27, 2016, to Consulting Agreements 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 annual report on Form 10-K filed November 25, 2016).
|
|
|
10.6+
|
Amendment,
dated November 28, 2016, to Consulting Agreements 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 quarterly report on Form 10-Q filed January 11, 2017).
|
|
|
10.7+
|
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 July 2, 2008).
|
|
|
10.8+
|
Amendment, dated July 13, 2013, to 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 annual report on Form 10-K filed November 14, 2014).
|
|
|
10.9+
|
Amendment, dated July 21, 2015, to Consulting Agreements 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 annual report on Form 10-K filed November 25, 2015).
|
|
|
10.10+
|
Amendment, dated June 27, 2016, to Consulting Agreements 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 annual report on Form 10-K filed November 25, 2016).
|
|
|
10.11+
|
Amendment, dated June 30, 2017, to Consulting Agreements 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 annual report on Form 10-K filed November 29, 2017).
|
|
|
10.12+
|
Amendment, dated January 10, 2020, to Consulting Agreements 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 quarterly report on Form 10-Q filed April 6, 2020).
|
|
|
10.13+
|
Oramed Pharmaceuticals Inc. Second Amended and Restated 2008 Stock Incentive Plan (incorporated by reference from our definitive proxy statement on Schedule 14A filed August 4, 2016).
|
|
|
10.14+
|
Form of Restricted Stock Unit Notice and Restricted Stock Unit Agreement (incorporated by reference from our annual report on Form 10-K filed November 14, 2014).
|
10.15+
|
Form of Restricted Stock Unit Notice and Restricted Stock Unit Agreement between the Company and the CSO or CEO (incorporated by reference from our annual report on Form 10-K filed November 29, 2017).
|
|
|
10.16+
|
Form of Notice of Stock Option Award and Stock Option Award Agreement (incorporated by reference from our current report on Form 8-K filed July 2, 2008).
|
|
|
10.17+
|
Oramed Pharmaceuticals Inc. 2019 Stock Incentive Plan (incorporated by reference from our definitive proxy statement on Schedule 14A filed August 6, 2019).
|
|
|
10.18+
|
Oramed Pharmaceuticals Inc. Amended and Restated 2019 Stock Incentive Plan (incorporated by reference from our definitive proxy statement on Schedule 14A filed June 30, 2020).
|
|
|
10.19+
|
Form of Notice of Stock Option Award and Stock Option Award Agreement (incorporated by reference from our annual report on Form 10-K filed November 27, 2019).
|
|
|
10.20+
|
Employment Agreement, dated May 16, 2019, by and between Oramed Ltd. and Avraham Gabay (incorporated by reference from our current report on Form 8-K filed May 16, 2019).
|
|
|
10.21+
|
First Amendment, dated December 19, 2019, to Employment Agreement, entered into as of May 16, 2019, by and between Oramed Ltd. and Avraham Gabay (incorporated by reference from our quarterly report on Form 10-Q filed January 9, 2020).
|
|
|
10.22+
|
Clinical Trial Agreement, dated September 11, 2011, between Oramed Ltd., Hadasit Medical Research Services and Development Ltd., Miriam Kidron and Daniel Schurr (incorporated by reference from our annual report on Form 10-K/A filed December 21, 2012).
|
|
|
10.23+
|
Clinical Trial Agreement, dated July 8, 2009, between Oramed Ltd., Hadasit Medical Research Services and Development Ltd., Miriam Kidron and Itamar Raz (incorporated by reference from our current report on Form 8-K filed July 9, 2009).
|
|
|
10.24
|
Agreement, dated January 7, 2009, between Oramed Pharmaceuticals Inc. and Hadasit Medical Research Services and Development Ltd. (incorporated by reference from our current report on Form 8-K filed January 7, 2009).
|
|
|
10.25
|
Patent Transfer Agreement, dated February 22, 2011, between Oramed Ltd. and Entera Bio Ltd. (incorporated by reference from our registration statement on Form S-1 filed March 25, 2011).
|
10.26+
|
Representative Form of Indemnification Agreements between Oramed Pharmaceuticals Inc. and each of our directors and officers (incorporated by reference from our quarterly report on Form 10-Q filed January 9, 2020).
|
|
|
10.27+
|
Employment Agreement, dated August 18, 2019, between Oramed
Ltd. and Joshua Hexter (incorporated by reference from our annual report on Form 10-K filed November 27, 2019).
|
|
|
10.28
|
Securities Purchase Agreement, dated November 30, 2015, between Oramed Pharmaceuticals, Inc. and Hefei Tianhui Incubator of Technologies Co., Ltd. (incorporated by reference from Schedule 13D/A filed by Nadav Kidron on December 29, 2015).
|
|
|
10.29
|
Amended and Restated Technology License Agreement, dated December 21, 2015, between Hefei Tianhui Incubator of Technologies Co., Ltd., Oramed Pharmaceuticals, Inc. and Oramed Ltd. (Confidential treatment has been granted for portions of this document. Incorporated by reference from our quarterly report on Form 10-Q filed January 13, 2016).
|
|
|
10.30
|
Amendment
to the Amended and Restated Technology License Agreement, dated June 3, 2016, between Hefei Tianhui Incubator of Technologies
Co., Ltd., Oramed Pharmaceuticals, Inc. and Oramed Ltd. (Confidential treatment has been requested for portions of this
document. The confidential portions will be omitted and filed separately, on a confidential basis, with the Securities and
Exchange Commission) (incorporated by reference from our annual report on Form 10-K filed November 25, 2016).
|
|
|
10.31
|
Amendment
to the Amended and Restated Technology License Agreement, dated July 24, 2016, between Hefei Tianhui Incubator of
Technologies Co., Ltd., Oramed Pharmaceuticals, Inc. and Oramed Ltd. (Confidential treatment has been requested for portions
of this document. The confidential portions will be omitted and filed separately, on a confidential basis, with the
Securities and Exchange Commission) (incorporated by reference from our annual report on Form 10-K filed November 25,
2016).
|
|
|
10.32
|
Service Agreement, dated as of June 3, 2016, between Oramed Ltd. and XERTECS GmbH (Confidential treatment has been granted for portions of this document. The confidential portions have been omitted and filed separately, on a confidential basis, with the Securities and Exchange Commission) (incorporated by reference from our annual report on Form 10-K filed November 25, 2016).
|
|
|
10.33
|
General Technical Agreement between Oramed Ltd. and Premas Biotech Pvt. Ltd., dated July 24, 2016 (Confidential treatment has been granted for portions of this document. The confidential portions have been omitted and filed separately, on a confidential basis, with the Securities and Exchange Commission) (incorporated by reference from our annual report on Form 10-K filed November 25, 2016).
|
10.34
|
Equity Distribution Agreement, dated September 5, 2019, between Oramed Pharmaceuticals Inc. and Canaccord Genuity LLC (incorporated by reference from our current report on Form 8-K filed September 5, 2019).
|
|
|
10.35
|
Amendment to the Equity Distribution Agreement, dated February 10, 2020, by and between the Company and Canaccord Genuity LLC (incorporated by reference from our quarterly report on Form 10-Q filed April 6, 2020).
|
|
|
10.36
|
Clinical Research Organization Services Agreement, dated February 14, 2018 and effective as of November 1, 2017, between Oramed Ltd. and Integrium, LLC (Confidential treatment has been granted for portions of this document. The confidential portions have been omitted and filed separately, on a confidential basis, with the Securities and Exchange Commission.) (incorporated by reference from our quarterly report on Form 10-Q filed April 9, 2018).
|
|
|
10.37
|
Amendment #1 to Clinical Research Organization Services Agreement Protocol # ORA-D-015 between Oramed, Inc. and Integrium, LLC (incorporated by reference from our quarterly report on Form 10-Q filed July 10, 2019).
|
|
|
10.38
|
Amendment #2 to Clinical Research Organization Services Agreement Protocol # ORA-D-015 between Oramed, Inc. and Integrium, LLC (incorporated by reference from our quarterly report on Form 10-Q filed July 10, 2019).
|
|
|
10.39
|
Clinical Research Organization Services Agreement, dated September 2, 2020 and effective as of January 15, 2020, between Oramed Ltd. and Integrium, LLC (incorporated by reference from our Form 8-K filed September 9, 2020).
|
|
|
10.40
|
Clinical Research Organization Services Agreement, dated September 16, 2020 and effective as of January 15, 2020, between Oramed Ltd. and Integrium, LLC (incorporated by reference from our Form 8-K filed September 18, 2020).
|
|
|
21.1
|
Subsidiaries (incorporated by reference from our annual report on Form 10-K filed November 27, 2019).
|
|
|
23.1*
|
Consent of Kesselman & Kesselman, Independent Registered Public Accounting Firm.
|
|
|
31.1*
|
Certification Statement of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
31.2*
|
Certification Statement of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
+
|
Management contract or compensation plan.
|
ITEM 16. FORM 10-K SUMMARY.
None.
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 PHARMACEUTICALS INC.
|
|
|
|
/s/ NADAV KIDRON
|
|
Nadav Kidron,
|
|
President and Chief Executive Officer
|
|
|
|
Date: November 24, 2020
|
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 and in the capacities
and on the dates indicated.
|
/s/
NADAV KIDRON
|
|
November
24, 2020
|
|
Nadav
Kidron,
|
|
|
|
President
and Chief Executive Officer and Director
|
|
|
|
(principal
executive officer)
|
|
|
|
|
|
|
|
/s/
AVRAHAM GABAY
|
|
November
24, 2020
|
|
Avraham
Gabay,
|
|
|
|
Chief
Financial Officer
|
|
|
|
(principal
financial and accounting officer)
|
|
|
|
|
|
|
|
/s/
AVIAD FRIEDMAN
|
|
November
24, 2020
|
|
Aviad
Friedman,
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
MIRIAM KIDRON
|
|
November
24, 2020
|
|
Miriam
Kidron,
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
ARIE MAYER
|
|
November
24, 2020
|
|
Arie
Mayer,
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
KEVIN RAKIN
|
|
November
24, 2020
|
|
Kevin
Rakin,
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
LEONARD SANK
|
|
November
24, 2020
|
|
Leonard
Sank,
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
GAO XIAOMING
|
|
November
24, 2020
|
|
Gao
Xiaoming,
|
|
|
|
Director
|
|
|
60
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