Delaware
(State or other jurisdiction
of incorporation or organization)
|
2834
(Primary Standard Industrial
Classification Code Number)
|
98-0376008
(I.R.S. Employer
Identification No.)
|
Eliezer M. Helfgott, Esq.
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
Telephone: (212) 885-5431
Facsimile: (917) 332-3065
|
Adam M. Klein, Adv.
Goldfarb, Levy, Eran, Meiri, Tzafrir & Co.
Electra Tower
98 Yigal Alon Street
Tel-Aviv 67891, Israel
Telephone: 972-3-608-9947
Facsimile: 972-3-608-9855
|
Large accelerated filer: o | Accelerated filer: o |
Non-accelerated filer: o
(Do not check if a smaller reporting company)
|
Smaller reporting company: x |
Title of each class of
securities to be registered
|
Amount To Be Registered (1)
|
Proposed Maximum Offering Price Per Unit (2)
|
Proposed Maximum Aggregate Offering Price
|
Amount of Registration Fee (3)
|
||||||||||||
Common Stock, $0.001 par value
|
1,517,908 | (4) | $ | 0.31 | $ | 470,551 | $ | 54.63 |
(1)
|
Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Act”), this registration statement shall be deemed to cover any additional number of shares of common stock as may be issued from time to time upon exercise of the warrants or options to prevent dilution as a result of stock splits, stock dividends or similar transactions. No additional consideration will be received for the common stock, and therefore no registration fee is required pursuant to Rule 457(i) under the Act.
|
(2)
|
Estimated in accordance with Rule 457(c) under the Act, solely for the purpose of calculating the registration fee, based on the average of the high and low prices of our common stock on June 27, 2011, as reported on the OTC Bulletin Board.
|
(3)
|
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus constituting a part of this registration statement also relates to 30,444,550 shares of Registrant’s securities registered under Registration Statement No. 333-164288, for which a filing fee in the amount of $2,672.73 has previously been paid, and 15,047,905 shares of Registrant’s securities registered under Registration Statement No. 333-173058, for which a filing fee in the amount of $524.12 has previously been paid.
|
(4)
|
Represents 1,124,375 shares of common stock of Oramed Pharmaceuticals Inc. being registered for resale that have been issued to the selling stockholders and 393,533 shares of common stock of Oramed Pharmaceuticals Inc. issuable upon exercise of warrants and options that have been issued to the selling stockholders.
|
Page | |
1
|
|
6
|
|
14
|
|
14
|
|
15
|
|
16
|
|
24
|
|
33
|
|
33
|
|
34
|
|
36
|
|
41
|
|
43
|
|
44
|
|
45
|
|
50
|
|
52 | |
52
|
|
Legal Matters | 52 |
52
|
|
52
|
|
F-1
|
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the section entitled “Risk Factors”.
THE COMPANY
General
We are a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions, including an orally ingestible insulin capsule or tablet to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules, tablets or pills for delivery of other polypeptides.
Oral Insulin: We are seeking to revolutionize the treatment of diabetes through our proprietary flagship product, an orally ingestible insulin capsule (ORMD0801). Our technology allows insulin to travel from the gastrointestinal tract via the portal vein to the bloodstream, revolutionizing the manner in which insulin is delivered. It enables its passage in a more physiological manner than current delivery methods of insulin.
Our technology is a platform that has the potential to deliver medications and vaccines orally that today can only be delivered via injection.
Diabetes: Diabetes is a disease in which the body does not produce or properly use insulin. Insulin is a hormone that causes sugar to be absorbed into cells, where the sugar is converted into energy needed for daily life.
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.
Management: We are led by a highly-experienced management team knowledgeable in the treatment of diabetes. Our Chief Medical and Technology Officer, Miriam Kidron, PhD, is a world-recognized pharmacologist and a biochemist and the innovator primarily responsible for our oral insulin technology development and know-how.
Scientific Advisory Board: Our management team has access to our internationally recognized Scientific Advisory Board whose members are thought-leaders in their respective areas. The Advisory Board is comprised of Dr. Nir Barzilai, Professor Ele Ferrannini, Professor Avram Hershko, Dr. Derek LeRoith, Dr. John Amatruda and Dr. Michael Berelowitz as Chairman.
Strategy
We plan to conduct further research and development on the technology covered by the patent application "Methods and Composition for Oral Administration of Proteins", which we acquired from Hadasit, as well as the other patents we have filed since. Through our research and development efforts, we are seeking to develop an oral dosage form that will withstand the harsh chemical environment of the stomach or intestines and will be effective in delivering active insulin for the treatment of diabetes. The proteins and vehicles that are added to the insulin in the formulation process must not modify chemically or biologically the insulin and the dosage form must be safe to ingest. We plan to continue to conduct clinical trials to show the effectiveness of our technology. We intend to conduct the clinical trials necessary to file an Investigational New Drug (“IND”) application with the U.S. Food and Drug Administration (the “FDA”). 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.
If our oral insulin capsule or other drug delivery solutions show significant promise in clinical trials, we plan to ultimately seek a strategic commercial partner, or partners, with extensive experience in the development, commercialization, and marketing of insulin applications and/or other orally digestible drugs. We anticipate such partner or partners would be responsible for, or substantially support, late stage clinical trials (Phase III) to 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 and marketing of our oral insulin capsule in these markets. Such planned strategic partnership, or partnerships, may provide a marketing and sales infrastructure for our products as well as financial and operational support for global clinical trials, post marketing studies, label expansions and other regulatory requirements concerning future clinical development in the United States and elsewhere. Any future strategic partner, or partners, may also provide capital and expertise that would enable the partnership to develop new oral dosage form for other polypeptides. While our strategy is to partner with an appropriate party, no assurance can be given that any third party would be interested in partnering with us. Under certain circumstances, we may determine to develop one or more of our oral dosage form on our own, either world-wide or in select territories.
|
In addition to developing our own oral dosage form drug portfolio, we are, on an on-going basis, considering in-licensing and other means of obtaining additional technologies to complement and/or expand our current product portfolio. Our goal is to create a well-balanced product portfolio that will enhance and complement our existing drug portfolio.
Product Development
Orally Ingestible Insulin: During fiscal year 2007 we conducted several clinical studies of our orally ingestible insulin. The studies were intended to assess both the safety/tolerability and absorption properties of our proprietary oral insulin. Based on the pharmacokinetic and pharmacologic outcomes of these trials, we decided to continue the development of our oral insulin product.
On November 15, 2007, we successfully completed animal studies in preparation for the Phase 1B clinical trial of our oral insulin capsule (ORMD0801). On January 22, 2008, we commenced non-FDA approved Phase 1B clinical trials with our oral insulin capsule (ORMD0801), in healthy human volunteers with the intent of dose optimization. On March 11, 2008, we successfully completed our Phase 1B clinical trials.
On April 13, 2008, we commenced a non-FDA approved Phase 2A study to evaluate the safety and efficacy of our oral insulin capsule (ORMD0801) in type 2 diabetic volunteers at Hadassah Medical Center in Jerusalem. On August 6, 2008, we announced the successful results of this trial.
In July 2008 we were granted approval by the Institutional Review Board Committee of Hadassah Medical Center in Jerusalem to conduct a non-FDA approved Phase 2A study to evaluate the safety and efficacy of our oral insulin capsule (ORMD0801) on type 1 diabetic volunteers. On September 24, 2008, we announced the beginning of this trial. On July 21, 2009 we reported positive results from this trial.
On September 14, 2010, we reported the successful results of an exploratory clinical trial testing the effectiveness of our oral insulin capsule (ORMD0801) in type 1 diabetes patients suffering from uncontrolled diabetes. Unstable or labile diabetes is characterized by recurrent, unpredictable and dramatic blood glucose swings often linked with irregular hyperglycemia and sometimes serious hypoglycemia affecting type 1 diabetes patients. This newly completed exploratory study was a proof of concept study for defining a novel indication for ORMD0801. We believe the encouraging results justify further clinical development of ORMD0801 capsule application toward management of uncontrolled diabetes.
On February 10, 2010, we entered into agreements with Vetgenerics Research G. Ziv Ltd., a clinical research organization (CRO), to conduct a toxicology trial on our oral insulin capsules. On March 23, 2011, we reported that we successfully completed the resulting comprehensive toxicity study for our oral insulin capsule (ORMD0801).
On April 21, 2009, we entered into a consulting service agreement with ADRES Advanced Regulatory Services Ltd. (“ADRES”), pursuant to which ADRES will provide services for the purpose of filing an IND application with the FDA for a Phase 2 study according to the FDA requirements. The FDA approval process and, if approved, registration for commercial use as an oral drug can take several years.
In May 2009, we commenced a non-FDA approved Phase 2B study in South Africa to evaluate the safety, tolerability and efficacy of our oral insulin capsule (ORMD0801) on type 2 diabetic volunteers. On May 6, 2010, we reported that the capsule was found to be well tolerated and exhibited a positive safety profile. No cumulative adverse effects were reported throughout this first study of extended exposure to the capsule.
|
In March, 2011, we consummated a private placement that commenced in November 2010, with a number of accredited investors pursuant to which we agreed to sell to the investors an aggregate of 10,487,500 units at a purchase price of $0.32 per unit for total consideration of $3,356,000. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 shares of common stock at an exercise price of $0.50 per share. We also issued 196,750 shares of common stock and warrants to purchase 70,863 shares of common stock as finders' fees in connection with the private placement. These amounts include the $250,000 investment by D.N.A made in connection with our technology transaction which closed on March 31, 2011.
In April 2011, we consummated a private placement with a number of “accredited investors” as defined in Rule 501(a) of Regulation D, pursuant to which we agreed to sell to the investors an aggregate of 1,124,375 units at a purchase price of $0.32 per unit for total consideration of $359,800. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stock at an exercise price of $0.50 per Share.
|
THE OFFERING
Issuer
|
Oramed Pharmaceuticals Inc.
Hi-Tech Park 2/5
Givat-Ram, PO Box 39098
Jerusalem 91390, Israel
Telephone: 972-2-566-0001
|
||
Securities offered by the Selling Stockholders
|
39,174,923 shares of common stock and 6,346,188 shares of common stock issuable upon exercise of warrants and options.
|
||
Trading Market
|
The common stock offered in this prospectus is quoted on the OTCBB under the symbol “ORMP.OB”.
|
||
Common stock outstanding (as of June 29, 2011)
|
70,104,583 shares1.
|
||
Use of Proceeds
|
We will not receive any of the proceeds from the sale of the shares of our common stock being offered for sale by the selling stockholders. However, we may receive up to approximately $3.2 million in proceeds upon exercise of the warrants and options held by the selling stockholders, as the warrants and options have an average exercise price of $0.50 per share and are exercisable into 6,346,188 shares of our common stock. These potential proceeds will be used for the research and development of our products and for general working capital purposes. See “Use of Proceeds.”
|
||
Plan of Distribution
|
The selling stockholders, and their pledgees, donees, transferees or other successors in interest, may from time to time offer and sell, separately or together, some or all of the common stock covered by this prospectus. Registration of the common stock covered by this prospectus does not mean, however, that those shares necessarily will be offered or sold. See “Plan of Distribution.”
|
||
Risk Factors
|
Please read “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the securities offered in this prospectus.
|
||
__________________________
1 Does not include 21,469,919 shares of our common stock issuable upon the exercise of outstanding options and warrants.
|
·
|
continued scientific progress in our research and development programs;
|
·
|
costs and timing of conducting clinical trials and seeking regulatory approvals and patent prosecutions;
|
·
|
competing technological and market developments;
|
·
|
our ability to establish additional collaborative relationships; and
|
·
|
effects of commercialization activities and facility expansions if and as required.
|
·
|
Clinical trial results and the timing of the release of such results,
|
·
|
The amount of cash resources and ability to obtain additional funding,
|
·
|
Announcements of research activities, business developments, technological innovations or new products by companies or their competitors,
|
·
|
Entering into or terminating strategic relationships,
|
·
|
Changes in government regulation,
|
·
|
Departure of key personnel,
|
·
|
Disputes concerning patents or proprietary rights,
|
·
|
Changes in expense level,
|
·
|
Future sales of our equity or equity-related securities,
|
·
|
Public concern regarding the safety, efficacy or other aspects of the products or methodologies being developed,
|
·
|
Activities of various interest groups or organizations,
|
·
|
Media coverage, and
|
·
|
Status of the investment markets.
|
·
|
Control of the market for the security0 by one or a few broker-dealers;
|
·
|
“Boiler room” practices involving high-pressure sales tactics;
|
·
|
Manipulation of prices through prearranged matching of purchases and sales;
|
·
|
The release of misleading information;
|
·
|
Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
|
·
|
Dumping of securities by broker-dealers after prices have been manipulated to a desired level, which hurts the price of the stock and causes investors to suffer loss.
|
High
|
Low
|
|||||||
Fiscal Year Ending August 31, 2011
|
||||||||
First Quarter
|
$ | 0.42 | $ | 0.28 | ||||
Second Quarter
|
$ | 0.37 | $ | 0.27 | ||||
Third Quarter
|
$ | 0.33 | $ | 0.26 | ||||
Fourth Quarter (through June 28, 2011)
|
$ | 0.34 | $ | 0.29 | ||||
Year Ended August 31, 2010
|
||||||||
First Quarter
|
$ | 0.64 | $ | 0.43 | ||||
Second Quarter
|
$ | 0.48 | $ | 0.37 | ||||
Third Quarter
|
$ | 0.55 | $ | 0.41 | ||||
Fourth Quarter
|
$ | 0.51 | $ | 0.36 | ||||
Year Ended August 31, 2009
|
||||||||
First Quarter
|
$ | 0.76 | $ | 0.36 | ||||
Second Quarter
|
$ | 0.52 | $ | 0.25 | ||||
Third Quarter
|
$ | 0.62 | $ | 0.20 | ||||
Fourth Quarter
|
$ | 0.59 | $ | 0.40 |
Six months ended
|
Three months ended
|
|||||||||||||||
Operating Data:
|
February 28,
2011
|
February 28,
2010
|
February 28,
2011
|
February 28,
2010
|
||||||||||||
Research and development costs
|
$ | 627,816 | $ | 516,057 | $ | 341,328 | $ | 183,572 | ||||||||
General and administrative expenses
|
621,016 | 493,344 | 305,887 | 208,328 | ||||||||||||
Financial (income) expense, net
|
(3,257 | ) | (4,397 | ) | (4,424 | ) | 311 | |||||||||
Net loss for the period
|
1,245,575 | 1,005,004 | $ | 642,791 | $ | 392,211 | ||||||||||
Loss per common share – basic and diluted
|
$ | 0.02 | $ | 0.02 | $ | 0.01 | $ | 0.01 | ||||||||
Weighted average common shares outstanding
|
60,344,880 | 57,289,266 | 62,804,799 | 57,442,484 |
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 |
·
|
In September 2010 and January 2011, we issued a total of 353,714 shares of our common stock, valued at $119,800, in the aggregate, to Swiss Caps AG as remuneration for services rendered.
|
·
|
In March 2011, we completed a private placement with a number of “accredited investors” as defined in Rule 501(a) of Regulation D, pursuant to which we agreed to sell to the investors an aggregate of 10,487,500 units at a purchase price of $0.32 per unit for total consideration of $3,356,000. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stock at an exercise price of $0.50 per Share. These amounts include the $250,000 investment by D.N.A made in connection with our technology transaction on March 31, 2011.
|
·
|
On March 31, 2011, we consummated a transaction with D.N.A for the sale of 781,250 shares of common stock and warrants to purchase up to 273,438 shares of common stock, for a total purchase price of $250,000 in cash. The shares and warrants were sold in units at a price per unit of $0.32, each unit consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock. The warrants have an exercise price of $0.50 per share, subject to adjustment, and a term of five years commencing from the closing of the transaction. D.N.A's $250,000 investment in Oramed is included in the private placement described in the immediately preceding paragraph.
|
·
|
In April 2011, we completed a private placement with a number of “accredited investors” as defined in Rule 501(a) of Regulation D, pursuant to which we agreed to sell to the investors an aggregate of 1,124,375 units at a purchase price of $0.32 per unit for total consideration of $359,800. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stock at an exercise price of $0.50 per Share.
|
·
|
In May 2011, we issued 176,923 shares of our common stock, valued at $47,769, in the aggregate, to Swiss Caps AG as remuneration for services rendered in the past.
|
·
|
In May 2011, we issued 200,00 shares of our common stock, valued at $60,000, in the aggregate, to New Castle Consulting, LLC as remuneration for services to be rendered.
|
·
|
On November 23, 2009 we granted options under the 2008 Stock Incentive Plan to purchase up to 100,000 shares of our common stock at an exercise price of $0.76 to a consultant.
|
·
|
On November 23, 2009 we granted options under the 2008 Stock Incentive Plan to purchase up to 36,000 shares of our common stock at an exercise price of $0.46 to an employee of our subsidiary.
|
·
|
On March 16, 2010, 50,000 options were granted to a consultant of our subsidiary at an exercise price of $0.50 per share. The options vest in three equal annual installments commencing on March 16, 2011 and will expire on March 15, 2015.
|
·
|
On March 16, 2010, 100,000 options were granted to a consultant of the Company at an exercise price of $0.43 per share. The options vest in three equal monthly installments commencing on March 30, 2010 and will expire on March 15, 2015.
|
·
|
On March 16, 2010, 13,200 options were granted to a consultant of the Company at an exercise price of $0.43 per share. The options vest in six monthly installments commencing on March 30, 2010 and will expire on March 15, 2015.
|
·
|
On March 25, 2010, 100,000 options were granted to a consultant of the Company at an exercise price of $0.50 per share. The options vest in four equal quarterly installments commencing on May 17, 2010 and will expire on March 24, 2015.
|
·
|
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 equal monthly installments, commencing on May 31, 2010. The options have an expiration date of April 20, 2020.
|
·
|
On July 8, 2010, 300,000 options were granted to a director at an exercise price of $0.48 per share. The options vest in three equal annual installments commencing on July 8, 2011 and will expire on July 7, 2020.
|
·
|
On February 15, 2011, 250,000 options were granted to a consultant of the Company at an exercise price of $0.50 per share. The options vest in five equal quarterly installments commencing on February 16, 2011 and will expire on February 16, 2021.
|
Category
|
Amount
|
|||
Research and development costs, net of OCS funds
|
$ | 4,358,000 | ||
General and administrative expenses
|
1,044,000 | |||
Financial income, net
|
1,000 | |||
Taxes on income
|
- | |||
Total
|
$ | 5,404,000 |
·
|
Aggressively protect all current and future technological developments to assure strong and broad protection by filing patents and/or continuations in part as appropriate;
|
·
|
Protect technological developments at various levels, in a complementary manner, including the base technology, as well as specific applications of the technology; and
|
·
|
Establish comprehensive coverage in the U.S. and in all relevant foreign markets in anticipation of future commercialization opportunities.
|
·
|
who must be recruited as qualified participants;
|
·
|
how often to administer the drug or product;
|
·
|
what tests to perform on the participants; and
|
·
|
what dosage of the drug or amount of the product to give to the participants.
|
·
|
Insulin injections;
|
·
|
Insulin pumps;
|
·
|
Insulin inhalers; or
|
·
|
a combination of diet, exercise and oral medication which improve the body's response to insulin or cause the body to produce more insulin.
|
Name
|
Age
|
Position
|
||
Nadav Kidron
|
37
|
President, Chief Executive Officer and Director
|
||
Miriam Kidron
|
70
|
Chief Medical and Technology Officer and Director
|
||
Leonard Sank
|
46
|
Director
|
||
Harold Jacob
|
57
|
Director
|
||
Michael Berelowitz
|
67
|
Director and Chairman of the Scientific Advisory Board
|
||
Yifat Zommer
|
37
|
Chief Financial Officer, Treasurer and Secretary
|
Name and Principal Position
|
Year
(1)
|
Salary
($)
(9)
|
Option Awards
($)
(2)
|
All Other
Compensation
($)
(3)(9)
|
Total
($)
|
||||||||||||
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 our audited consolidated financial statements included in this prospectus. 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 received 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 received 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 and Secretary on April 19, 2009.
|
(8)
|
Mr. Orlev served as our CFO and Secretary from May 1, 2008 through March 31, 2009.
|
(9)
|
Amounts paid for Salary and All Other Compensation were originally denominated in NIS and were translated into dollars using historical exchange rates.
|
Name
|
Year
|
Automobile
Related Expenses
($)
|
Manager’s
Insurance *
($)
|
Education
Fund*
($)
|
Total
($)
|
||||||||||||
Nadav Kidron
|
2010
|
10,783 | -- | -- | 10,783 | ||||||||||||
Miriam Kidron
|
2010
|
7,727 | -- | -- | 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.
|
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(3)
|
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 prospectus. Our directors will not realize the value of these awards in cash unless and until these awards are exercised and the underlying shares subsequently sold.
|
(2)
|
Please refer to the summary compensation table for executive compensation with respect to the named individual.
|
(3)
|
Appointed as Director in June 2010 and as Chairman of our Scientific Advisory Board in June 2011. We have entered into an agreement with Dr. Berelowitz pursuant to which Dr. Berelowitz will be entitled to a fee of $300 per hour and up to $1,500 per day, as compensation for serving as Chairman of our Scientific Advisory Board.
|
Name and Address of
Beneficial Owner
|
Number of Shares
|
Percentage of Shares Beneficially Owned
|
||
Nadav Kidron †‡
10 Itamar Ben Avi St.
Jerusalem, Israel
|
12,661,735(1)
|
17.49%
|
||
Zeev Bronfeld
6 Uri St.
Tel-Aviv, Israel
|
7,213,205(2)
|
10.25%
|
||
Miriam Kidron †‡
2 Elza St.
Jerusalem, Israel
|
5,651,360(3)
|
7.46%
|
||
Hadasit Medical Research Services & Development Ltd.
P.O. Box 12000
Jerusalem, Israel
|
4,141,532
|
5.91%
|
||
Leonard Sank †
3 Blair Rd Camps Bay
Cape Town, South Africa
|
2,682,650 (4)
|
3.81%
|
||
Harold Jacob †
Haadmur Mebuyon 26
Jerusalem, Israel
|
210,000(5)
|
*
|
||
Michael Berelowitz †
415 East 37th Street
New York, NY, USA
|
--
|
--
|
||
Yifat Zommer ‡
P.O. Box 39098,
Jerusalem, Israel
|
133,333(6)
|
*
|
||
Attara Fund, Ltd
767 Fifth Ave.
New York, NY, USA
|
7,016,208 (7)
|
9.90%
|
||
All current executive officers and directors, as a group (six persons)
|
21,339,078(8)
|
29.25%
|
*
|
Less than 1%
|
†
|
Indicates Director
|
‡
|
Indicates Officer
|
(1)
|
Includes 2,290,000 shares of common stock issuable upon the exercise of outstanding stock options.
|
(2)
|
Includes 781,250 shares of common stock and five-year warrants to purchase 273,438 shares of common stock at an exercise price of $0.50 per share, held by D.N.A Mr. Bronfeld is a director of D.N.A and party to a voting agreement with Mr. Meni Mor relating to their respective shares of D.N.A, representing, in the aggregate, approximately 46.8% of D.N.A's outstanding share capital. As a result, Mr. Bronfeld may be deemed a beneficial owner of, and to share the power to vote and dispose of our securities held by D.N.A. Mr. Bronfeld has disclaimed beneficial ownership of any of our securities held by D.N.A. The foregoing is based on a Schedule 13G filed by Mr. Bronfeld on April 4, 2011.
|
(3)
|
Includes 5,651,360 shares of common stock issuable upon the exercise of outstanding stock options.
|
(4)
|
Includes 325,000 shares of common stock issuable upon the exercise of warrants beneficially owned by the referenced person and outstanding stock options. Includes 2,190,983 shares held by Hargreave Hale Nominees Limited.
|
(5)
|
Includes 200,000 shares of common stock issuable upon the exercise of outstanding stock options.
|
(6)
|
Includes of 133,333 shares of common stock issuable upon the exercise of outstanding stock options.
|
(7)
|
Includes of 766,208 shares of common stock issuable upon the exercise of warrants beneficially owned by the referenced person.
|
(8)
|
Includes 8,599,693 shares of common stock issuable upon the exercise of warrants beneficially owned by the referenced person and the exercise of outstanding stock options.
|
Name of Selling Stockholder
|
Shares Beneficially Owned
Before the Offering (excluding shares issuable upon the exercise of warrants or options) (1)
|
Shares Beneficially Owned Before the Offering that are Issuable Upon the Exercise of Warrants or Options
|
Maximum Number
of Shares to be Offered
in the Offering
|
Number of Shares
Beneficially Owned Immediately After Sale of Maximum Number of
Shares in the Offering
|
|
# of Shares (2)
|
% of Class
|
||||
Hargreave Hale Nominees Limited A/C 060788
|
83,333
|
-
|
83,333
|
--
|
--
|
Hargreave Hale Nominees Limited A/C 063717
|
1,666,667
|
-
|
1,666,667
|
--
|
--
|
Hargreave Hale Nominees Limited (3)
|
2,437,500
|
328,125
|
2,765,625
|
--
|
--
|
Leonard Sank (3)
|
607,650
|
-
|
166,667
|
440,983
|
0.6%
|
Apollo Nominees Inc.
|
281,250
|
98,438
|
379,688
|
--
|
--
|
Laurie Rubin
|
440,000
|
-
|
440,000
|
-
|
-
|
Swiss Caps AG (4)
|
940,039
|
--
|
940,039
|
--
|
--
|
Mirabaud & CIE
|
166,667
|
166,667
|
--
|
--
|
|
Joan Samson
|
166,667
|
-
|
166,667
|
--
|
--
|
Vered Schimmel
|
100,000
|
-
|
100,000
|
--
|
--
|
Shikma A M R Ltd
|
110,000
|
-
|
110,000
|
--
|
--
|
Edward Danehy
|
110,000
|
-
|
110,000
|
--
|
--
|
Name of Selling Stockholder | Shares Beneficially Owned
Before the Offering (excluding shares issuable upon the exercise of warrants or options) (1)
|
Shares Beneficially Owned Before the Offering that are Issuable Upon the Exercise of Warrants or Options
|
Maximum Number
of Shares to be Offered
in the Offering
|
Number of Shares
Beneficially Owned Immediately After Sale of Maximum Number of
Shares in the Offering
|
|
# of Shares (2)
|
% of Class | ||||
Oberdorf Finance SA
|
80,000
|
--
|
80,000
|
--
|
--
|
Pnini David Jerusalem
|
83,500
|
-
|
83,500
|
--
|
--
|
David Lifscitz
|
70,000
|
-
|
70,000
|
--
|
--
|
Elhanan Noam Enterprising Ltd.
|
102,642
|
--
|
102,642
|
--
|
--
|
Lawrence Leigh
|
41,666
|
-
|
41,666
|
--
|
--
|
Ryan Lazarus
|
40,000
|
-
|
40,000
|
--
|
--
|
Aviad Freidman
|
63,583
|
7,088
|
70,671
|
--
|
--
|
Nadav Kidron (5)
|
10,371,735
|
2,182,000
|
12,553,735
|
144,000
|
0.2%
|
Zeev Bronfeld
|
6,158,517
|
--
|
6,158,517
|
--
|
--
|
Hadasit Medical Services and Development Ltd
|
4,141,532
|
--
|
4,141,532
|
--
|
--
|
Russel Leigh
|
700,000
|
--
|
700,000
|
--
|
--
|
Attara Fund, Ltd (6)
|
6,250,000
|
766,208
|
8,437,500
|
--
|
--
|
Vivid Horizon Limited
|
937,500
|
328,125
|
1,265,625
|
--
|
--
|
Novatrust Ltd re Clifton Two Trust
|
156,250
|
54,687
|
210,937
|
--
|
--
|
Name of Selling Stockholder | Shares Beneficially Owned
Before the Offering (excluding shares issuable upon the exercise of warrants or options) (1)
|
Shares Beneficially Owned Before the Offering that are Issuable Upon the Exercise of Warrants or Options | Maximum Number
of Shares to be Offered
in the Offering
|
Number of Shares
Beneficially Owned Immediately After Sale of Maximum Number of
Shares in the Offering
|
|
# of Shares (2)
|
% of Class | ||||
Lashmar Holdings Inc
|
675,000
|
236,250
|
911,250
|
--
|
--
|
ICT NV
|
468,750
|
164,062
|
632,812
|
--
|
--
|
Marcel Kremer
|
156,250
|
56,688
|
212,938
|
--
|
--
|
Vladimir Shklar
|
103,583
|
36,254
|
139,837
|
--
|
--
|
D.N.A Biomedical
Solutions Ltd
|
781,250
|
273,438
|
1,054,688
|
--
|
--
|
Ron Weissberg
|
156,250
|
54,688
|
210,938
|
--
|
--
|
S.Brimer investments and Consultating
|
156,250
|
54,688
|
210,938
|
--
|
--
|
Abramovich Yehoshua,
|
156,250
|
54,688
|
210,938
|
--
|
--
|
Amir Fishler
|
40,000
|
14,000
|
54,000
|
--
|
--
|
Shmuel Pasternak
|
140,625
|
49,219
|
189,844
|
--
|
--
|
DSN Holdings Ltd
|
50,000
|
17,500
|
67,500
|
--
|
--
|
Daniel Younisian
|
300,000
|
105,000
|
405,000
|
--
|
--
|
Boaz Raam
|
78,125
|
27,344
|
105,469
|
--
|
--
|
Yael Berant
|
46,875
|
16,406
|
63,281
|
--
|
--
|
Total
|
39,615,906
|
4,924,896
|
45,521,111
|
584,983
|
0.8%
|
·
|
in the over-the-counter market;
|
·
|
in privately negotiated transactions;
|
·
|
through broker-dealers, who may act as agents or principals;
|
·
|
through one or more underwriters on a firm commitment or best-efforts basis;
|
·
|
in a block trade in which a broker-dealer will attempt to sell a block of securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
·
|
directly to one or more purchasers;
|
·
|
through agents; or
|
·
|
in any combination of the above.
|
·
|
purchases of the securities by a broker-dealer as principal and resales of the securities by the broker-dealer for its account pursuant to this prospectus;
|
·
|
ordinary brokerage transactions; or
|
·
|
transactions in which the broker-dealer solicits purchasers on a best efforts basis.
|
Page
|
||
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
|
||
F-3
|
||
F-4
|
||
F-5
|
||
F-6
|
||
F-7- F-14
|
Page
|
||
F - 2 | ||
F - 3
|
||
CONSOLIDATED FINANCIAL STATEMENTS:
|
||
F - 4
|
||
F - 5
|
||
F - 6
|
||
F - 7
|
||
F - 8
|
Page
|
||
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
|
||
F-3
|
||
F-4
|
||
F-5
|
||
F-6
|
||
F-7- F-14
|
February 28,
|
August 31,
|
|||||||
2011
|
2010
|
|||||||
Unaudited
|
Audited
|
|||||||
Assets
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 1,931,761 | $ | 1,199,638 | ||||
Short term investments
|
1,777,000 | 100,000 | ||||||
Restricted cash
|
16,000 | 16,008 | ||||||
Accounts receivable - other
|
87,430 | 59,175 | ||||||
Prepaid expenses
|
17,101 | 1,859 | ||||||
Related parties
|
5,754 | 7,689 | ||||||
Grants receivable from the Chief Scientist
|
- | 12,438 | ||||||
T o t a l current assets
|
3,835,046 | 1,396,807 | ||||||
INVESTMENT IN A JOINT VENTURE
|
16,428 | |||||||
LONG TERM DEPOSITS
|
11,152 | 10,582 | ||||||
PROPERTY AND EQUIPMENT, net
|
29,852 | 43,499 | ||||||
T o t a l assets
|
$ | 3,892,478 | $ | 1,450,888 | ||||
Liabilities and stockholders' equity
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable and accrued expenses
|
$ | 518,579 | $ | 411,330 | ||||
Account payable with former shareholder
|
47,252 | 47,252 | ||||||
T o t a l current liabilities
|
565,831 | 458,582 | ||||||
PROVISION FOR UNCERTAIN TAX POSITION
|
162,034 | 162,034 | ||||||
COMMITMENTS
|
||||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Common stock of $ 0.001 par value - Authorized: 200,000,000 shares at February 28, 2011 and August 31, 2010; Issued and outstanding:
67,625,285 at February 28, 2011 and 57,565,321 shares at August 31, 2010, respectively
|
67,625 | 57,565 | ||||||
Additional paid-in capital
|
17,328,617 | 13,758,761 | ||||||
Deficit accumulated during the development stage
|
(14,231,629 | ) | (12,986,054 | ) | ||||
T o t a l stockholders' equity
|
3,164,613 | 830,272 | ||||||
T o t a l liabilities and stockholders' equity
|
$ | 3,892,478 | $ | 1,450,888 |
Period
|
||||||||||||||||||||
from April
|
||||||||||||||||||||
12, 2002 | ||||||||||||||||||||
(inception)
|
||||||||||||||||||||
Six months ended
|
Three months ended
|
through
|
||||||||||||||||||
February 28,
|
February 28,
|
February 28,
|
February 28,
|
February 28,
|
||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011 | ||||||||||||||||
Unaudited
|
||||||||||||||||||||
RESEARCH AND DEVELOPMENT EXPENSES
|
$ | 627,816 | $ | 516,057 | $ | 341,328 | $ | 183,572 | $ | 7,320,356 | ||||||||||
IMPAIRMENT OF INVESTMENT
|
434,876 | |||||||||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES
|
621,016 | 493,344 | 305,887 | 208,328 | 6,303,439 | |||||||||||||||
OPERATING LOSS
|
1,248,832 | 1,009,401 | 647,215 | 391,900 | 14,058,671 | |||||||||||||||
FINANCIAL INCOME
|
(10,045 | ) | (10,916 | ) | (7,856 | ) | (2,543 | ) | (170,845 | ) | ||||||||||
FINANCIAL EXPENSES
|
6,788 | 6,519 | 3,432 | 2,854 | 169,265 | |||||||||||||||
LOSS BEFORE TAXES ON INCOME
|
1,245,575 | 1,005,004 | 642,791 | 392,211 | 14,057,091 | |||||||||||||||
TAXES ON INCOME
|
- | - | - | - | 174,538 | |||||||||||||||
NET LOSS FOR THE PERIOD
|
$ | 1,245,575 | $ | 1,005,004 | $ | 642,791 | $ | 392,211 | $ | 14,231,629 | ||||||||||
BASIC AND DILUTED LOSS PER COMMON SHARE
|
$ | 0.02 | $ | 0.02 | $ | 0.01 | $ | 0.01 | ||||||||||||
WEIGHTED AVERAGE NUMBER OF COMMON STOCK USED IN
COMPUTING BASIC AND DILUTED LOSS PER COMMON STOCK
|
60,344,880 | 57,289,266 | 62,804,799 | 57,422,484 |
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 (audited):
|
||||||||||||||||||||
SHARES CANCELLED
|
(19,800,000 | ) | (19,800 | ) | 19,800 | - | ||||||||||||||
SHARES ISSUED FOR INVESTMENT IN ISTI-NJ
|
1,144,410 | 1,144 | 433,732 | 434,876 | ||||||||||||||||
SHARES ISSUED FOR OFFERING COSTS
|
1,752,941 | 1,753 | (1,753 | ) | - | |||||||||||||||
SHARES ISSUED FOR CASH– NET OF ISSUANCE EXPENSES
|
37,359,230 | 37,359 | 7,870,422 | 7,907,781 | ||||||||||||||||
SHARES ISSUED FOR SERVICES
|
621,929 | 622 | 367,166 | 367,788 | ||||||||||||||||
SHARES TO BE ISSUED FOR SERVICES RENDERED
|
203,699 | 203,699 | ||||||||||||||||||
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
|
2,864,039 | 2,864,039 | ||||||||||||||||||
STOCK BASED COMPENSATION RELATED TO OPTIONS
GRANTED TO CONSULTANTS
|
498,938 | 498,938 | ||||||||||||||||||
DISCOUNT ON CONVERTIBLE NOTE RELATED TO BENEFICIAL
CONVERSION FEATURE
|
108,000 | 108,000 | ||||||||||||||||||
COMPREHENSIVE LOSS
|
(16 | ) | (16 | ) | ||||||||||||||||
IMPUTED INTEREST
|
15,997 | 15,997 | ||||||||||||||||||
NET LOSS
|
(10,008,662 | ) | (10,008,662 | ) | ||||||||||||||||
BALANCE AS OF AUGUST 31, 2009 (audited)
|
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 (audited)
|
57,565,321 | $ | 57,565 | $ | 13,758,761 | $ | (12,986,054 | ) | $ | 830,272 | ||||||||||
SHARES ISSUED FOR SERVICES RENDERED
|
353,714 | 354 | 119,446 | 119,800 | ||||||||||||||||
SHARES ISSUED FOR CASH
|
9,706,250 | 9,706 | 3,096,294 | 3,106,000 | ||||||||||||||||
STOCK BASED COMPENSATION RELATED TO OPTIONS
GRANTED TO EMPLOYEES AND DIRECTORS
|
327,910 | 327,910 | ||||||||||||||||||
STOCK BASED COMPENSATION RELATED TO OPTIONS
GRANTED TO CONSULTANTS
|
7,887 | 7,887 | ||||||||||||||||||
OTHER COMPREHENSIVE INCOME
|
16,428 | 16,428 | ||||||||||||||||||
IMPUTED INTEREST
|
1,891 | 1,891 | ||||||||||||||||||
NET LOSS
|
(1,245,575 | ) | (1,245,575 | ) | ||||||||||||||||
BALANCE AS OF February 28, 2011 (unaudited)
|
67,625,285 | $ | 67,625 | $ | 17,328,617 | $ | (14,231,629 | ) | $ | 3,164,613 |
The accompanying notes are an integral part of the consolidated financial statements
|
Six months ended
|
Period from April 12, 2002 (inception date) through
|
|||||||||||
February 28,
|
February 28,
|
|||||||||||
2011
|
2010
|
2011
|
||||||||||
Unaudited
|
||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net loss
|
$ | (1,245,575 | ) | $ | (1,005,004 | ) | $ | (14,231,629 | ) | |||
Adjustments required to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Depreciation
|
15,122 | 15,756 | 92,926 | |||||||||
Amortization of debt discount
|
- | - | 108,000 | |||||||||
Exchange differences on long term deposits
|
(570 | ) | 347 | (1,236 | ) | |||||||
Stock based compensation
|
335,797 | 155,703 | 4,506,600 | |||||||||
Common stock issued for services
|
119,800 | 199,500 | 737,438 | |||||||||
Common stock to be issued for services
|
- | - | 203,699 | |||||||||
Impairment of investment
|
- | - | 434,876 | |||||||||
Imputed interest
|
1,891 | 1,890 | 21,668 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Prepaid expenses and other current assets
|
(29,124 | ) | 125,857 | (110,285 | ) | |||||||
Restricted cash
|
8 | - | (16,000 | ) | ||||||||
Accounts payable and accrued expenses
|
107,249 | (86,209 | ) | 518,579 | ||||||||
Provision for uncertain tax position
|
- | - | 162,034 | |||||||||
Total net cash used in operating activities
|
(695,402 | ) | (592,160 | ) | (7,573,330 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase of property and equipment
|
(1,475 | ) | - | (122,778 | ) | |||||||
Acquisition of short-term investments, net
|
(1,677,000 | ) | (400,000 | ) | (3,728,000 | ) | ||||||
Proceeds from sale of Short term investments
|
- | - | 1,951,000 | |||||||||
Lease deposits
|
- | - | (9,916 | ) | ||||||||
Total net cash derived from (used in) investing activities
|
(1,678,475 | ) | (400,000 | ) | (1,909,694 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Proceeds from issuance of common stock and
warrants - net of issuance expenses
|
3,106,000 | - | 11,067,481 | |||||||||
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
|
3,106,000 | - | 11,414,785 | |||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
732,123 | (992,160 | ) | 1,931,761 | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,199,638 | 1,716,866 | - | |||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 1,931,761 | $ | 724,706 | $ | 1,931,761 | ||||||
Non cash investing and financing activities:
|
||||||||||||
Shares issued for offering costs
|
$ | 1,753 | ||||||||||
Contribution to paid in capital
|
$ | $18,991 | ||||||||||
Discount on convertible note related to beneficial
conversion feature
|
$ | 108,000 |
a.
|
General:
|
1.
|
Oramed Pharmaceuticals, Inc. (the “Company”) was incorporated on April 12, 2002, under the laws of the State of Nevada. From incorporation until March 3, 2006, the Company was an exploration stage company engaged in the acquisition and exploration of mineral properties. On February 17, 2006, the Company entered into an agreement with Hadasit Medical Services and Development Ltd (the “First Agreement”) to acquire the provisional patent related to orally ingestible insulin pill to be used for the treatment of individuals with diabetes. The Company has been in the development stage since its formation and has not yet realized any revenues from its planned operations.
|
|
On May 14, 2007, the Company incorporated a wholly-owned subsidiary in Israel, Oramed Ltd., which is engaged in research and development. Unless the context indicates otherwise, the term “Group” refers to Oramed Pharmaceuticals Inc. and its Israeli subsidiary, Oramed Ltd (the “Subsidiary”).
|
|
On March 11, 2011, Oramed was reincorporated from the State of Nevada to the State of Delaware.
|
|
The Group is engaged in research and development in the biotechnology field and is considered a development stage company in accordance with ASC Topic 915 “Development Stage Entities”.
|
2.
|
The accompanying unaudited interim consolidated financial statements as of February 28, 2011 and for the six months then ended, have been prepared in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accounting principles applied in the preparation of the interim statements are consistent with those applied in the preparation of the annual financial statements; however, the interim statements do not include all the information and explanations required for the annual financial statements. Operating results for the six months ended February 28, 2011, are not necessarily indicative of the results that may be expected for the year ending August 31, 2011.
|
3.
|
Going concern considerations
|
b.
|
Newly issued and recently adopted Accounting Pronouncements
|
1.
|
In February 2010, the FASB issued Accounting Standards Update No. 2010-09 ("ASU 2010-09"), "Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements," which among other things amended ASC 855 to remove the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between ASC 855 and the SEC's requirements. All of the amendments in this update are effective upon issuance of this update. Management has included the provisions of these amendments in the financial statements.
|
2.
|
In June 2009, the FASB updated accounting guidance relating to variable interest entities. As applicable to the Company, this will become effective as of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. As applicable to the Company, the adoption of the new guidance does not have a material impact on the consolidated financial statements.
|
c.
|
Reclassifications
|
a.
|
In June 2010, the subsidiary of the Company entered into an agreement with D.N.A Biomedical Solutions Ltd ("D.N.A"), for the establishment of a new company, Entera Bio Ltd. ("Entera"), ("the JV Agreement").
|
b.
|
The investment in Entera is composed at follows:
|
February 28
|
August 31
|
|||||||
2011
|
2010
|
|||||||
Share in Entera's shareholders equity
|
$ | 300,000 | $ | 200,000 | ||||
Currency translation adjustment
|
16,428 | (176 | ) | |||||
Less - equity losses
|
(239,759 | ) | (67,025 | ) | ||||
76,669 | 132,799 | |||||||
Less - deferred income
|
(60,241 | ) | (132,799 | ) | ||||
Net investment
|
$ | 16,428 | -,- |
a.
|
Under the terms of the First Agreement with Hadasit (note 1a(1) 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.
|
As to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note 5.
|
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 February 28, 2011 the monthly payment in the Company's functional currency is $661, the future annual lease payments under the agreement for the years ending August 31, 2011 and 2012 are $7,938 and $2,646, respectively).
|
d.
|
On April 21, 2009, the subsidiary entered into a consulting service agreement withADRES 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 of $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 through February 28, 2011, of that $30,000 were paid for completing the three first milestones.
|
e.
|
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 ($139,138) of which €78,595 ($108,696) was paid through February 28, 2011.
|
f.
|
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 $78,494 was paid through February 28, 2011.
|
g.
|
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.
|
h.
|
On January 2, 2011, the Company entered into a consulting agreement with a third party (the "Advisor”) for a period of 24 months, pursuant to which the Advisor will provide financial services, advice and assistance in connection with fund raisingsin the public or private equity markets. In consideration for the services provided the Advisor will be entitled to monthly fee of $3,500 payable in cash in respect of the first 18 months of the term of this agreement and subject to the closing of the Company's first round of financing conducted by the Advisor, a certain finders fee on financing transactions conducted by the Advisor and a warrant to purchase up to 2,000,000 shares of the Company. The warrant will have a term of five years and an exercise price of $0.50 per Share. The warrant will vest and be exercisable only upon achieving certain milestones prior to the second anniversary of the date of issuance, as determined in the agreement. The warrants were granted on March 16, 2011.
|
i.
|
On February 15, 2011, the Subsidiary entered into a consulting agreement with a third party (“the Consultant”) for a period of five years, pursuant to which the Consultant will provide consultation on scientific and clinical matters. The Consultant is entitled to a fixed monthly fee of $8,000, royalties of 8% of the net royalties actually received by the Subsidiary in respect of the patent that was sold to Entera on February 22, 2011 (see note 2) and an option to purchase up to 250,000 shares of common stock, par value $0.001 per share, of the Company at an exercise price of $0.50 per share.
|
j.
|
Grants from the Chief Scientist Office of the Ministry of Industry, Trade and Labor of Israel ("OCS")
|
a.
|
In March 2011, in connection with the securities purchase agreement as described in note 4, the Company issued 196,750 shares of the Company's common stock and warrants to purchase 70,864 shares of common stock for three individuals, as finders fee.
|
b.
|
On March 31, 2011, the Company consummated a securities purchase agreement with D.N.A for the sale of 781,250 shares of common stock and warrants to purchase up to 273,438 shares of common stock, for a total purchase price of $250,000 in cash. The shares and warrants were sold in units at a price per unit of $0.32, each unit consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock. The warrants have an exercise price of $0.50 per share, subject to adjustment, and a term of five years commencing from the closing of the transaction. See also note 2.
|
c.
|
In April 2011, the Company entered into Securities Purchase Agreements with nine accredited investors for the sale of 1,124,375 units at a purchase price of $0.32 per unit for total consideration of $359,800. 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. The Company paid $21,588 and will issue 67,462 warrants as finders fee.
|
d.
|
In May 2011, the Company issued 176,923 shares of our common stock, valued at $47,769, in the aggregate, to Swiss as settlement of our liability for services rendered in the past.
|
e.
|
In May 2011, the Company issued 200,00 shares of our common stock, valued at $60,000, in the aggregate, to New Castle Consulting, LLC as remuneration for services to be rendered during the six month period commencing May 4, 2011.
|
ORAMED PHARMACEUTICULS, Inc.
|
(A development stage company)
|
NOTES TO INTERIM FINANCIAL STATEMENTS
|
Page
|
||
F - 2 | ||
F - 3
|
||
CONSOLIDATED FINANCIAL STATEMENTS:
|
||
F - 4
|
||
F - 5
|
||
F - 6
|
||
F - 7
|
||
F - 8 - F -31
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
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 | ||||||
T o t a l 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 | ||||||
T o t a l 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 | ||||||
T o t a l 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 | ) | ||||
T o t a l stockholders' equity
|
830,272 | 2,746,192 | ||||||
T o t a l 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:
Oramed Pharmaceuticals Inc. (the “Company”) was incorporated on April 12, 2002, under the laws of the State of Nevada. From incorporation until March 3, 2006, the Company was an exploration stage company engaged in the acquisition and exploration of mineral properties. On March 8, 2006, the Company entered into an agreement with Hadasit Medical Services and Development Ltd (“Hadasit”) (the “First Agreement”) to acquire the provisional patent related to orally ingestible insulin pill to be used for the treatment of individuals with diabetes, see also note 6a.
The Company has been in the development stage since its formation and has not yet generated any revenues from its planned operations.
On May 14, 2007, the Company incorporated a wholly-owned subsidiary in Israel, Oramed Ltd., which is engaged in research and development. Unless the context indicates otherwise, the term “Group” refers to Oramed Pharmaceuticals Inc. and its Israeli subsidiary, Oramed Ltd. (the “Subsidiary”), (together with the Company, "the Group").
The Group is engaged in research and development in the biotechnology field and is considered a development stage company in accordance with the guidance.
The Company has suffered recurring losses for the period from inception (April 12, 2002) through August 31, 2010 amounting to $12,986,054, as well as negative cash flow from operating activities. Presently, the Company does not have sufficient cash and other resources to meet its requirements in the twelve months following September 1, 2010. These factors raise substantial doubts as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Management is in the process of evaluating various financing alternatives through fund raising in the public or private equity markets, as the Company will need to finance future research and development activities and general and administrative expenses. Although there is no assurance that the Company will be successful with those initiatives, management believes that it will be able to secure the necessary financing as a result of ongoing financing discussions with third party investors, existing shareholders, as well as on going funding from the Office of the Chief Scientist ("OCS"), (see note 6h).
These consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.
|
|
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
|
|
Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.
Regarding the Subsidiary, the recognition is prohibited for a 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
|
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.
|
|
h.
|
Research and development
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, employee benefits, costs of registered patents materials, supplies, the cost of services provided by outside contractors, including services related to the Company’s clinical trials, clinical trial expenses, the full cost of manufacturing drug for use in research, preclinical development. All costs associated with research and development are expensed as incurred.
Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. The Company out sources a substantial portion of its clinical trial activities, utilizing external entities such as contract research organizations, independent clinical investigators, and other third-party service providers to assist the Company with the execution of its clinical studies. For each clinical trial that the Company conducts, certain clinical trial costs are expensed immediately, while others are expensed over time based on the expected total number of patients in the trial, the rate at which patients enter the trial, and the period over which clinical investigators or contract research organizations are expected to provide services.
Grants received from the OCS are recognized when the grants become receivable, provided there is reasonable assurance that the Company will comply with the conditions attached to the grant and there is reasonable assurance the grant will be received. The grants are deducted from the related research and development expenses as the costs are incurred. See also note 6h.
|
|
i.
|
Cash equivalents
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.
|
|
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
The Company reviews long-lived assets, to be held and used, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In the event the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets are written down to their estimated fair values.
|
|
m.
|
Stock based compensation
Equity awards granted to employees are accounted for using the grant-date fair value method. The fair value of share-based payment transactions is recognized as an expense over the requisite service period, net of estimated forfeitures. The Company estimated forfeitures based on historical experience and anticipated future conditions.
The Company elected to recognize compensation cost for an award with only service conditions that has a graded vesting schedule using the accelerated method based on the multiple-option award approach.
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 is measured on a final basis at the end of the related service period and is recognized over the related service period using the straight-line method.
|
|
n.
|
Fair value measurement:
On September 1, 2008, the Company adopted the methods of fair value as described in the authoritative guidance issued by the FASB, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure about fair value measurements to value its financial assets and liabilities. As defined in the guidance, fair value is based on the price that would be received to sell an asset or paid to transfer a liability 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 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
Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, deposit and short term investments, which are deposited in major financial institutions. The company is in the opinion the credit risk in respect of these balances is remote.
|
|
p.
|
Newly issued and recently adopted accounting pronouncements:
In June 2009, the FASB updated accounting guidance relating to variable interest entities. As applicable to the Company, this will become effective as of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. As applicable to the Company, the adoption of the new guidance is not expected to have a material impact on the consolidated financial statements.
|
|
q.
|
Reclassifications
|
NOTE 2 - SHORT TERM INVESTEMNTS:
|
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
|
|
b.
|
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").
According to the JV Agreement, D.N.A will invest $600,000 in Entera, and Entera will be owned in equal parts by the subsidiary and D.N.A. In consideration for 50% of Entera's shares, the Subsidiary of the Company will enter into a Patent License Agreement with Entera, according to which, the subsidiary of the Company will out-license to Entera a technology for the development of oral delivery drugs for certain actions. The out-licensed technology differs from Oramed’s main delivery technology that is used for oral insulin and is subject to a different patent application. Entera's initial development effort will be an oral formulation for the treatment of osteoporosis.
Entera's Chief Executive Officer will be granted options to purchase ordinary shares of Entera, reflecting 9.9% of Entera's share capital.
In the event that Entera has not obtained third-party financing by June 1, 2011, or such other date mutually agreed upon by the parties, each of the subsidiary and D.N.A will be required to make a capital contribution to Entera in the amount of $150,000. The agreement also contains customary provisions with respect to preemptive rights, rights of first refusal, drag-along rights, veto rights and information rights.
Mr. Zeev Bronfeld, who is one of D.N.A 's controlling shareholders, is also an affiliated shareholder of the Company.
On August 19, 2010, the closing of the transaction took place and the subsidiary of the Company and Entera entered into the Patent License Agreement. On August 31, 2010, D.N.A. invested $400,000 in Entera.
As of August 31, 2010, the Group holds 50% of the issued and outstanding share capital of Entera (45% - on fully diluted basis). As the Group did not obtain control in Entera, these consolidated financial statements do not include Entera's financial statement.
|
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 exnses totaled $31,862 and $30,488 in the years ended August 31, 2010 and 2009, respectively.
|
|
k.
|
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.
|
|
l.
|
The Subsidiary has entered into operating lease agreements for vehicles used by its employees for a period of 3 years.
|
|
m.
|
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).
|
|
n.
|
As to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note 8a.
|
|
o.
|
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.
|
|
p.
|
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.
|
|
q.
|
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.
|
|
r.
|
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.
|
|
s.
|
Grants from the Chief Scientist Office ("OCS")
|
NOTE 7 - STOCK HOLDERS’ EQUITY:
|
|
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 |
NOTE 8 - STOCK BASED COMPENSATION (continued):
|
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) through
August 31,
|
||||||||||||
Year ended
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
|
Year ended
August 31 |
Period from April
12, 2002
(inception)
through |
|||||||||||
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
|
NOTE 12 - TAXES ON INCOME (continued):
|
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 |
NOTE 14 - SUBSEQUENT EVENTS
|
|
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.
|
ITEM 13.
|
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
|
Amount | ||||
SEC fee
|
$ | 54.63 | ||
Legal fees and expenses
|
$ | 12,000 | ||
Accountant’s fees and expenses
|
$ | 4,000 | ||
Printing expenses
|
$ | 700 | ||
Miscellaneous
|
$ | 245.37 | ||
Total
|
$ | 17,000 |
ITEM 14.
|
INDEMNIFICATION OF DIRECTORS AND OFFICERS
|
ITEM 15.
|
RECENT SALES OF UNREGISTERED SECURITIES
|
ITEM 17.
|
UNDERTAKINGS
|
The undersigned Registrant hereby undertakes:
|
(i)
|
to include any prospectus required by Section 10(a)(3) of the Securities Act;
|
(ii)
|
to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
|
(iii)
|
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
That, for the purpose of determining liability under the Securities Act to any purchaser:
|
(A)
|
Each prospectus filed by a Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
|
(B)
|
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
|
(i)
|
Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;
|
(iii)
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
|
(iv)
|
Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
|
Oramed Pharmaceuticals Inc.
|
|||
|
By:
|
/s/ Nadav Kidron | |
Name : Nadav Kidron | |||
Title: President, Chief Executive Officer and Director | |||
Signature
|
Title
|
Date
|
||
/s/ Nadav Kidron | ||||
Nadav Kidron | President, Chief Executive Officer and Director (principal executive officer) | June 29, 2011 | ||
/s/ Yifat Zommer | ||||
Yifat Zommer | Chief Financial Officer, Treasurer and Secretary (principal financial and accounting officer) | June 29, 2011 | ||
/s/ Miriam Kidron | ||||
Miriam Kidron | Chief Medical and Technology Officer and Director | June 29, 2011 | ||
/s/ Leonard Sank
|
||||
Leonard Sank | Director | June 29, 2011 | ||
/s/ Harold Jacob
|
||||
Harold Jacob | Director | June 29, 2011 | ||
/s/ Michael Berelowitz
|
||||
Michael Berelowitz | Director and Chairman of the Scientific Advisory Board | June 29, 2011 |
Exhibit
No.
|
Description
|
3.1
|
Certificate of Incorporation (incorporated by reference from our current report on Form 8-K filed March 14, 2011).
|
4.1
|
Specimen Stock Certificate (incorporated by reference from our Registration Statement on Form S-1 filed March 24, 2011).
|
5.1*
|
Opinion of Blank Rome LLP.
|
10.1
|
Form of Securities Purchase Agreement for February 6, 2006 private placement (incorporated by reference from our current report on Form 8-K filed February 6, 2006).
|
10.2
|
Agreement between our company and Hadasit Medical Services and Development Ltd. dated February 17, 2006 concerning the acquisition of U.S. patent application 60/718716 (incorporated by reference from our current report on Form 8-K filed February 17, 2006).
|
10.3
|
Consulting Agreement between our company and Dr. Miriam Kidron (incorporated by reference from our current report on Form 8-K filed February 17, 2006).
|
10.4
|
Agreement between our company and Swiss Caps Ag dated October 30, 2006 (incorporated by reference from our current report on Form 8-K filed October 26, 2006).
|
10.5
|
Stock Option Plan dated October 15, 2006 (incorporated by reference from our current report on Form 8-K filed on November 28, 2006).
|
10.6
|
Stock Option Agreement dated November 23, 2006 (incorporated by reference from our current report on Form 8-K filed on November 28, 2006).
|
10.7
|
Form of subscription agreement and warrant certificate (incorporated by reference from our current report on Form 8-K filed on June 18, 2007).
|
10.8
|
Form of Shares for Services agreement (incorporated by reference from our current report on Form 8-K filed on August 3, 2007).
|
10.9
|
Master Services Agreement dated January 29, 2008 between Oramed Pharmaceuticals Inc. and OnQ Consulting (incorporated by reference from our current report on Form 8-K filed on February 1, 2008).
|
10.10
|
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).
|
10.11
|
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).
|
10.12
|
Oramed Pharmaceuticals Inc. 2008 Stock Incentive Plan (incorporated by reference from our current report on Form 8-K filed on July 2, 2008).
|
10.13
|
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).
|
10.14
|
Form of Stock Purchase Agreement (incorporated by reference from our current report on Form 8-K filed on July 15, 2008).
|
10.15
|
Form of Warrant Certificate (incorporated by reference from our current report on Form 8-K filed July 15, 2008).
|
10.16
|
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).
|
10.17
|
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).
|
10.18
|
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).
|
10.19
|
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).
|
10.20
|
Agreement dated June 1, 2010, between Oramed Ltd and LASER Detect Systems Ltd (incorporated by reference from our current report on Form 10-Q filed July 14, 2010).
|
10.21
|
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).
|
10.22
|
Securities Purchase Agreement, between Oramed Pharmaceuticals Inc. and Attara Fund, Ltd., dated as of December 21, 2010 (incorporated by reference from our current report on Form 10-Q filed January 13, 2011).
|
10.23
|
Common Stock Purchase Warrant issued to Attara Fund, Ltd. on January 10, 2011 (incorporated by reference from our current report on Form 10-Q filed January 13, 2011).
|
10.24
|
Share Purchase Agreement dated February 22, 2011, between Oramed Ltd. and D.N.A Biomedical Solutions Ltd. (incorporated by reference from our Registration Statement on Form S-1 filed March 24, 2011).
|
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 24, 2011).
|
10.26
|
Form of Securities Purchase Agreement used in 2010-2011 private placement round (incorporated by reference from our Registration Statement on Form S-1 filed March 24, 2011).
|
10.27
|
Form of Common Stock Purchase Warrant used in 2010-2011private placement round (incorporated by reference from our Registration Statement on Form S-1 filed March 24, 2011).
|
10.28
|
Form of Indemnification Agreements dated March 11, 2011, between our company and each of our directors and officers (incorporated by reference from our definitive proxy statement on Schedule 14A filed on January 31, 2011).
|
10.29
|
Agreement dated June 21, 2011, with Dr. Michael Berelowitz (incorporated by reference from our current report on Form 8-K filed June 22, 2011).
|
23.1*
|
Consent of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International.
|
23.2*
|
Consent of Malone & Bailey, PC –Certified Public Accountants.
|
23.3*
|
Consent of Blank Rome LLP. (contained in Exhibit 5.1).
|
24.1*
|
Power of Attorney (included in the signature pages hereto).
|
Very truly yours,
/s/ Blank Rome LLP
BLANK ROME LLP
|