x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Nevada
|
98-0376008
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer Identification
No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
PART I
|
1
|
ITEM
1 - BUSINESS
|
1
|
ITEM
1A – RISK FACTORS
|
14
|
ITEM
1B – UNRESOLVED STAFF COMMENTS
|
25
|
ITEM
2 – PROPERTIES
|
25
|
ITEM
3 - LEGAL PROCEEDINGS
|
25
|
ITEM
4 - REMOVED AND RESERVED
|
25
|
PART II
|
26
|
ITEM
5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
26
|
ITEM
6 – SELECTED FINANCIAL DATA
|
29
|
ITEM
7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
|
29
|
ITEM
7A – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
|
36
|
ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
36
|
ITEM
9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
|
36
|
ITEM
9A – CONTROLS AND PROCEDURES
|
37
|
ITEM
9B – OTHER INFORMATION
|
38
|
PART III
|
39
|
ITEM
10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
39
|
ITEM
11 - EXECUTIVE COMPENSATION
|
41
|
ITEM
12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
|
45
|
ITEM
13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR
INDEPENDENCE
|
47
|
ITEM
14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
47
|
ITEM
15 - EXHIBITS AND FINANCIALSTATEMENTS SCHEDULES
|
49
|
High
|
Low
|
|||||||
Year
Ended August 31, 2009
|
||||||||
Three
Months Ended November 30, 2008
|
$ | 0.76 | $ | 0.36 | ||||
Three
Months Ended February 28, 2009
|
$ | 0.52 | $ | 0.25 | ||||
Three
Months Ended May 31, 2009
|
$ | 0.62 | $ | 0.20 | ||||
Three
Months Ended August 31, 2009
|
$ | 0.59 | $ | 0.40 | ||||
Year
Ended August 31, 2010
|
||||||||
Three
Months Ended November 30, 2009
|
$ | 0.64 | $ | 0.43 | ||||
Three
Months Ended February 28, 20010
|
$ | 0.48 | $ | 0.37 | ||||
Three
Months Ended May 31, 20010
|
$ | 0.55 | $ | 0.41 | ||||
Three
Months Ended August 31, 20010
|
$ | 0.51 | $ | 0.36 |
Plan category
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
Weight-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (A))
|
|||||||||
(A)
|
(B)
|
(C)
|
||||||||||
Equity
compensation plans approved by security holders
|
— | — | — | |||||||||
Equity
compensation plans not approved by security holders
|
10,822,560 | $ | 0.25 | 3,538,000 | ||||||||
Total
|
10,822,560 | $ | 0.25 | 3,538, 800 |
Year ended
|
||||||||
Operating Data:
|
August 31, 2010
|
August 31, 2009
|
||||||
Research
and development expenses, net
|
$ | 1,463,886 | $ | 1,574,074 | ||||
General
and administrative expenses
|
1,508,667 | 1,210,044 | ||||||
Financial
income, net
|
(10,148 | ) | (21,047 | ) | ||||
Loss
before taxes on income
|
(2,962,405 | ) | (2,763,071 | ) | ||||
Taxes
on income
|
14,971 | (2,597 | ) | |||||
Net
loss for the period
|
$ | (2,977,376 | ) | $ | (2,760,474 | ) | ||
Loss
per common share – basic and diluted
|
$ | (0.05 | ) | $ | (0.05 | ) | ||
Weighted
average common shares outstanding
|
57,389,991 | 56,645,820 |
Category
|
Amount
|
|||
Research
& Development, net of OCS funds
|
$ | 4,033,000 | ||
General
& Administrative expenses
|
1,204,000 | |||
Finance
income, net
|
2,000 | |||
Total
|
$ | 5,239,000 |
·
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect our transactions and asset
dispositions;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
the preparation of our financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and
|
·
|
provide
reasonable assurance regarding the prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on our financial
statements.
|
Name
|
Age
|
Position
|
||
Nadav
Kidron
|
36
|
President,
Chief Executive Officer and Director
|
||
Miriam
Kidron
|
69
|
Chief
Medical and Technology Officer and Director
|
||
Leonard
Sank
|
45
|
Director
|
||
Harold
Jacob
|
56
|
Director
and member of the Scientific Advisory Board
|
||
Michael
Berelowitz
|
66
|
Director
|
||
Yifat
Zommer
|
36
|
Chief
Financial Officer, Treasurer and Secretary
|
||
|
Year
|
Salary
|
Option Awards
|
All Other
Compensation
|
Total
|
|||||||||||||
Name and Principal
|
($)
|
($)
|
($)
|
($)
|
||||||||||||||
Position
|
(1)
|
(2)
|
(3)
|
|||||||||||||||
Nadav
Kidron
President
and CEO and director (4)
|
2010
|
159,919 | 236,344 | 10,783 | 407,046 | |||||||||||||
2009
|
155,359 | 153,855 | 15,474 | 324,688 | ||||||||||||||
Miriam
Kidron
Chief
Medical and Technology Officer and director (5)(6)
|
2010
|
160,092 | 236,344 | 7,727 | 404,163 | |||||||||||||
2009
|
154,983 | 153,855 | 11,539 | 320,377 | ||||||||||||||
Yifat
Zommer
CFO,
Treasurer and Secretary (7)
|
2010
|
76,896 | 81,803 | 26,979 | 185,678 | |||||||||||||
2009
|
20,468 | 19,946 | 11,245 | 51,659 | ||||||||||||||
Chaime
Orlev
CFO
and Secretary(8)
|
2009
|
59,300 |
Nil
|
25,544 | 84,844 |
1
|
The
information is provided for each fiscal year which begins on September 1
and ends on August 31.
|
2
|
The
amounts reflect the compensation expense in accordance with FAS 123(R) of
these option awards. The assumptions used to determine the fair value of
the option awards for fiscal years ended August 31, 2010 and 2009 are set
forth in the notes to of our audited consolidated financial statements
included in our Form 10-K for fiscal year ended August 31, 2010. Our Named
Executive Officers will not realize the value of these awards in cash
unless and until these awards are exercised and the underlying shares
subsequently sold.
|
3
|
See
All Other Compensation Table below.
|
4
|
Mr.
Kidron was appointed as our President, CEO and Director on March 8, 2006
and receives compensation from our subsidiary through KNRY, an Israeli
entity owned by Mr. Kidron. See “Employment and Consulting
Agreements.”
|
5
|
Dr.
Kidron was appointed as our Chief Medical and Technology Officer and
Director on March 8, 2006 and receives compensation from our subsidiary
through KNRY, an Israeli entity owned by Mr. Kidron. See “Employment and
Consulting Agreements.”
|
6
|
See
“Certain Relationships and Related Transactions and Director Independence”
for a description of management fees received by Dr. Kidron from
Hadasit.
|
7
|
Ms.
Zommer was appointed as our CFO, Treasurer and Secretary on
April 19, 2009.
|
8
|
Mr.
Orlev served as our CFO and Secretary from May 1, 2008 through March 31,
2009.
|
Name
|
Year
|
Automobile
Related
Expenses
($)
|
Manager’s
Insurance *
($)
|
Education
Fund*
($)
|
Total
($)
|
|||||||||||||
Nadav
Kidron
|
2010
|
10,783 |
Nil
|
Nil
|
10,783 | |||||||||||||
Miriam
Kidron
|
2010
|
7,727 |
Nil
|
Nil
|
7,727 | |||||||||||||
Yifat
Zommer
|
2010
|
9,814 | 11,466 | 5,699 | 26,979 |
*
|
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.
|
Option
Awards
|
|||||||||||||
Name
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|||||||||
Nadav
Kidron
|
850,000 | (1) | - | 0.45 |
08/01/12
|
||||||||
720,000 | (2) | 144,000 | (2) | 0.54 |
05/06/18
|
||||||||
864,000 | (5) | 612,000 | (2) | 0.49 |
04/20/20
|
||||||||
Miriam
Kidron
|
3,361,360 | (3) | - | 0.001 |
08/13/12
|
||||||||
850,000 | (1) | - | 0.45 |
08/01/12
|
|||||||||
720,000 | (2) | 144,000 | (2) | 0.54 |
05/06/18
|
||||||||
864,000 | (5) | 612,000 | (2) | 0.49 |
04/20/20
|
||||||||
Yifat
Zommer
|
- | 400,000 | (4) | 0.47 |
10/19/19
|
(1)
|
On August 2, 2007, 850,000
options were granted to each of Nadav Kidron and Miriam Kidron under the
2006 Stock Option Plan at an exercise price of $0.45 per share; the
options vested immediately and have an expiration date of August 2,
2012.
|
(2)
|
On May 7, 2008, 864,000 options
were granted to each of Nadav Kidron and Miriam Kidron under the 2008
Stock Option Plan at an exercise price of $0.54 per share, 144,000 of such
options vested immediately on the date of grant and the remainder will
vest in twenty equal monthly installments, commencing on June 7, 2008. The
options have an expiration date of May 7,
2018.
|
(3)
|
On August 14, 2007 3,361,630
stock options were granted to Miriam Kidron, at an exercise price of
$0.001 per share; the options vested immediately and have an expiration
date of August 14, 2012. These options were not issued pursuant to any
outstanding award plans.
|
(4)
|
On
June 3, 2009, 400,000 options were granted to Yifat Zommer under the 2008
Stock Option Plan at an exercise price of $0.47 per share. The options
vest in three equal annual installments, commencing October 19, 2010, and
expire on October 19, 2019.
|
(5)
|
On April 21, 2010, 864,000
options were granted to each of Nadav Kidron and Miriam Kidron under the
2008 Stock Option Plan at an exercise price of $0.49 per share, 108,000 of
such options vested immediately on the date of grant and the remainder
will vest in twenty one equal monthly installments, commencing on May 31,
2010. The options have an expiration date of April 20,
2020.
|
Name
of Director
|
Fees
Earned or
Paid
in Cash
($)
|
Option
Awards
(1)
($)
|
Total
($)
|
|||||||||
Nadav
Kidron (2)
|
||||||||||||
Miriam
Kidron (2)
|
||||||||||||
Leonard
Sank
|
8,500 | 45,218 | 53,718 | |||||||||
Harold
Jacob
|
8,500 | 45,218 | 53,718 | |||||||||
Michael
Berelowitz
|
2,500 | 11,201 | 13,701 |
1
|
The amounts reflect the
compensation expense in accordance with FAS 123(R) of these option awards.
The assumptions used to determine the fair value of the option awards are
set forth in Note 8 of our audited consolidated financial statements
included in this Form 10-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.
|
2
|
Please
refer to the summary compensation table for executive compensation with
respect to the named individual.
|
Name
and Address of
Beneficial Owner
|
Number of Shares
|
Percentage
of Shares
Beneficially Owned
|
||||||
Nadav
Kidron †‡
|
||||||||
10
Itamar Ben Avi St.
|
||||||||
Jerusalem,
Israel
|
12,373,735 | (1) | 20.77 | % | ||||
Zeev
Bronfeld
|
||||||||
6
Uri St.
|
||||||||
Tel-Aviv,
Israel
|
6,158,517 | 10.70 | % | |||||
Miriam
Kidron †‡
|
||||||||
2
Elza St.
|
||||||||
Jerusalem,
Israel
|
5,363,360 | (2) | 8.52 | % | ||||
Apollo
Nominees Inc
|
||||||||
One
Financial Place Suite 100 Lower Collymore Rock
|
||||||||
St.
Michael, Barbados
|
3,577,501 |
(3)
|
6.09 | % | ||||
Hadasit
Medical Research Services & Development Ltd.
|
||||||||
P.O.
Box 12000
|
||||||||
Jerusalem,
Israel
|
4,141,532 | 7.19 | % | |||||
Leonard
Sank †
|
||||||||
3
Blair Rd Camps Bay
|
||||||||
Cape
Town, South Africa
|
2,582,650 | (4) | 4.47 | % | ||||
Harold
Jacob †
|
||||||||
Haadmur
Mebuyon 26
|
||||||||
Jerusalem,
Israel
|
100,000 | (5) | * | |||||
Michael
Berelowitz †
|
||||||||
415
East 37th
Street
|
||||||||
New
York, NY, USA
|
— | — | ||||||
Yifat
Zommer ‡
|
||||||||
P.O.
Box 39098,
|
||||||||
Jerusalem,
Israel
|
133,333 | (6) | * | |||||
All
current executive officers and
|
||||||||
directors,
as a group (six persons)
|
20,553,078 | (7) | 34.17 | % |
*
|
Less
than 1%
|
†
|
Indicates
Director
|
‡
|
Indicates
Officer
|
(1)
|
Includes
2,002,000 shares of common stock issuable upon the exercise of outstanding
stock options.
|
(2)
|
Includes
5,363,360 shares of common stock issuable upon the exercise of outstanding
stock options.
|
(3)
|
Includes
1,145,834 shares of common stock issuable upon the exercise of warrants
beneficially owned by the referenced
entity.
|
(4)
|
Includes
225,000 shares of common stock issuable upon the exercise of warrants
beneficially owned by the referenced
entity.
|
(5)
|
Consists
of 100,000 shares of common stock issuable upon the exercise of
outstanding stock options.
|
(6)
|
Consists
of 133,333 shares of common stock issuable upon the exercise of
outstanding stock options.
|
(7)
|
Includes
7,863,693 shares of common stock issuable upon the exercise of outstanding
stock options.
|
Summary:
|
2010
|
2009
|
||||||
Audit
fees(1)
|
$ | 65,880 | $ | 60,000 | ||||
Tax
fees(2)
|
$ | 15,000 |
(1)
|
Amount
represents fees paid for professional services for the audit of our
consolidated annual financial statements and review of our interim
consolidated financial statements included in quarterly reports and
services that are normally provided by our accountants in connection with
statutory and regulatory filings or
engagements.
|
(2)
|
Amount
represents fees paid for professional services for tax compliance and tax
advice.
|
Page
|
||
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Kesselman & Kesselman
|
F-1
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Malone & Bailey, PC
|
F-2
|
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
||
Balance
sheets
|
F-3
|
|
Statements
of operations
|
F-4
|
|
Statements
of changes in stockholders’ equity
|
F-5
|
|
Statements
of cash flows
|
F-6
|
|
Notes
to financial statements
|
F-7-F-29
|
Kesselman
& Kesselman
|
Tel
Aviv, Israel
|
November
29, 2010
|
August
31
|
||||||||
2010
|
2009
|
|||||||
Assets
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash and cash
equivalents
|
$ | 1,199,638 | $ | 1,716,866 | ||||
Short term
investments (note 2)
|
100,000 | 1,000,000 | ||||||
Restricted
cash (note 1n)
|
16,008 | 16,000 | ||||||
Accounts
receivable - other
|
59,175 | 36,939 | ||||||
Prepaid
expenses
|
1,859 | 4,119 | ||||||
Related
parties (note 13)
|
7,689 | |||||||
Grants receivable
from the Chief Scientist
|
12,438 | 400,405 | ||||||
Total current
assets
|
1,396,807 | 3,174,329 | ||||||
LONG
TERM DEPOSITS (note 6b)
|
10,582 | 12,161 | ||||||
PROPERTY
AND EQUIPMENT, NET (note 5)
|
43,499 | 75,361 | ||||||
Total
assets
|
$ | 1,450,888 | $ | 3,261,851 | ||||
Liabilities
and stockholders' equity
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued expenses (note 9)
|
$ | 411,330 | $ | 321,344 | ||||
Account
payable with former shareholder
|
47,252 | 47,252 | ||||||
Total current
liabilities
|
458,582 | 368,596 | ||||||
PROVISION
FOR UNCERTAIN TAX POSITION (note 12f)
|
162,034 | 147,063 | ||||||
COMMITMENTS
(note 6)
|
||||||||
STOCKHOLDERS’
EQUITY:
|
||||||||
Common
stock, $ 0.001 par value (200,000,000 authorized shares; 57,565,321 and
56,456,710 shares issued and outstanding as of August 31, 2010
and 2009, respectively)
|
57,565 | 56,456 | ||||||
Additional
paid-in capital
|
13,758,761 | 12,698,414 | ||||||
Deficit
accumulated during the development stage
|
(12,986,054 | ) | (10,008,678 | ) | ||||
Total stockholders'
equity
|
830,272 | 2,746,192 | ||||||
Total liabilities
and stockholders’ equity
|
$ | 1,450,888 | $ | 3,261,851 |
Period
|
||||||||||||
from
April
|
||||||||||||
12, 2002 | ||||||||||||
(inception)
|
||||||||||||
Year
ended
|
through
|
|||||||||||
August
31
|
August
31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
RESEARCH
AND DEVELOPMENT EXPENSES, NET (note
10)
|
$ | 1,463,886 | $ | 1,574,074 | $ | 6,692,540 | ||||||
IMPAIRMENT
OF INVESTMENT
|
434,876 | |||||||||||
GENERAL
AND ADMINISTRATIVE EXPENSES (note
11)
|
1,508,667 | 1,210,044 | 5,682,423 | |||||||||
OPERATING
LOSS
|
2,972,553 | 2,784,118 | 12,809,839 | |||||||||
FINANCIAL
INCOME
|
(24,692 | ) | (38,602 | ) | (160,800 | ) | ||||||
FINANCIAL
EXPENSE
|
14,544 | 17,555 | 162,477 | |||||||||
LOSS
BEFORE TAXES ON INCOME
|
2,962,405 | 2,763,071 | 12,811,516 | |||||||||
TAXES
ON INCOME (note
12)
|
14,971 | (2,597 | ) | 174,538 | ||||||||
NET
LOSS FOR THE PERIOD
|
$ | 2,977,376 | $ | 2,760,474 | $ | 12,986,054 | ||||||
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$ | (0.05 | ) | $ | (0.05 | ) | ||||||
WEIGHTED
AVERAGE NUMBER OF COMMON STOCK USED IN COMPUTING BASIC
AND DILUTED LOSS PER COMMON STOCK
|
57,389,991 | 56,645,820 |
Deficit
|
||||||||||||||||||||
accumulated
|
||||||||||||||||||||
Additional
|
during
the
|
Total
|
||||||||||||||||||
Common
Stock
|
paid-in
|
development
|
stockholders'
|
|||||||||||||||||
Shares
|
$ |
capital
|
stage
|
equity
|
||||||||||||||||
BALANCE
AS OF APRIL 12, 2002 (inception)
|
34,828,200 | $ | 34,828 | $ | 18,872 | $ | 53,700 | |||||||||||||
CHANGES
DURING THE PERIOD FROM APRIL 12, 2002 THROUGH AUGUST
31, 2008:
|
||||||||||||||||||||
SHARES
CANCELLED
|
(19,800,000 | ) | (19,800 | ) | 19,800 | - | ||||||||||||||
SHARES
ISSUED FOR INVESTMENT IN ISTI-NJ
|
1,144,410 | 1,144 | 433,732 | 434,876 | ||||||||||||||||
SHARES
ISSUED FOR OFFERING COSTS
|
1,752,941 | 1,753 | (1,753 | ) | - | |||||||||||||||
SHARES
ISSUED FOR CASH- NET OF ISSUANCE EXPENSES
|
37,359,230 | 37,359 | 7,870,422 | 7,907,781 | ||||||||||||||||
SHARES
ISSUED FOR SERVICES
|
418,025 | 418 | 214,442 | 214,860 | ||||||||||||||||
CONTRIBUTIONS
TO PAID IN CAPITAL
|
18,991 | 18,991 | ||||||||||||||||||
RECEIPTS
ON ACCOUNT OF SHARES AND
WARRANTS
|
6,061 | 6,061 | ||||||||||||||||||
SHARES
ISSUED FOR CONVERSION OF CONVERTIBLE NOTE
|
550,000 | 550 | 274,450 | 275,000 | ||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
DIRECTORS
|
2,428,014 | 2,428,014 | ||||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
CONSULTANTS
|
381,764 | 381,764 | ||||||||||||||||||
DISCOUNT
ON CONVERTIBLE NOTE RELATED TO BENEFICIAL CONVERSION
FEATURE
|
108,000 | 108,000 | ||||||||||||||||||
COMPREHENSIVE
LOSS
|
(16 | ) | (16 | ) | ||||||||||||||||
IMPUTED
INTEREST
|
12,217 | 12,217 | ||||||||||||||||||
NET
LOSS
|
(7,248,188 | ) | (7,248,188 | ) | ||||||||||||||||
BALANCE
AS OF AUGUST 31, 2008
|
56,252,806 | 56,252 | 11,785,012 | (7,248,204 | ) | 4,593,060 | ||||||||||||||
SHARES
ISSUED FOR SERVICES RENDERED
|
203,904 | 204 | 152,724 | 152,928 | ||||||||||||||||
SHARES
TO BE ISSUED FOR SERVICES RENDERED
|
203,699 | 203,699 | ||||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
DIRECTORS
|
436,025 | 436,025 | ||||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
CONSULTANTS
|
117,174 | 117,174 | ||||||||||||||||||
IMPUTED
INTEREST
|
3,780 | 3,780 | ||||||||||||||||||
NET
LOSS
|
(2,760,474 | ) | (2,760,474 | ) | ||||||||||||||||
BALANCE
AS OF AUGUST 31, 2009
|
56,456,710 | 56,456 | 12,698,414 | (10,008,678 | ) | 2,746,192 | ||||||||||||||
SHARES
ISSUED FOR SERVICES RENDERED
|
1,108,611 | 1,109 | 248,741 | 249,850 | ||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
DIRECTORS
|
690,882 | 690,882 | ||||||||||||||||||
STOCK
BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
CONSULTANTS
|
116,944 | 116,944 | ||||||||||||||||||
IMPUTED
INTEREST
|
3,780 | 3,780 | ||||||||||||||||||
NET
LOSS
|
(2, 977, 376 | ) | (2,977,376 | ) | ||||||||||||||||
BALANCE
AS OF AUGUST 31, 2010
|
57,565,321 | $ | 57,565 | $ | 13,758,761 | $ | (12,986,054 | ) | $ | 830,272 |
Period
from April
12,
2002
(inception
date)
through
|
||||||||||||
Year
ended August 31
|
August
31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
loss
|
$ | (2,977,376 | ) | $ | (2,760,474 | ) | $ | (12,986,054 | ) | |||
Adjustments
required to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Depreciation
and amortization
|
31,862 | 30,488 | 77,804 | |||||||||
Amortization
of debt discount
|
108,000 | |||||||||||
Exchange
differences on long term deposits
|
335 | 641 | (666 | ) | ||||||||
Stock
based compensation
|
807,826 | 553,199 | 4,170,803 | |||||||||
Common
stock issued for services
|
249,850 | 152,928 | 617,638 | |||||||||
Common
stock to be issued for services
|
203,699 | 203,699 | ||||||||||
Impairment
of investment
|
434,876 | |||||||||||
Imputed
interest
|
3,780 | 3,780 | 19,777 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses and other current assets
|
360,302 | (38,889 | ) | (81,161 | ) | |||||||
Restricted
cash
|
(8 | ) | (16,000 | ) | (16,008 | ) | ||||||
Accounts
payable and accrued expenses
|
89,986 | (414,708 | ) | 411,330 | ||||||||
Provision
for uncertain tax position
|
14,971 | 16,413 | 162,034 | |||||||||
Total net cash used
in operating activities
|
(1,418,472 | ) | (2,268,923 | ) | (6,877,928 | ) | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase
of property and equipment
|
(7,553 | ) | (121,303 | ) | ||||||||
Purchase
of short term investments
|
(1,000,000 | ) | (3,728,000 | ) | ||||||||
Proceeds
from sale of short term investments
|
900,000 | 2,728,000 | 3,628,000 | |||||||||
Lease
deposits, net
|
1,244 | (1,978 | ) | (9,916 | ) | |||||||
Total
net cash provided by (used in) investing activities
|
901,244 | 1,718,469 | (231,219 | ) | ||||||||
CASH
FLOWS FROM
FINANCING ACTIVITIES:
|
||||||||||||
Proceeds
from sales of common stocks and warrants
- net of issuance expenses
|
7,961,481 | |||||||||||
Receipts
on account of shares issuances
|
6,061 | |||||||||||
Proceeds
from convertible notes
|
275,000 | |||||||||||
Proceeds
from short term note payable
|
120,000 | |||||||||||
Payments
of short term note payable
|
(120,000 | ) | ||||||||||
Shareholder
advances
|
66,243 | |||||||||||
Net cash provided by
financing activities
|
8,308,785 | |||||||||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(517,228 | ) | (550,454 | ) | 1,199,638 | |||||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,716,866 | 2,267,320 | ||||||||||
CASH
AND CASH EQUIVALENTS AT END
OF PERIOD
|
$ | 1,199,638 | $ | 1,716,866 | $ | 1,199,638 | ||||||
Non
cash investing and financing activities:
|
||||||||||||
Discount
on convertible note related to beneficial conversion
feature
|
$ | 108,000 | ||||||||||
Shares
issued for offering costs
|
$ | 1,753 | ||||||||||
Contribution
to paid in capital
|
$ | 18,991 |
|
a.
|
General:
|
|
b.
|
Accounting
principles
|
|
The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America
(“U.S.
GAAP”). In June 2009,
the Financial Accounting Standards Board ("FASB") issued the FASB
Accounting Standards Codification ("Codification" or "ASC"). The
Codification became the single authoritative source for U.S. GAAP and
changed the way in which the accounting literature is organized. The
Codification does not change U.S. GAAP and accordingly its adoption did
not have a material impact on the Company's consolidated financial
statements
|
|
c.
|
Use
of estimates in the preparation of financial
statements
|
|
d.
|
Functional
currency
|
|
e.
|
Principles
of consolidation
|
|
f.
|
Property
and equipment
|
%
|
||||
Computers
and peripheral equipment
|
33
|
|||
Office
furniture and equipment
|
15-33
|
|
g.
|
Income
taxes
|
1.
|
Deferred
taxes
|
2.
|
Uncertainty
in income tax
|
|
h.
|
Research
and development
|
|
i.
|
Cash
equivalents
|
|
j.
|
Comprehensive
loss
|
|
The
Company has no other comprehensive loss components other than net loss for
the fiscal years of 2009 and 2010.
|
|
k.
|
Loss
per share
|
|
l.
|
Impairment
in value of long-lived assets
|
|
m.
|
Stock
based compensation
|
|
n.
|
Fair
value measurement:
|
|
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 not quoted on active markets, but
corroborated by market data.
|
|
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.
|
|
o.
|
Concentration
of credit risks
|
|
p.
|
Newly
issued and recently adopted accounting
pronouncements:
|
|
q.
|
Reclassifications
|
a.
|
On
June 1, 2010, the subsidiary of the Company entered into an agreement with
D.N.A Biomedical Solutions Ltd (formerly, Laser Detect Systems Ltd)
("D.N.A"), an Israeli company, for the establishment of a new company,
Entera Bio Ltd. ("Entera"), ("the JV
Agreement").
|
b.
|
The
investment in Entera is composed at
follows:
|
August
31
|
||||
2010
|
||||
Share
in Entera's shareholders
|
|
$ | 200,000 | |
Currency
translation adjustment
|
(176 | ) | ||
Less
- equity losses
|
(67,025 | ) | ||
132,799 | ||||
Less
- deferred income
|
(132,799 | ) | ||
Net
investment
|
-,- |
|
a.
|
Composition
of property and equipment, grouped by major classifications, is as
follows:
|
August
31
|
||||||||
2010
|
2009
|
|||||||
Cost:
|
||||||||
Leasehold
improvements
|
$ | 76,029 | $ | 76,029 | ||||
Office
furniture and equipment
|
19,941 | 19,941 | ||||||
Computers
and peripheral equipment
|
25,333 | 25,333 | ||||||
121,303 | 121,303 | |||||||
Less
- accumulated depreciation and amortization
|
77,804 | 45,942 | ||||||
$ | 43,499 | $ | 75,361 |
|
b.
|
Depreciation
expenses totaled $31,862 and $30,488 in the years ended August
31, 2010 and 2009, respectively.
|
|
a.
|
Under
the terms of the First Agreement with Hadasit (note 1a above), the Company
retained Hadasit to provide consulting and clinical trial services. As
remuneration for the services provided under the agreement, Hadasit is
entitled to $200,000. The primary researcher for Hadasit is Dr. Miriam
Kidron, a director and officer of the Company. The funds paid to Hadasit
under the agreement are deposited by Hadasit into a research fund managed
by Dr. Kidron. Pursuant to the general policy of Hadasit with respect to
its research funds, Dr. Kidron receives from Hadasit a management fee in
the rate of 10% of all the funds deposited into this research
fund.
|
|
b.
|
The
Subsidiary has entered into operating lease agreements for vehicles used
by its employees for a period of 3
years.
|
|
c.
|
On
September 19, 2007 the Subsidiary entered into a lease agreement for its
office facilities in Israel. The lease agreement is for a period of 51
months, and will end on December 31, 2011. The monthly lease payment is
2,396 NIS and is linked to the increase in the Israeli consumer price
index, (as of August 31, 2010 the monthly payment in the Company's
functional currency is $628, the future annual lease payments under the
agreement for the years ending August 31, 2011 and 2012 are $7,532 and
$2,512, respectively).
|
|
d.
|
As
to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note
8a.
|
|
e.
|
On
April 21, 2009, the subsidiary entered into a consulting service agreement
with ADRES Advanced Regulatory Services
Ltd. (“ADRES”) pursuant to which
ADRES will provide
consulting services
relating to quality assurance and regulatory processes and procedures in
order to assist the subsidiary in submission of a U.S.
IND according to FDA regulations. In consideration for the services
provided under the agreement, ADRES will be entitled to a total cash
compensation of $211,000, of which the amount $110,000 will
be paid as a monthly fixed fee of $10,000 each month for 11 months
commencing May 2009, and the remaining $101,000 will be paid based on
achievement of certain milestones. $160,000 of the total amount was
paid though August 31, 2010, of that $30,000 were paid for completing the
three first milestones.
|
|
f.
|
On
February 10, 2010, the subsidiary entered into an agreement with
Vetgenerics Research G. Ziv Ltd, a clinical research organization (CRO),
to conduct a toxicology trial on its oral insulin capsules. The total cost
estimated for the studies is €107,100 ($133,040) of which €12,195
($16,806) was paid through August 31, 2010 and additional $38,147 are
presented as accounts payables.
|
|
g.
|
On
May 2, 2010, the subsidiary entered into an agreement with SAFC Pharma, a
division of the Sigma-Aldrich Corporation, to develop a process to produce
one of its oral capsule ingredients, for a total estimated consideration
of $269,600, of which $35,589 are presented as accounts
payables.
|
|
h.
|
On
July 5, 2010, the subsidiary of the Company entered into a Manufacturing
Supply Agreement (MSA) with Sanofi-Aventis Deutschland GMBH
("sanofi-aventis"). According to the MSA, sanofi-aventis will supply the
subsidiary with specified quantities of recombinant human insulin to be
used for clinical trials in the
USA.
|
|
i.
|
Grants
from the Chief Scientist Office
("OCS")
|
|
a.
|
As to shares issued as part of
stock based compensation plan see Note
8.
|
|
b.
|
As
to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note
8a.
|
|
a.
|
On
October 30, 2006 the Company entered into a Clinical Trial Manufacturing
Agreement with Swiss Caps AG (“Swiss”), pursuant to
which Swiss would manufacture and deliver the oral insulin capsule
developed by the Company. In consideration for the services being provided
to the Company by Swiss, the Company agreed to pay a certain predetermined
amounts which are to be paid in common stocks of the Company, the number
of stocks to be issued is based on the invoice received from Swiss, and
the stock market price 10 days after the invoice is issued. During the
years ended on August 31 2010 and 2009, the Company issued 388,724 and
203,904 shares of its common stock, respectively, to Swiss as remuneration
for the services provided in the amount of $198,850 and $113,210,
respectively.
|
|
b.
|
On
October 12, 2008, 828,000 options were granted to an employee of the
subsidiary, at an exercise price of $0.47 per share (equivalent to the
traded market price on the date of grant). The options vest in three equal
annual installments commencing on November 1, 2009 and expire on October
11, 2018. On March 31, 2009 the employee ended his services with the Company and the options were
forfeited before they had vested. The Company recognized an expense
of $71,406 during the six months ended February 28, 2009 and reversed that
expense in the three months ended May 31,
2009.
|
|
c.
|
On
October 12, 2008, 56,000 options were granted to an employee of the
subsidiary, at an exercise price of $0.47 per share (equivalent to the
traded market price on the date of grant). The options vest in two equal
annual installments commencing on May 1, 2009 and expire on October 11,
2018.
|
|
d.
|
On
January 11, 2009, an aggregate of 600,000 options were granted to two
Board of Directors members and 150,000 options were granted to an employee
of the subsidiary. All 750,000 options were granted at an exercise price
of $0.43 per share (equivalent to the traded market price on the date of
grant). The options vest in three equal annual installments commencing on
January 1, 2010 and expire on January 10, 2019. On May 31, 2009 the
employee ended his
services with the Company and the options were
forfeited before they had vested. During the year ended August 31,
2009, the Company recognized an expense of $4,354 related to the options
granted to the employee and reversed that expense during the same
year.
|
|
e.
|
On
January 11, 2009, an aggregate of 300,000 options were granted to three
Scientific Advisory Board members, at an exercise price of $0.76 per share
(higher than the traded market price on the date of grant). The options
vest in four equal quarterly installments commencing on April 1, 2009 and
expire on January 10, 2019.
|
|
f.
|
On
June 3, 2009, 400,000 options were granted to an employee of the
subsidiary, at an exercise price of $0.47 per share (equivalent to the
traded market price on the date of grant). The options vest in three equal
annual installments, commencing October 19, 2010, and expire on October
19, 2019.
|
|
g.
|
On
August 20, 2009, 100,000 options were granted to an employee of the
subsidiary, at an exercise price of $0.42 per share (equivalent to the
traded market price on the date of grant). The options vest in three equal
annual installments commencing August 20, 2010, and expire on August 20,
2019.
|
|
h.
|
On
November 23, 2009, 100,000 options were granted to a consultant, at an
exercise price of $0.76 per share (higher than the traded market price on
the date of grant), the options vest in three equal annual installments
commencing November 23, 2010 and expire on November 23, 2014. The
engagement with the consultant has ended during the nine months period
ended May 31, 2010. The fair value of these options on the date of grant,
was $36,662, using the Black Scholes option-pricing model and was based on
the following assumptions: dividend yield of 0% for all years; expected
volatility of 123.30%; risk-free interest rates of 2.20%; and the
remaining contractual life of 5 years. The Company recorded all expenses
in respect of these options during that
period.
|
|
i.
|
On
November 23, 2009, 36,000 options were granted to an employee of the
Subsidiary, at an exercise price of $0.46 per share (equivalent to the
traded market price on the date of grant), the options vest in three equal
annual installments commencing November 23, 2010, and expire on November
23, 2019. The fair value of these options on the date of grant was
$14,565, using the Black Scholes option-pricing model and was based on the
following assumptions: dividend yield of 0% for all years; expected
volatility of 123.55%; risk-free interest rates of 2.55%; and the
remaining contractual life of 6
years.
|
|
j.
|
On
December 29, 2009, the Company issued 100,000 shares of its common stock
to a third party as remuneration for services rendered and to be rendered
during the six month period commencing December 15, 2009. The fair value
of these shares on the date of issuance was
$37,000.
|
|
k.
|
On
March 16, 2010, 13,200 options were granted to a consultant, at an
exercise price of $0.43 per share (equivalent to the traded market price
on the date of grant), the options vest in six monthly installments
commencing March 30, 2010 and expire on March 15, 2015. The fair
value of these options on the date of grant, was $4,747, using the Black
Scholes option-pricing model and was based on the following assumptions:
dividend yield of 0% for all years; expected volatility of 121.61%;
risk-free interest rates of 2.37%; and the remaining contractual life of 5
years.
|
|
l.
|
On
March 16, 2010, 100,000 options were granted to a consultant, at an
exercise price of $0.43 per share (equivalent to the traded market price
on the date of grant), the options vest in three equal monthly
installments commencing March 30, 2010 and expire on March 15, 2015.
The fair value of these options on the date of grant, was $35,960, using
the Black Scholes option-pricing model and was based on the following
assumptions: dividend yield of 0% for all years; expected volatility of
121.61%; risk-free interest rates of 2.37%; and the remaining contractual
life of 5 years.
|
|
m.
|
On
March 16, 2010, 50,000 options were granted to a consultant, at an
exercise price of $0.50 per share (higher than the traded market price on
the date of grant), the options vest in three equal annual installments
commencing March 16, 2011 and expire on March 15, 2015. The fair
value of these options on the date of grant, was $17,702, using the Black
Scholes option-pricing model and was based on the following assumptions:
dividend yield of 0% for all years; expected volatility of 121.61%;
risk-free interest rates of 2.37%; and the remaining contractual life of 5
years.
|
|
n.
|
On
March 25, 2010, 100,000 options were granted to a consultant, at an
exercise price of $0.50 per share (higher than the traded market price on
the date of grant), the options vest in four equal quarterly installments
commencing May 17, 2010 and expire on March 24, 2015. The fair value
of these options on the date of grant, was $39,051, using the Black
Scholes option-pricing model and was based on the following assumptions:
dividend yield of 0% for all years; expected volatility of 121.21%;
risk-free interest rates of 2.65%; and the remaining contractual life of 5
years.
|
|
o.
|
On
April 21, 2010, an aggregate of 1,728,000 options were granted to Nadav
Kidron, the Company’s President, Chief Executive Officer and director, and
Miriam Kidron, the Company’s Chief Medical and Technology Officer and
director, both are related parties, at an exercise price of $0.49 per
share (equivalent to the traded market price on the date of grant),
216,000 of the options vested immediately on the date of grant and the
remainder will vest in twenty one equal monthly installments. These
options expire on April 20, 2020. The fair value of these options on
the date of grant was $807,392, using the Black Scholes option-pricing
model and was based on the following assumptions: dividend yield of 0% for
all years; expected volatility of 120.69%; risk-free interest rates of
3.77%; and expected lives of 10
years.
|
|
p.
|
On
July 8, 2010, 300,000 options were granted to a director at an exercise
price of $0.48 per share (equivalent to the traded market price on the
date of grant). The options vest in three equal annual installments
commencing on July 8, 2011 and will expire on July 7, 2020. The fair value
of these options on the date of grant, was $123,890, using the Black
Scholes option-pricing model and was based on the following assumptions:
dividend yield of 0% for all years; expected volatility of 117.82%;
risk-free interest rates of 2.14%; and the remaining contractual life of 6
years.
|
|
q.
|
On
August 2, 2010, the Company issued 50,000 shares of its common stock to a
third party as remuneration for services to be rendered during the six
month period commencing July 14, 2010. The fair value of these shares on
the date of issuance was $21,000.
|
For
options granted in
|
||||||||
the
year ended August 31
|
||||||||
2010
|
2009
|
|||||||
Expected
option life (years)
|
4.5-10.0 | 1.0-9.8 | ||||||
Expected
stock price volatility (%)
|
113.1-130.5 | 113.1-130.5 | ||||||
Risk
free interest rate (%)
|
1.3-3.9 | 0.7-3.6 | ||||||
Expected
dividend yield (%)
|
0.0 | 0.0 |
Year
ended August 31,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Number
|
average
|
Number
|
average
|
|||||||||||||
of
|
exercise
|
of
|
exercise
|
|||||||||||||
options
|
price
|
options
|
price
|
|||||||||||||
$
|
$
|
|||||||||||||||
Options
outstanding at beginning of year
|
8,445,360 | 0.31 | 7,289,360 | 0.29 | ||||||||||||
Changes
during the year:
|
||||||||||||||||
Granted
- at market price
|
2,064,000 | 0.49 | 2,134,000 | 0.45 | ||||||||||||
Expired
|
(500,000 | ) | 0.76 | |||||||||||||
Forfeited
|
(978,000 | ) | 0.46 | |||||||||||||
Options
outstanding at end of year
|
10,009,360 | 0.32 | 8,445,360 | 0.31 | ||||||||||||
Options
exercisable at end of year
|
7,549,360 | 7,001,360 | ||||||||||||||
Weighted
average fair value of options granted during the year
|
$ | 0.46 | $ | 0.45 |
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Range of
|
Remaining
|
average
|
||||||||||||||
exercise
|
Number
|
Contractual
|
exercise
|
Aggregate
|
||||||||||||
prices
|
outstanding
|
Life
|
price
|
intrinsic value
|
||||||||||||
$
|
Years
|
$
|
$
|
|||||||||||||
0.001
|
3,361,360 | 1.95 | 0.001 | 1,307,569 | ||||||||||||
0.40
to 0.62
|
6,648,000 | 5.31 | 0.32 | - | ||||||||||||
10,009,360 | 4.18 | 0.21 | 1,307,569 |
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Range of
|
Remaining
|
average
|
||||||||||||||
exercise
|
Number
|
Contractual
|
exercise
|
Aggregate
|
||||||||||||
prices
|
exercisable
|
Life
|
price
|
intrinsic value
|
||||||||||||
$
|
Years
|
$
|
$
|
|||||||||||||
0.001
|
3,361,360 | 1.95 | 0.001 | 1,307,569 | ||||||||||||
0.40
to 0.62
|
4,188,000 | 3.99 | 0.49 | - | ||||||||||||
7,549,360 | 3. 08 | 0.27 | 1,307,569 |
Year
ended August 31
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Number
|
average
|
Number
|
average
|
|||||||||||||
of
|
exercise
|
of
|
exercise
|
|||||||||||||
options
|
price
|
options
|
price
|
|||||||||||||
$
|
$
|
|||||||||||||||
Options outstanding at beginning of
year
|
1,200,000 | 0.68 | 900,000 | 0.65 | ||||||||||||
Changes
during the year:
|
||||||||||||||||
Granted
- at market price
|
113,200 | 0.43 | ||||||||||||||
Granted
- at an exercise price above market price
|
250,000 | 0.60 | 300,000 | 0.76 | ||||||||||||
Expired
|
(750,000 | ) | (0.64 | ) | ||||||||||||
Options
outstanding at end of year
|
813,200 | 0.63 | 1,200,000 | 0.68 | ||||||||||||
Options
exercisable at end of year
|
313,200 | 900,000 |
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Range of
|
Remaining
|
average
|
||||||||||||||
exercise
|
Number
|
Contractual
|
exercise
|
Aggregate
|
||||||||||||
prices
|
outstanding
|
Life
|
price
|
intrinsic value
|
||||||||||||
$
|
Years
|
$
|
$
|
|||||||||||||
0.40
to 0.62
|
363,200 | 3.54 | 0.78 | - | ||||||||||||
0.76
to 0.90
|
450,000 | 6.18 | 0.51 | - | ||||||||||||
813,200 | 5.00 | 0.63 | - |
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Range of
|
Remaining
|
average
|
||||||||||||||
exercise
|
Number
|
Contractual
|
exercise
|
Aggregate
|
||||||||||||
prices
|
exercisable
|
Life
|
price
|
intrinsic value
|
||||||||||||
$
|
Years
|
$
|
$
|
|||||||||||||
0.40
to 0.62
|
263,200 | 3.15 | 0.52 | - | ||||||||||||
0.76
to 0.90
|
|
50,000 | 0.92 | 0.90 | - | |||||||||||
313,200 | 2.80 | 0.58 | - |
Year
ended
|
||||||||
August
31,
|
||||||||
2010
|
2009
|
|||||||
Service
providers
|
$ | 381,522 | $ | 274,291 | ||||
Tax
provisions
|
12,504 | |||||||
Payroll
and related expenses
|
29,808 | 34,549 | ||||||
$ | 411, 330 | $ | 321,344 |
Period
from April
|
||||||||||||
12, 2002
|
||||||||||||
(inception)
|
||||||||||||
Year ended
|
through
|
|||||||||||
August 31,
|
August 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Clinical
trials
|
$ | 905,206 | $ | 1,304,779 | $ | 3,273,311 | ||||||
Payroll
and consulting fees
|
402,145 | 286,315 | 1,122,696 | |||||||||
Costs
for registration of patents
|
32,992 | 17,775 | 151,457 | |||||||||
Compensation
costs in respect of warrants granted to employees, directors and
consultants
|
341,203 | 264,861 | 2,557,866 | |||||||||
Other
|
132,538 | 100,749 | 337,814 | |||||||||
Less
- grants from the OCS
|
(350,198 | ) | (400,405 | ) | (750,603 | ) | ||||||
$ | 1,463,886 | $ | 1,574,074 | $ | 6,692,540 |
Period
from April
|
||||||||||||
12, 2002
|
||||||||||||
(inception)
|
||||||||||||
Year ended
|
through
|
|||||||||||
August 31
|
August 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Compensation
costs in respect of warrants granted to employees, directors and
consultants
|
$ | 466,623 | $ | 288,338 | $ | 1,612,937 | ||||||
Professional
services
|
322,447 | 240,523 | 1,334,249 | |||||||||
Consulting
fees
|
159,919 | 155,359 | 640,597 | |||||||||
Travel
costs
|
67,543 | 94,844 | 419,425 | |||||||||
Write
off of debt
|
275,000 | |||||||||||
Business
development
|
151,517 | 73,286 | 379,160 | |||||||||
Payroll
and related expenses
|
159,485 | 190,923 | 434,878 | |||||||||
Insurance
|
23,958 | 25,068 | 72,656 | |||||||||
Other
|
157,175 | 141,703 | 513,521 | |||||||||
$ | 1,508,667 | $ | 1,210,044 | $ | 5,682,423 |
|
a.
|
Corporate
taxation in the U.S.
|
|
b.
|
Corporate
taxation in Israel:
|
c.
|
Deferred
income taxes:
|
August
31
|
||||||||
2010
|
2009
|
|||||||
In
respect of:
|
||||||||
Net
operating loss carryforward
|
$ | 1,978,850 | $ | 1,507,587 | ||||
Less
- Valuation allowance
|
(1,978,850 | ) | (1,507,587 | ) | ||||
Net
deferred tax assets
|
-,- | -,- |
|
d.
|
Income
loss before taxes on income and income taxes included in the income
statements:
|
Period
from April
|
||||||||||||
12, 2002
|
||||||||||||
(inception)
|
||||||||||||
Year ended
|
through
|
|||||||||||
August 31
|
August 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Loss
before taxes on income:
|
||||||||||||
U.S.
|
$ | 453,676 | $ | 248,890 | $ | 7,587,802 | ||||||
Outside
U.S.
|
2,508,729 | 2,514,181 | 5,385,876 | |||||||||
2,962,405 | 2,763,071 | 12,973,678 | ||||||||||
Taxes
on income:
|
||||||||||||
Current:
|
||||||||||||
U.S.
|
13,107 | 16,664 | 69,570 | |||||||||
Outside
U.S.
|
1,864 | (19,261 | ) | 104,968 | ||||||||
$ | 14,971 | $ | (2,597 | ) | $ | 174,538 |
|
e.
|
Reconciliation
of the theoretical tax expense to actual tax
expense
|
Period
from April
|
||||||||||||
12, 2002
|
||||||||||||
(inception)
|
||||||||||||
Year ended
|
through
|
|||||||||||
August 31
|
August 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Loss
before income taxes as reported in the consolidated statement of
operations
|
$ | (2,962,405 | ) | $ | (2,763,071 | ) | $ | (12,811,516 | ) | |||
Computed
“expected” tax benefit
|
(1,036,842 | ) | (967,075 | ) | (4,484,031 | ) | ||||||
Increase
(decrease) in income taxes resulting from:
|
||||||||||||
Change
in the balance of the valuation allowance for deferred tax
losses
|
576,939 | 528,143 | 2,229,483 | |||||||||
Disallowable
deductions
|
211,304 | 149,043 | 1,642,813 | |||||||||
Increase
in taxes resulting from different tax rates applicable to non
U.S. subsidiary
|
248,599 | 270,879 | 554,239 | |||||||||
Uncertain
tax position
|
14,971 | 16,413 | 162,034 | |||||||||
Taxes
on income for the reported year
|
$ | 14,971 | $ | (2,597 | ) | $ | 174,538 |
|
f.
|
Uncertainty
in Income Taxes
|
Year
ended August
31
|
||||||||
2010
|
2009
|
|||||||
Balance
at Beginning of Year
|
$ | 147,063 | $ | 130,650 | ||||
Increase
(decrease) in tax positions for prior years
|
14,971 | 8,844 | ||||||
Increase
in tax positions for current year
|
7,569 | |||||||
Balance
at End of Year
|
$ | 162,034 | $ | 147,063 |
|
a.
|
During
the fiscal years of 2010 and 2009 the Company paid to directors $19,500
and $16,000, respectively, for managerial
services.
|
|
b.
|
As
to the agreements with Hadassit, see note
6a.
|
|
c.
|
On
July 1, 2008, the subsidiary entered into a consulting agreement with KNRY
Ltd. (“KNRY”), an Israeli company owned by Nadav Kidron, whereby Mr. Nadav
Kidron, through KNRY, will provide services as President and Chief
Executive Officer of both Oramed and the subsidiary (the “Nadav Kidron
Consulting Agreement”). Additionally, on July 1, 2008, the
subsidiary entered into a consulting agreement with KNRY whereby Dr.
Miriam Kidron, through KNRY, will provide services as Chief Medical and
Technology Officer of both Oramed and the subsidiary (the “Miriam Kidron
Consulting Agreement” and together with the Nadav Kidron Consulting
Agreement, the “Consulting Agreements”). The Consulting Agreements
replaced the employment agreements entered into between the Company and
KNRY, dated as of August 1, 2007, pursuant to which Nadav Kidron and
Miriam Kidron, respectively, provided services to Oramed and the
subsidiary. The Consulting Agreements are both terminable by either
party upon 60 days prior written notice. The Consulting Agreements
provide that KNRY (i) will be paid, under each of the Consulting
Agreements, in New Israeli Shekels (“NIS”) a gross amount of NIS50,400 per
month (as of August 31, 2010 the monthly payment in the Company's
functional currency is $13,204) and (ii) will be reimbursed for reasonable
expenses incurred in connection with performance of the Consulting
Agreements.
|
|
d.
|
As
to options granted to related parties, see note
8o.
|
|
e.
|
As
to the establishment of the Joint Venture Entera, see note
4.
|
|
f.
|
According
to the JV agreement (note 4), Entera will rent office space and services
from the subsidiary of the Company for a period of up to 24 months
commencing August 19, 2010, for a non-refundable, up-front fee in the
amount of $36,000. It was acknowledged that the rental period may be less
than 24 months if Oramed vacates such premises before the end of such
24-month period.
|
|
g.
|
According
to the JV agreement (note 4), the subsidiary of the Company shall provide
accounting services to Entera at a monthly fee in the amount of NIS 3,500
($917).
|
|
h.
|
Balances
with related parties:
|
August
31
|
||||||||
2010
|
2009
|
|||||||
Current
assets - related parties - Entera
|
7,689 | - | ||||||
Accounts
payable and accrued expenses - KNRY
|
22,773 | 26,450 |
|
a.
|
On November 9, 2010, the Company
issued 253,714 shares of its common stock to Swiss as remuneration for the
services provided, in the amount of
$88,880.
|
|
b.
|
On
November 16, 2010, the Company entered into a Securities Purchase
Agreement with an accredited investor for the sale of 937,500 units at a
purchase price of $0.32 per unit for total consideration of $300,000. Each
unit consisted of one share of the Company's common stock and one common
stock purchase warrant. Each warrant entitles the holder to purchase 0.35
a share of common stock exercisable for five years at an exercise price of
$0.50 per share.
|
(b)
|
Exhibits:
|
3.1
|
Articles
of Incorporation (incorporated by reference from our Registration
Statement on Form SB-2, filed on November 29,
2002).
|
3.2
|
Bylaws
(incorporated by reference from our Current Report on Form 8-K filed on
April 10, 2006).
|
3.3
|
Articles
of Merger filed with the Nevada Secretary of State on March 29, 2006
(incorporated by reference to our Current Report on Form 8-K filed on
April 10, 2006).
|
4.1
|
Specimen
Stock Certificate (incorporated by reference from our Registration
Statement on Form SB-2, filed on November 29,
2002).
|
4.2
|
Form
of Warrant Certificate (incorporated by reference from our current report
on Form 8-K filed July 15, 2008)
|
10.1
|
Form
of Securities Purchase Agreement for February 6, 2006 private placement
(incorporated by reference from our current report on Form 8-K filed
February 6, 2006).
|
10.2
|
Agreement
between us and Hadasit Medical Services and Development Ltd. dated
February 17, 2006 concerning the acquisition of U.S. patent application
60/718716 (incorporated by reference from our current report on Form 8-K
filed February 17, 2006).
|
10.3
|
Consulting
Agreement between us and Dr. Miriam Kidron (incorporated by reference from
our current report on Form 8-K filed February 17,
2006).
|
10.4
|
Agreement
between us and Swiss Caps Ag dated October 30, 2006 (incorporated by
reference from our current report on Form 8-K filed October 26,
2006).
|
10.5
|
Stock
Option Plan dated October 15, 2006 (incorporated by reference from our
current report on Form 8-K filed on November 28,
2006).
|
10.6
|
Stock
Option Agreement dated November 23, 2006 (incorporated by reference from
our current report on Form 8-K filed on November 28,
2006).
|
10.7
|
Form
of Subscription Agreement and Warrant Certificate (incorporated by
reference from our current report on Form 8-K filed on June 18,
2007).
|
10.8
|
Form
of Shares for Services Agreement (incorporated by reference from our
current report on Form 8-K filed on August 3,
2007).
|
10.12
|
Master
Services Agreement dated January 29, 2008 between us and OnQ Consulting
(incorporated by reference from our current report on Form 8-K filed on
February 1, 2008).
|
10.13
|
Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of
July 1, 2008 for the services of Nadav Kidron (incorporated by reference
from our current report on Form 8-K filed on July 2,
2008).
|
10.14
|
Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of
July 1, 2008 for the services of Miriam Kidron (incorporated by reference
from our current report on Form 8-K filed on July 2,
2008).
|
10.15
|
Oramed
Pharmaceuticals Inc. 2008 Stock Incentive Plan (incorporated by reference
from our current report on Form 8-K filed on July 2,
2008).
|
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 on
July 2, 2008).
|
10.17
|
Form
of Stock Purchase Agreement (incorporated by reference from our current
report on Form 8-K filed on July 15,
2008).
|
10.18
|
Employment
Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and
Yifat Zommer (incorporated by reference from our current report on Form
8-K filed on April 22, 2009).
|
10.18
|
Indemnification
Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and
Yifat Zommer (incorporated by reference from our current report on Form
8-K filed on April 22, 2009).
|
10.19
|
Agreement
dated April 22, 2009, between Oramed Ltd. and ADRES Advanced Regulatory
Services Ltd. (incorporated by reference from our current report on Form
8-K filed April 22, 2009).
|
10.20
|
Agreement
dated July 8, 2009, between our company and Hadasit Medical Services and
Development Ltd. (incorporated by reference from our current report on
Form 8-K filed July 9, 2009).
|
10.21
|
Agreement
dated January 7, 2009, between our company and Hadasit Medical Services
and Development Ltd. (incorporated by reference from our current report on
Form 8-K filed January 7, 2009).
|
10.22
|
Form
of Indemnification Agreements dated November 2, 2008, between our company
and each of our directors and officers (incorporated by reference from our
current report on Form 8-K filed November 6,
2009).
|
10.23
|
Agreement
dated June 1, 2010, between Oramed Ltd. and Laser Detect Systems Ltd.
(incorporated by reference from our quarterly report on Form 10-Q filed
July 14, 2010).
|
10.22
|
Manufacturing
Supply Agreement dated July 5, 2010, between Oramed Ltd. and
Sanofi-Aventis Deutschland GMBH (incorporated by reference from our
current report on Form 8-K filed July 14,
2010).
|
23.1*
|
Consent
of Kesselman & Kesselman
|
23.2*
|
Consent
of Malone & Bailey
|
31.1*
|
Certification
Statement of the Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
31.2*
|
Certification
Statement of the Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification
Statement of the Principal Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act Of
2002.
|
|
*
|
Filed
herewith
|
ORAMED
PHARMACEUTICLAS INC.
|
/s/ NADAV KIDRON
|
Nadav
Kidron,
|
President
and Chief Executive Officer
|
(principal
executive officer)
|
/s/ YIFAT ZOMMER
|
Yifat
Zommer,
|
Chief
Financial Officer
|
(principal
accounting officer)
|
Date:
November 26, 2010
|
/s/ NADAV KIDRON
|
Nadav
Kidron,
|
President
and Chief Executive Officer and Director
|
/s/ MIRIAM KIDRON
|
Miriam
Kidron,
|
Chief
Medical and Technology Officer and Director
|
/s/ LEONARD SANK
|
Leonard
Sank,
|
Director
|
/s/ HAROLD JACOB
|
Harold
Jacob,
|
Director
|
/s/ MICHAEL BERELOWITZ
|
Michael
Berelowitz,
|
Director
|
|
Kesselman
& Kesselman
Certified
Public Accountants
Trade
Tower, 25 Hamered Street
Tel
Aviv 68125 Israel
P.O
Box 452 Tel Aviv 61003
Telephone
+972-3-7954555
Facsimile
+972-3-7954556
|
Date:
November 26, 2010
|
By: /s/ Nadav Kidron
|
Nadav
Kidron
|
|
President
and Chief Executive
Officer
|
Date:
November 26, 2010
|
By: /s/ Yifat Zommer
|
Yifat
Zommer
|
|
Chief
Financial Officer
|
Dated: November 26, 2010
|
/s/ Nadav Kidron
|
Nadav Kidron, President and Chief Executive Officer
|
|
Dated: November 26, 2010
|
/s/ Yifat Zommer
|
Yifat Zommer, Chief Financial Officer
|