ORAMED PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES(continued):

The following table summarizes the movement in deferred revenues balances for the three-month period ended November 30, 2017 and the year ended August 31, 2017:

The Company is engaged in research and development in the biotechnology field for innovative pharmaceutical solutions, including an orally ingestible insulin capsule to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules for delivery of other polypeptides, and has not generated significant revenues from its operations. Continued operationFollowing the termination of the ORA-D-013-1 and ORA-D-013-2 Phase 3 trials, the Company’s research and development activities have been significantly reduced while it conducts a strategic review process. As a result, the Company is contingent upon obtaining sufficient funding until it becomes profitable. Successful completion ofcurrently incurring lower research and development and sales and marketing expenses.

Based on the Company’s development programscurrent cash resources and commitments, the Company believes it will be able to maintain its transition to normal operations is dependent upon obtaining necessary regulatory approvals fromcurrent planned activities and the U.S. Food and Drug Administration prior to selling its products withincorresponding level of expenditures for at least the United States, obtaining foreign regulatory approvals to sell its products internationally, or entering into licensing agreements with third parties. Therenext 12 months, although no assurance can be no assurancegiven that the Company will receive regulatory approval of anynot need additional funds prior to such time. If there are unexpected increases in its operating expenses, the Company may need to seek additional financing during the next 12 months. The Company may also need additional funds to realize the decisions made as part of its product candidates, and a substantial amount of time may pass before the Company achieves a level of revenues adequate to support its operations, if at all. The Company also expects to incur substantial expenditures in connection with the regulatory approval process for each of its product candidates during their respective developmental periods. Obtaining marketing approval will be directly dependent on the Company’s ability to implement the necessary regulatory steps required to obtain marketing approval in the United States and in other countries.strategic review process. The Company cannot predict the outcome of these activities.

BasicOn August 7, 2023, the Company entered into a Stock Purchase Agreement, as subsequently amended on August 9, 2023 and diluted net loss per common shareAugust 21, 2023, (the “Sorrento SPA”), with Sorrento Therapeutics, Inc. (“Sorrento”), to acquire certain equity securities of Scilex Holding Company (“Scilex”), owned by Sorrento (the “Purchased Securities”), for a purchase price of $105,000. Sorrento and its affiliated debtor, Scintilla Pharmaceuticals, Inc. (“Scintilla” and together with Sorrento, the “Debtors”) are computedin Chapter 11 bankruptcy proceedings.

On August 9, 2023, the Company entered into a Senior Secured, Super-Priority Debtor-in-Possession Loan and Security Agreement (the “Senior DIP Loan Agreement”) with the Debtors in the principal amount of $100,000, which included a non-refundable closing fee of $450 paid in full out of the proceeds. This amount was subsequently drawn in full by dividing the net lossDebtors and was intended to be used by the Company as a credit for the periodconsideration for the Purchased Securities, with an additional $5,000 in cash to be paid by the weighted average numberCompany at closing. Thereafter, the Company and Sorrento continued discussions and negotiations relating to the sale contemplated under the Sorrento SPA.

On September 21, 2023, the Company entered into and consummated the transactions contemplated by a Securities Purchase Agreement (the “Scilex SPA”) with Scilex and Acquiom Agency Services LLC. Pursuant to the Scilex SPA, in exchange for Scilex assuming outstanding obligations of sharesSorrento under the Senior DIP Loan Agreement (the “DIP Assumption”) and for the ability to credit the amounts assumed under the DIP Assumption in exchange for certain equity securities of common stock outstanding for each period. Outstanding stock options, warrants and restricted stock units (“RSUs”) have been excludedScilex owned by Sorrento, Scilex (i) issued to the Company (A) a Senior Secured Promissory Note due 18 months from the calculationdate of issuance in the principal amount of $101,875 (the “Note”), which includes accrued and unpaid interest of $875 under the Senior DIP Loan Agreement and $1,000 of fees added to the principal amount of the diluted loss per share because all such securities are anti-dilutive for all periods presented. The total numberNote, (B) the Closing Penny Warrant (as defined herein), and (C) the Subsequent Penny Warrants (as defined herein), and (ii) caused the Transferred Warrants (as defined herein) to be transferred to the Company. For further details, see note 7.

On August 8, 2023, the Company borrowed an aggregate of common stock options, warrants and RSUs excluded$99,550 pursuant to loan agreements from the calculation of diluted net loss was 1,424,029 and 2,470,494 for the three-month periods ended November 30, 2017 and 2016, respectively.Israel Discount Bank Ltd. For further details, see note 6.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 12 - SIGNIFICANT ACCOUNTING POLICIESPOLICIES:(continued):

The condensed consolidated financial statements included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAPGAAP”) and, on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended AugustDecember 31, 20172023 (the “2017“2023 Form 10-K”). These condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair statement of the results of the periods presented. Certain information and disclosures normally included in annual consolidated financial statements have been omitted in this interim period report pursuant to the rules and regulations of the Securities and Exchange Commission. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the 20172023 Form 10-K. The results for interim periods are not necessarily indicative of a full fiscal year’s results.

Basic net earnings (loss) per common share are computed by dividing the net earnings (loss) attributable to stockholders for the period by the weighted average number of shares of common stock outstanding for each period, including vested restricted stock units (“RSUs”). Outstanding stock options, warrants and RSUs have been excluded from the calculation of the diluted loss per share because all such securities are anti-dilutive for the three month period ended March 31, 2023.

For the diluted earnings per share calculation for the three month period ended March 31, 2024, the weighted average number of shares outstanding during the three month period ended March 31, 2024 is adjusted for the potential dilution that could occur in connection with employee share-based payment, using the treasury stock method.

The weighted average number of stock options, warrants and RSUs that has been excluded from the calculation of the diluted income per share as of March 31, 2024 was 4,846,474 shares.

The weighted average number of stock options, warrants and RSUs excluded from the calculation of diluted net loss was 3,357,911 for the three month period ended March 31, 2023.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers” that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle of this ASU is that an entity will recognize revenue upon the transfer of goods or services to customers in an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance is effective in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company will implement the guidance for the annual period ending on August 31, 2019. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 2 - COMMITMENTS:

As part of this agreement, the Subsidiary entered into a patent transfer agreement according to which the Subsidiary assigned to Entera all of its right, title and interest in and to the patent application that it has licensed to Entera since August 2010. Under this agreement, the Subsidiary is entitled to receive from Entera royalties of 3% of Entera’s net revenues (as defined in the agreement) and a license back of that patent application for use in respect of diabetes and influenza. As of November 30, 2017, Entera had not yet realized any revenues and had not paid any royalties to the Subsidiary.

In addition, as part of a consulting agreement with a third party, dated February 15, 2011, the Subsidiary is obliged to pay this third party royalties of 8% of the net royalties received in respect of the patent that was sold to Entera in March 2011.

The annual lease payment is New Israeli Shekel (“NIS”) 119,000 ($34) from October 2016 through September 2018 and NIS 132,000 ($38) from October 2018 through September 2021, and is linked to the increase in the Israeli consumer price index (“CPI”) (as of November 30, 2017, the future lease payments until the expiration of the lease agreement will be $142, based on the exchange rate as of November 30, 2017).

As security for its obligation under this lease agreement, the Company provided a bank guarantee in an amount equal to three monthly lease payments.

ORAMED PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 2 - COMMITMENTSSIGNIFICANT ACCOUNTING POLICIES (continued):

In November 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures.” This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280 “Segment Reporting”. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements related disclosures.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures. 

The Subsidiary is committed to pay royalties to Bio-Jerusalem on proceeds from future sales at a rate of 4% and up to 100% of the amount of the grant received (Israeli CPI linked) at the total amount of $65. The Company received no grants from Bio-Jerusalem since fiscal year 2013.

Through November 30, 2017, total milestone payments received which are related to the funded project aggregated $17,500 and all related royalty expenses were recognized in cost of revenues in prior periods.

Under the terms of the Company’s funding from the IIA, royalties of 3.5% are payable on sales of products developed from a project so funded, up to a maximum amount equaling 100%-150% of the grants received (dollar linked) with the addition of interest at an annual rate based on LIBOR.

At the time the grants were received, successful development of the related projects was not assured.

The total amount that was received through November 30, 2017 was $2,194.

Through November 30, 2017, total milestone payments received which are related to the funded project aggregated $17,500. The royalty expenses were recognized in cost of revenues in prior periods and will be paid over the term of the License Agreement in accordance with the revenue recognized from the related project.

ORAMED PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 3 - FAIR VALUE:

The Company measures fair value and discloses fair value measurements for financial assets and liabilities. 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:

As of November 30, 2017,March 31, 2024, the assets or liabilities measured at fair value are comprised of available for salemarketable equity securities (Level 1).

In determiningas presented in note 4 and of the Transferred Warrants included in the Scilex SPA as presented in note 7 were based on a Level 1 measurement. The fair value of the Company utilizes valuation techniques that maximizeClosing Penny Warrant as presented in note 7 were based on a Level 2 measurement. The fair value of the useinvestment in non-marketable equity securities as presented in note 5, of observable inputsthe Subsequent Penny Warrants as presented in note 7 and minimizeof the use of unobservable inputs to the extent possible.Note as presented in note 7 were based on a Level 3 measurement.

As of November 30, 2017,March 31, 2024, the carrying amountamounts of cash and cash equivalents, short-term deposits, Short-Term Borrowings (as defined herein) and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term maturities of these instruments.

As of November 30, 2017, the carrying amount of long-term deposits approximates their fair values due to the stated interest rates which approximate market rates.

The fair value of held to maturity bonds as presented in note 4 was based on a Level 1 measurement.

The amounts funded in respect of employee rights are stated at cash surrender value which approximates its fair value.

There were no Level 3 items for the three-month periods ended November 30, 2017 and 2016.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 3 - COMMITMENTS:

(UNAUDITED)

Under the terms of the Company’s funding from the IIA, royalties of 3% are payable on sales of products developed from a project so funded, up to a maximum amount equaling 100%-150% of the grants received (dollar linked) with the addition of interest at an annual rate based on SOFR.

At the time the grants were received, successful development of the related projects was not assured. The total amount received through March 31, 2024 was $2,213 ($2,570 including interest).

As of March 31, 2024, the liability to the IIA was $59.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 4 - MARKETABLE SECURITIES:

The Company’s marketable securities include investments in equity securities of DNA GROUP (T.R.) Ltd. (formerly D.N.A Biomedical Solutions Ltd.) (“DNA”), Entera Bio Ltd. (“Entera”), and in held to maturity bonds.the Transferred Warrants (as defined herein; for further details, see note 7).

The investment in D.N.A is reported at fair value, with unrealized gains and losses, recorded as a separate component of other comprehensive income in equity until realized. Unrealized losses that are considered to be other-than-temporary are charged to statement of operations as an impairment charge and are included in the consolidated statement of operations under impairment of available-for-sale securities.

The D.N.ADNA ordinary shares are traded on the Tel Aviv Stock Exchange. The fair value of those securities is measured at the quoted prices of the securities on the measurement date.

During the three month periods ended March 31, 2024 and March 31, 2023, the Company did not sell any of DNA’s ordinary shares. As of November 30, 2017,March 31, 2024, the Company owns approximately 6.9%1.4% of D.N.A’sDNA’s outstanding ordinary shares.

The cost of the securities as of November 30, 2017both March 31, 2024 and AugustDecember 31, 2017 is2023 was $595.

Entera ordinary shares have been traded on the Nasdaq Capital Market since June 28, 2018. The Company measures the investment at fair value from such date, since it has a readily determinable fair value (prior to such date the investment was accounted for as a cost method investment (amounting to $1)).

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)
(UNAUDITED)

(UNAUDITED)

NOTE 45 - MARKETABLE SECURITIESOTHER NON-MARKETABLE EQUITY SECURITIES: (continued):

On August 26, 2022, the Company entered into a stock purchase agreement with Diasome Pharmaceuticals, Inc. (“Diasome”), a privately-held company, pursuant to which the Company purchased shares of Series B preferred stock of Diasome for an aggregate purchase price of approximately $2,700. Following the purchase, the Company holds less than 5% of the issued and outstanding stock of Diasome. The amortizedstock purchase agreement provides the Company with the option to purchase additional preferred shares of stock on a pro rata basis at similar terms to the terms and conditions of that round contingent upon Diasome achieving certain milestones.

The Company accounts for the investment under the measurement alternative in Accounting Standards Codification (“ASC”) 321 “Investments – Equity Securities,” whereby the equity investment is recorded at cost, and estimatedless impairment. The carrying amount is subsequently remeasured to its fair value in accordance with the provisions of held-to-maturity securitiesASC 820 “Fair Value Measurement” when observable price changes occur as of November 30, 2017,the date the transaction occurred, or it is impaired. Any adjustments to the carrying amount are as follows:recorded in the statements of comprehensive income or loss.

The Company’s non-marketable equity securities are an investment in a company without a readily determinable fair value. During fiscal year 2023, the Company recorded an $824 increase in value due to the closing in June 2023 of a Series C investment round in Diasome. The change was recorded using the transaction price of similar securities issued by Diasome, adjusted for contractual rights and obligations of the securities held by the Company.

NOTE 6 - SHORT-TERM BORROWINGS:

On August 8, 2023, the Company borrowed an aggregate of $99,550 pursuant to loan agreements from Israel Discount Bank Ltd. (the “Short-Term Borrowings”). The Short-Term Borrowings mature on dates ranging from August 11, 2023 to May 24, 2024, bear interest ranging from 6.66% to 7.38%, and are secured by certificates of deposits issued by Israel Discount Bank Ltd. having an aggregate face amount of $99,550. The net proceeds of the Short-Term Borrowings were used to fund the Note (for further details, see note 7). The Short-Term Borrowings are paid in one payment of principal and interest at each respective maturity. As of November 30, 2017,March 31, 2024, $70,146 was repaid under the contractual maturities ofShort-Term Borrowings.

The aggregate remaining annual principal payments on debt securities classified as held-to-maturity are as follows: after one year through two years, $4,598, and the yield tountil maturity rates vary between 1.40% to 1.90%.is $30,550.

The amortized cost and estimated fair value of held-to-maturity securities as of August 31, 2017, are as follows:

As of August 31, 2017, the contractual maturities of debt securities classified as held-to-maturity are as follows: after one year through two years, $2,151 and the yield to maturity rates vary between 1.30% to 1.87%.

Held to maturity securities which will mature during the 12 months from the balance sheet date are included in short-term marketable securities. Held to maturity securities with maturity dates of more than one year are considered long-term marketable securities.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)
(UNAUDITED)

(UNAUDITED)

NOTE 5 - LONG-TERM DEPOSITS AND INVESTMENTS:

Composition:

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Composition:

NOTE 7 - STOCKHOLDERS’ EQUITY:INVESTMENTS, AT FAIR VALUE:

Scilex Transaction

On April 2, 2015,September 21, 2023 (the “Closing Date”), the Company entered into and consummated the transactions (collectively, the “Transaction”) contemplated by the Scilex SPA with Scilex and Acquiom Agency Services LLC. Pursuant to the Scilex SPA, in exchange for the DIP Assumption and for the ability to credit the amounts assumed under the DIP Assumption in exchange for certain equity securities of Scilex owned by Sorrento, Scilex (i) issued to the Company (A) the Note, (B) a warrant to purchase up to an At The Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley FBR, Inc., as successor to FBR Capital Markets & Co.aggregate of 4,500,000 shares of common stock of Scilex, par value $0.0001 per share (“FBR”Scilex Common Stock”), as amended,with an exercise price of $0.01 per share and containing certain restrictions on exercisability (the “Closing Penny Warrant”), and (C) warrants to purchase up to an aggregate of 8,500,000 shares of Scilex Common Stock (the “Subsequent Penny Warrants” and together with the Closing Penny Warrant, the “Penny Warrants”), each with an exercise price of $0.01 per share and each with certain restrictions on exercisability, and (ii) caused certain outstanding warrants to purchase up to an aggregate of 4,000,000 shares of Scilex Common Stock with an exercise price of $11.50 per share to be transferred to the Company (the “Transferred Warrants” and together with the Penny Warrants, the “Warrants”). In addition, on the Closing Date, Scilex reimbursed $1,910 of the Company’s Transaction expenses pursuant to whichthe Scilex SPA.

Pursuant to the terms of the Scilex SPA, Scilex agreed to certain restrictions on additional issuances of equity securities. In connection with the Transaction, the Company and Sorrento mutually agreed to terminate the Sorrento SPA and to release all claims the Company and Sorrento may from timehave against one another, and Scilex completed the acquisition of the Purchased Securities.

The Note

The principal of the Note issued on September 21, 2023 is $101,875, which includes accrued and unpaid interest of $875 under the Senior DIP Loan Agreement and $1,000 of fees added to time and at its option, issue and sell sharesthe principal amount of its common stock havingthe Note. The Note matures on March 21, 2025 or upon an aggregate offering priceuncured event of up to $25,000 through FBR as its sales agent,default, subject to certain termsmandatory prepayments, and conditions. Any shares sold willbears interest at a rate per annum equal to Term SOFR (as defined in the Note) plus 8.5% (subject to a Term SOFR floor of 4.0%), to be sold pursuantpaid in-kind, by being capitalized and added to the Company’s effective shelf registration statementprincipal amount of the Note on Form S-3 including a prospectus dated February 2, 2017, as supplementedmonthly basis. The Scilex SPA provides for principal payments of (i) $5,000 on December 21, 2023, (ii) $15,000 on March 21, 2024, and (iii) $20,000 on each of June 21, 2024, September 21, 2024, and December 21, 2024, and for the entire remaining principal balance of the Note to be paid on March 21, 2025. If the Note is not repaid in full on or prior to March 21, 2024, an exit fee equal to approximately $3,056 shall be payable upon repayment of the Note in full.

The Note constitutes senior secured indebtedness of Scilex and is guaranteed by all existing or future formed, direct and indirect, domestic subsidiaries of Scilex and is secured by a prospectus supplement dated April 5, 2017. The Company will pay FBR a commission of 3.0%first priority security interest in and liens on all of the gross proceedsassets of Scilex, subject to customary and mutually agreed permitted liens and except for certain specified exemptions.

Mandatory prepayments under the Note are required following the earlier of (a) April 1, 2024 and (b) the date upon which certain of Scilex’s outstanding indebtedness are repaid in full. Mandatory prepayments may be triggered by certain future equity and debt issuances by Scilex. Voluntary prepayments may be made at Scilex’s discretion; provided that, if made prior to the one-year anniversary of the saleClosing Date, Scilex will also be required to pay a 50% interest make-whole on the portion of any shares sold through FBR. Asthe Note so prepaid.

The Note includes customary events of November 30, 2017, 456,889 shares were solddefault, upon which the Note will bear interest at a default rate of Term SOFR plus 15.0%, which shall be payable in-kind, by being capitalized and added to the principal amount of the Note on a monthly basis. If the Note is accelerated upon an event of default, Scilex is required to repay the principal amount of the Note at a mandatory default rate of 125% of such principal amount (together with 100% of accrued and unpaid interest thereon and all other amounts due in respect of the Note).

Until the obligations under the Sales Agreement for aggregate net proceedsNote are repaid in full, the Company has the right to designate one non-voting observer to attend meetings of $4,256the board of directors and an additional 50,000 shares were subsequently sold duringcommittees of Scilex and its subsidiaries.

Pursuant to the terms of the Note, the Company received the first principal payment of $5,000 on December 2017 for aggregate net proceeds21, 2023 and the second principal payment of $441.

$15,000 prior to March 21, 2024. On May 2, 2024, the Company received a payment of approximately $9,600 from Scilex in accordance with the mandatory prepayment requirements under the Note.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)
(UNAUDITED)

NOTE 7 - INVESTMENTS, AT FAIR VALUE (continued):

Closing Penny Warrant

(UNAUDITED)

The Closing Penny Warrant will be exercisable upon the earliest of (i) March 14, 2025, (ii) the date on which the Senior Secured Note has been repaid in full and (iii) the Management Sale Trigger Date (as defined therein), if any, and will expire on the date that is the fifth anniversary of the issuance date (i.e., September 21, 2028). For purposes of the Penny Warrants, the Management Sale Trigger Date is generally the first date that either Dr. Henry Ji, Scilex’s Executive Chairperson, or Mr. Jaisim Shah, Scilex’s Chief Executive Officer and President and a member of Scilex’s Board of Directors, engages in certain sales or other similar transfers of shares of Common Stock or other of the Issuer’s or any of its subsidiaries’ securities, subject to certain exceptions in connection with financings or similar transactions. The exercise price of the Closing Penny Warrant is $0.01 per share, subject to adjustment.

Subsequent Penny Warrants

Scilex issued four Subsequent Penny Warrants to the Company, each for 2,125,000 shares of Scilex Common Stock, one of which shall vest and become exercisable on the date that is the later of (i) each of March 19, 2024, June 17, 2024, September 15, 2024 or December 14, 2024 (the “Subsequent Penny Warrant Vesting Date”) and (ii) the earliest of (A) March 14, 2025, (B) the date on which the Senior Secured Note has been repaid in full and (C) the Management Sale Trigger Date (as defined therein), if any. Each Subsequent Penny Warrant will expire on the date that is the fifth anniversary of the issuance date; provided that, if the Senior Secured Note is repaid in full prior to the Subsequent Penny Warrant Vesting Date applicable to such Subsequent Penny Warrant, such Subsequent Penny Warrant will expire on the date the Senior Secured Note is repaid in full. The Company may exercise the Penny Warrants by means of a “cashless exercise.”

The Penny Warrants may not be exercised if the Company, together with its affiliates, would beneficially own in excess of 9.9% of the number of shares of Scilex Common Stock outstanding immediately after giving effect to such exercise; provided, that the Company may increase or decrease such limitation upon 61 days’ prior notice to Scilex.

Transferred Warrants

The Transferred Warrants are listed on the Nasdaq Capital Market, have an exercise price of $11.50 per share, are fully exercisable and expire on November 10, 2027.

The Company accounted for the Transferred Warrants as derivatives measured at fair value.

The Company elected the fair value option for the Note and the Penny Warrants in order to reduce operational complexity of bifurcating embedded derivatives. Changes in value are recorded under financial income, net and include interest income on the Note.

The valuation was performed based on several scenarios which some of them took into account a partial or full early repayment of the Note. Each scenario took into consideration the present value of the Note’s cash flows (including the exit fee and the prepayment premium) and the Warrants’ value. The total value of the Transaction (and of each of its components) was valued on a weighted average of the different scenarios.

The discount rate of the Note was based on the B- rating Zero curve in addition to a risk premium which takes into account the credit risk of Scilex and ranged between 53.67% to 53.92%.

The fair value of the Transferred Warrants was based on their closing price on the Nasdaq Capital Market.

The fair value of the Penny Warrants was calculated based on the closing price of the Scilex Common Stock on the Nasdaq Capital Market, taking into account several scenarios which assume a partial or full early repayment of the Note, when applicable.

On the Closing Date, the fair value of the Transaction was $101,875. As of March 31, 2024, and following the aforementioned repayments of $20,000, the fair value of the Transaction was $98,741, split between the Note ($77,733, presented under short-term investments at fair value), the Closing Penny Warrant ($7,155), the Subsequent Penny Warrants ($12,389), both presented under long-term investments at fair value and the Transferred Warrants ($1,464) presented under long-term marketable securities. This resulted in a gain of $3,552 during the first quarter of 2024, attributed mainly to the change in fair value of the Warrants. The difference between the Note’s fair value and aggregate unpaid principal balance (which includes interest payable on maturity) is $7,654.

ORAMED PHARMACEUTICALS INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share data)
(UNAUDITED)

NOTE 8 - RELATED PARTIES - TRANSACTIONS:STOCKHOLDERS’ EQUITY:

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 9 - LEASES:

The Company has various operating leases for office space and vehicles that expire through 2027. Below is a summary of the Company’s operating right-of-use assets and operating lease liabilities as of March 31, 2024 and December 31, 2023:

Lease payments for the Company’s right-of-use assets over the remaining lease periods as of March 31, 2024 and December 31, 2023 are as follows:

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except share and per share data)

(UNAUDITED)

NOTE 10 - RELATED PARTY TRANSACTIONS:

On July 1, 2008, the SubsidiaryCompany’s wholly-owned subsidiary, Oramed Ltd. (the “Subsidiary”), entered into twoa consulting agreementsagreement with KNRY Ltd. (“KNRY”), an Israeli company owned by the Chief Scientific Officer, (the “CSO”), whereby the Chief ExecutiveScientific Officer, (the “CEO”) and the CSO, through KNRY, provideprovides services to the Company (the “Consulting Agreements”Agreement”). The Consulting Agreements are bothAgreement is terminable by either party upon 140 days prior written notice. The Consulting Agreements,Agreement, as amended, provide that KNRY will be reimbursed for reasonable expenses incurred in connection with the performance of the Consulting AgreementsAgreement and that the monthly consulting fee paid to the CEO and the CSOChief Scientific Officer is NIS 127,570117,040 ($35) and NIS 80,454 ($22), respectively.32).

In addition toEffective November 1, 2022, the Consulting Agreement, based onCompany entered into a relocation cost analysis prepared by consulting company ORI - Organizational Resources Internationalagreement with Shnida Ltd., whereby the Company paysPresident and Chief Executive Officer, through Shnida Ltd., provides services as President and Chief Executive Officer of the Company. The agreement is terminable by either party upon 140 days prior written notice. The agreement, as amended, provides that Shnida Ltd. will be reimbursed for certain direct costs andreasonable expenses incurred in connection with the relocationperformance of the CEOagreement and that the President and Chief Executive Officer will receive a monthly consulting fee of NIS 96,825 ($26), plus value added tax. Pursuant to New York, upthe agreement, Shnida Ltd. and the President and Chief Executive Officer each agree that during the term of the agreement and for a 12-month period thereafter, none of them will compete with the Company nor solicit employees of the Company.

In addition, the Company, through the Subsidiary, has entered into an employment agreement with the President and Chief Executive Officer, effective as of November 1, 2022, as amended, pursuant to an aggregate yearly amountwhich the President and Chief Executive Officer receives gross monthly salary of $332.NIS 51,591 ($14) in consideration for his services as President and Chief Executive Officer of the Subsidiary. In addition, the President and Chief Executive Officer is provided with a cellular phone and a company car pursuant to the terms of his agreement.

NOTE 9 - SUBSEQUENT EVENT:

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes included elsewhere herein and in our consolidated financial statements, accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report (as defined below).Report.

Forward-Looking StatementsOverview of Operations

We are a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions with a technology platform that allows for the oral delivery of therapeutic proteins.

We have developed an oral dosage form intended to withstand the harsh environment of the stomach and effectively deliver active biological insulin or other proteins. The statements containedexcipients in this Quarterly Report on Form 10-Q thatthe formulation are not historical facts are “forward-looking statements” withinintended to modify the meaningproteins chemically or biologically, and the dosage form is designed to be safe to ingest.

On January 11, 2023, we announced that the ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints. As a result, we terminated this trial and a parallel Phase 3, ORA-D-013-2 clinical trial. In 2023, we completed an analysis of the Private Securities Litigation Reform Actdata from the ORA-D-013-1 Phase 3 trial and found that subpopulations of 1995 and other federal securities laws. Wordspatients with pooled specific parameters, such as “expects,” “anticipates,” “intends,” “plans,” “planned expenditures,” “believes,” “seeks,” “estimates”body mass index, or BMI, baseline HbA1c and similar expressionsage, responded well to oral insulin. Based on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA. We are additionally examining our existing pipeline and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing value for our stockholders.

Scilex Transaction

On August 7, 2023, we entered into a Stock Purchase Agreement, as subsequently amended on August 9, 2023 and August 21, 2023, or variationsthe Sorrento SPA, with Sorrento Therapeutics, Inc., or Sorrento, to acquire certain equity securities of such wordsScilex owned by Sorrento, or the Purchased Securities, for a purchase price of $105 million. Sorrento and its affiliated debtor, Scintilla Pharmaceuticals, Inc., or Scintilla and together with Sorrento, the Debtors, are in Chapter 11 bankruptcy proceedings.

On August 9, 2023, we entered into a Senior Secured, Super-Priority Debtor-in-Possession Loan and Security Agreement, or the Senior DIP Loan Agreement, with the Debtors in the principal amount of $100 million, which included a non-refundable closing fee of $450,000 paid in full out of the proceeds. This amount was subsequently drawn in full by the Debtors and was intended to identify forward-looking statements, but are not deemed to representbe used by us as a credit for the consideration for the Purchased Securities, with an all-inclusive means of identifying forward-looking statements as denotedadditional $5,000,000 in this Quarterly Report on Form 10-Q. Additionally, statements concerning future matters are forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results,cash to be materially differentpaid by us at closing. Thereafter, we and Sorrento continued discussions and negotiations relating to the sale contemplated under the Sorrento SPA.

On September 21, 2023, or the Closing Date, we entered into and consummated the transactions, or, collectively, the Transaction, contemplated by a Securities Purchase Agreement, or the Scilex SPA, with Scilex and Acquiom Agency Services LLC. Pursuant to the Scilex SPA, in exchange for Scilex assuming Sorrento’s outstanding obligations under the Senior DIP Loan Agreement, or the DIP Assumption, and for the ability to credit the amounts assumed under the DIP Assumption in exchange for certain equity securities of Scilex owned by Sorrento, Scilex (i) issued to us (A) a Senior Secured Promissory Note due 18 months from any future results, performance, levelsthe date of activity,issuance in the principal amount of $101,875,000, or our achievements,the Note, which includes accrued and unpaid interest of $875,000 under the Senior DIP Loan Agreement and $1,000,000 of fees added to the principal amount of the Note, (B) a warrant to purchase up to an aggregate of 4,500,000 shares of common stock of Scilex, par value $0.0001 per share, or industry results, expressedthe Scilex Common Stock, and containing certain restrictions on exercisability, or implied by such forward-looking statements. Such forward-looking statements include, among other statements, statements regarding the following:Closing Penny Warrant, and (C) warrants to purchase up to an aggregate of 8,500,000 shares of Scilex Common Stock, or the Subsequent Penny Warrants, and, together with the Closing Penny Warrant, the Penny Warrants, each with an exercise price of $0.01 per share and each with certain restrictions on exercisability, and (ii) caused certain outstanding warrants to purchase up to an aggregate of 4,000,000 shares of Scilex Common Stock with an exercise price of $11.50 per share to be transferred to us, or the Transferred Warrants and together with the Penny Warrants, the Warrants. In addition, on the Closing Date, Scilex reimbursed $1,910,000 of the Company’s Transaction expenses pursuant to the Scilex SPA.

Pursuant to the terms of the Scilex SPA, Scilex agreed to certain restrictions on additional issuances of equity securities. In connection with the Transaction, we and Sorrento mutually agreed to terminate the Sorrento SPA and to release all claims we and Sorrento may have against one another, and Scilex completed the acquisition of the Purchased Securities.

Senior Secured Promissory Note

The Note matures on March 21, 2025 or upon an uncured event of default, subject to certain mandatory prepayments, and bears interest at a rate per annum equal to Term SOFR (as defined in the Note) plus 8.5% (subject to a Term SOFR floor of 4.0%), to be paid in-kind, by being capitalized and added to the principal amount of the Note on a monthly basis. The Scilex SPA provides for principal payments of (i) $5 million on December 21, 2023, (ii) $15 million on March 21, 2024, and (iii) $20 million on each of June 21, 2024, September 21, 2024, and December 21, 2024, and for the entire remaining principal balance of the Note to be paid on March 21, 2025. If the Note is not repaid in full on or prior to March 21, 2024, an exit fee equal to $3,056,250 shall be payable upon repayment of the Note in full.

The Note constitutes senior secured indebtedness of Scilex and is guaranteed by all existing or future formed, direct and indirect, domestic subsidiaries of Scilex and is secured by a first priority security interest in and liens on all of the assets of Scilex, subject to customary and mutually agreed permitted liens and except for certain specified exemptions.

Mandatory prepayments under the Note are required following the earlier of (a) April 1, 2024 and (b) the date upon which certain of Scilex’s outstanding indebtedness is repaid in full). Voluntary prepayments may be made at Scilex’s discretion; provided that, if made prior to the one-year anniversary of the Closing Date, Scilex will also be required to pay a customary 50% interest make-whole on the portion of the Note so prepaid.

The Note includes customary events of default, upon which the Note will bear interest at a default rate of Term SOFR plus 15.0%, which shall be payable in-kind, by being capitalized and added to the principal amount of the Note on a monthly basis. If the Note is accelerated upon an event of default, Scilex is required to repay the principal amount of the Note at a mandatory default rate of 125% of such principal amount (together with 100% of accrued and unpaid interest thereon and all other amounts due in respect of the Note).

Until the obligations under the Note are repaid in full, we have the right to designate one non-voting observer, to attend meetings of the board of directors and committees of Scilex and its subsidiaries.

Although forward-looking statementsPursuant to the terms of the Note, we received the first principal payment of $5 million on December 21, 2023 and the second principal payment of $15 million prior to March 21, 2024. On May 2, 2024, we received a payment of approximately $9.6 million from Scilex in this Quarterlyaccordance with the mandatory prepayment requirements under the Note.

Warrants

The Closing Penny Warrant will be exercisable upon the earliest of (i) March 14, 2025, (ii) the date on which the Note has been repaid in full and (iii) the Management Sale Trigger Date (as defined therein), if any, and will expire on the date that is the fifth anniversary of the issuance date. For purposes of the Penny Warrants, the Management Sale Trigger Date is generally the first date that either Dr. Henry Ji, Scilex’s Executive Chairperson, or Mr. Jaisim Shah, Scilex’s Chief Executive Officer and President and a member of Scilex’s Board of Directors, engages in certain sales or other similar transfers of shares of Scilex Common Stock or other of Scilex’s or any of its subsidiaries’ securities, subject to certain exceptions as are customary for lock-up agreements executed by directors and officers in connection with financings or similar transactions. The exercise price of the Closing Penny Warrant is $0.01 per share, subject to adjustment.

 Report

Oral Insulin

Type 2 Diabetes: We conducted the ORA-D-013-1 Phase 3 trial on Form 10-Q reflectpatients with type 2 diabetes, or T2D, with inadequate glycaemic control who were on two or three oral glucose-lowering agents. The primary endpoint of the good faith judgmenttrial was to evaluate the efficacy of our management,oral insulin capsule, ORMD-0801, compared to placebo in improving glycaemic control as assessed by HbA1c, with a secondary efficacy endpoint of assessing the change from baseline in fasting plasma glucose at 26 weeks. On January 11, 2023, we announced that the ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints. Following the results of the ORA-D-013-1 Phase 3 trial, we also terminated the ORA-D-013-2 Phase 3 trial, a second Phase 3 trial that included T2D patients with inadequate glycaemic control who were attempting to manage their condition with either diet alone or with diet and metformin. In 2023, we completed an analysis of the data from the ORA-D-013-1 Phase 3 trial and found that subpopulations of patients with pooled specific parameters, such statements can onlyas BMI, baseline HbA1c and age, responded well to oral insulin. These subsets exhibited an over 1% placebo adjusted, statistically significant, reduction in HbA1c. Based on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA.

Joint Venture Agreement: On January 22, 2024, Oramed and its wholly-owned subsidiary, Oramed Ltd., entered into a joint venture agreement, or the JV Agreement, with HTIT Biotech and Technowl Limited, a wholly-owned indirect subsidiary of HTIT Biotech, or HTIT Sub, and together with HTIT Biotech, HTIT, pursuant to which, subject to the terms and conditions set forth in the JV Agreement, the parties will establish a joint venture, or the JV, based on factsOramed’s oral drug delivery technology.

The JV will focus on the development and factorsworldwide commercialization of innovative products based on Oramed’s oral insulin and POD™ (Protein Oral Delivery) pipeline and HTIT’s manufacturing capabilities and technologies. The parties intend for the JV to use the protocol we are currently known by us. Consequently, forward-looking statements are inherentlyworking on to initiate a Phase 3 oral insulin trial in the United States.

Oramed and HTIT will initially hold equal shares in the JV, with each owning 50% of the equity. The board of directors will initially consist of equal representation from HTIT and Oramed. HTIT will contribute to the JV $70 million in cash, while Oramed will contribute $20 million (comprised of $10 million in cash and $10 million in shares of Oramed common stock that will be subject to riskscertain registration rights) and uncertaintieswill transfer intellectual property related to its oral insulin and actual resultsPOD™ technology, as well as other assets in the Oramed pipeline. HTIT will have an option to invest additional funds into the JV up to an aggregate amount of $20 million, thereby increasing its equity holdings and outcomesboard representation. Oramed will be entitled to receive a 3% royalty on gross revenues of the JV generated from Oramed related assets.

The consummation of the JV Agreement is subject to and contingent upon the parties entering into additional agreements within a three-month period, including an asset transfer agreement for the transfer of Oramed’s intellectual property to the JV, a commercial supply agreement for the manufacture and supply of products by HTIT to the JV, as well as other documents and agreements to regulate the relationship of the parties and the JV to be formed pursuant to the JV Agreement. There is no assurance that the parties will complete and sign these additional agreements within the agreed timeline or at all. If such agreements are not signed within the agreed timeframe, then either party may differ materially fromapply a 30-day extension, after which the resultsJV Agreement may be terminated and outcomes discussed in or anticipatedvoided by either party. The 30-day extension was applied by the forward-looking statements. Factors that could causeCompany on April 18, 2024 and will last until May 22, 2024. Thereafter, the consummation of the JV transaction is further subject to the satisfaction or contribute to such differences in resultswaiver of certain other closing conditions within a three-month period following the completion of the aforesaid ancillary agreements. If the closing conditions are not met within the agreed timeframe, then either party may apply a 30-day extension, after which the JV Agreement may be terminated and outcomes include, without limitation, those specifically addressedvoided by either party. In addition, completion of the transactions contemplated under the headingJV Agreement is subject to the satisfaction or waiver of customary and certain other closing conditions.

Oral Vaccine

On March 18, 2021, we entered into a license agreement, or the Oravax License Agreement, with Oravax, a 63% owned joint venture to commercialize oral vaccines for COVID-19 and other novel coronaviruses based on Premas Biotech Pvt. Ltd.’s proprietary vaccine technology involving a triple antigen virus like particle.

In October 2022, Oravax reported positive preliminary Phase 1 data for Cohort A of a Phase 1 clinical trial, meeting primary or secondary endpoints of safety and immunogenicity. These results included significant antibody response (2-6 fold over baseline) as measured by multiple markers of immune response to virus like particle vaccine antigens observed in the majority of the patients dosed, and no safety issues were observed, including mild symptoms. Cohort B completed dosing in January 2023. Cohort B measured Immunoglobulin G, or IGG, against the spike (S) protein, showing positive IGG in approximately 55% of the patients dosed. We are currently evaluating our path forward for Oravax’s oral vaccines for COVID-19.

PeriTech Acquisition and License

In December 2023, we executed and completed an agreement with PeriTech Pharma Ltd., or PeriTech, acquiring the rights to their film-forming technology tailored for the delivery of topical/dermatology agents. This includes a once-daily over-the-counter treatment for hemorrhoids. The PeriTech pipeline extends its potential applications to include indications such as pruritus ani, anal warts, anal fissures and herpes labialis.

We have entered into an exclusive licensing agreement with Genomma Lab Internacional S.A.B. de C.V, or Genomma Labs, pursuant to which we granted Genomma Labs the development and commercialization rights to the PeriTech pipeline, in exchange for a royalty based on net sales.

Raw Materials

We have purchased, pursuant to separate agreements with third parties, the raw materials required for the manufacturing of our oral capsule. We generally depend upon a limited number of suppliers for the raw materials. Although alternative sources of supply for these materials are generally available, we could incur significant costs and disruptions if we need to change suppliers. The termination of our relationships with our suppliers or the failure of these suppliers to meet our requirements for raw materials on a timely and cost-effective basis could have a material adverse effect on our business, prospects, financial condition and results of operations.

Impact of Current Events

On October 7, 2023, the State of Israel was attacked by and subsequently declared war on Hamas. Israel has been in an ongoing state of war with Hamas since that time. Following the attack by Hamas, Hezbollah has also launched attacks against Israel and Israel has been responding to these attacks with targeted air strikes. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, such as Iran, will join the hostilities. As of May 9, 2024, we believe that there is no immediate risk to our business operations related to these events. For further information, see “Item 1A. Risk Factors”Factors,” under “We are affected by the political, economic and military risks of having operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017, orIsrael” in our Annual Report, as filed with the Securities and Exchange Commission, or the SEC, on November 29, 2017, as well as those discussed elsewhere in our Annual Report and this QuarterlyReport on Form 10-Q and expressed from time to time in our other filings with the SEC.  In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this Quarterly Report on Form 10-Q could be interpreted differently in light of additional research, clinical and preclinical trials results. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this QuarterlyReport on Form 10-Q. Except as required by law, we undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this QuarterlyReport on Form 10-Q which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

Overview of Operations

We are a pharmaceutical company currently engaged in the research and development of innovative pharmaceutical solutions, including an oral insulin capsule to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules or pills for delivery of other polypeptides.

Recent business developments

Product Candidates

Orally Ingestible Insulin

In August 2017, we had a call with the U.S. Food and Drug Administration, or FDA, regarding our proprietary flagship product, an orally ingestible insulin capsule, or ORMD-0801. During the call, the FDA advised that the regulatory pathway for the submission of ORMD-0801 would be a Biologics License Application. If approved, such a pathway would grant us 12 years of marketing exclusivity for ORMD-0801, from the approval date, and an additional six months of exclusivity may be granted if the product also receives approval for use in pediatric patients. The FDA confirmed that the approach to nonclinical toxicology, chemistry manufacturing controls and qualification of excipients would be driven by their published guidance documents. We plan to initiate in the first quarter of calendar year 2018 a three-month dose-ranging clinical trial on approximately 240 type 2 diabetic patients to assess the safety and evaluate the effect of ORMD-0801 on HbA1c, the main FDA registrational endpoint and a clamp study on six type 1 diabetic patients.

In February 2017, we completed a Phase IIa dose finding clinical trial which was initiated in October 2016. This randomized, double-blind trial was conducted on 32 type 2 adult diabetic patients in order to better define the optimal dosing of ORMD-0801 moving forward. The results of the trial indicated a positive safety profile and potentially meaningful efficacy of ORMD-0801, as the efficacy data suggest ORMD-0801 improves glucose control.

In March 2017, we initiated a six month toxicology study to allow for the use of our oral insulin capsule for a longer period than previously performed, in preparation for our proposed upcoming three-month clinical trial for type 2 diabetes. We anticipate receiving the final report of this study in the first quarter of calendar year 2018.6, 2024.

In April 2016, we completed a Phase IIb clinical trial on 180 type 2 adult diabetic patients that was initiated in June 2015 and conducted in 33 sites in the United States. This double-blind, randomized, 28-day dosing clinical trial was conducted under an Investigational New Drug application, or IND, with the FDA. The clinical trial, designed to assess the safety and efficacy of our ORMD-0801, investigated ORMD-0801 over a 28 day treatment period and had statistical power to give us greater insight into the drug’s efficacy. The trial indicated a statistically significant lowering of blood glucose levels versus placebo across several endpoints, with no serious or severe adverse issues related to the drug. The trial successfully met all of its primary and most of its secondary and exploratory endpoints for both safety and efficacy.

Should our Phase IIb three-month dose-ranging clinical trial successfully meet its primary endpoints, we anticipate initiating two six-month Phase III clinical trials on both type 1 and type 2 diabetic patients, following which we expect to file a New Drug Application with a potential FDA approval by the third quarter of calendar year 2023.

GLP-1 Analog

In September 2013, we submitted a pre-IND package to the FDA for ORMD-0901, our oral exenatide capsule, for a Phase II clinical trial on healthy volunteers and type 2 diabetic patients. In August 2015, we began a non-FDA clinical trial outside of the United States on type 2 diabetic patients. The trial was completed during the second quarter of calendar year 2016 and indicated positive results as it showed ORMD-0901 to be safe and well tolerated and demonstrated encouraging efficacy data. We completed a three-month pre-clinical toxicology study in March 2017 and the final report will be submitted to the FDA with our IND. We expect to file an IND during the first quarter of calendar year 2018 and move directly into a small pharmacokinetics study on healthy volunteers followed by a large Phase II trial on type 2 diabetic patients which will be conducted in the United States under an IND.

Other products

During the first quarter of calendar 2017, we began developing a new drug candidate, a weight loss treatment in the form of an oral leptin capsule, and in April 2017, Israel’s Ministry of Health approved our commencement of a proof of concept single dose study for our oral leptin drug candidate to evaluate its pharmacokinetic and pharmacodynamics (glucagon reduction) in 10 type 1 adult diabetic patients. The study is projected to initiate in calendar year 2018 and be completed during calendar year 2019.

In November 2017, Israel’s Ministry of Health approved us to initiate an exploratory clinical study of our oral insulin capsule, ORMD-0801, in patients with nonalcoholic steatohepatitis (NASH). The proposed three-month treatment study will assess the effectiveness of ORMD-0801 in reducing liver fat content, inflammation and fibrosis in patients with NASH. We expect to initiate the study in calendar year 2018 and complete it during calendar year 2019.

The table below gives an overview of our primary product pipeline (calendar quarters):

		Phase I	Phase II	Phase III		Timeline
ORMD-0801 oral insulin	Type 2 diabetes					Q1 ’14: Phase IIa completed Q2 ’16: Phase IIb multi-center study completed Q1 ’17: Phase IIa - dose finding study completed Q1 ’18: Phase IIb 90-day multi-center study projected initiation (projected completion Q2 ’19) Q4 ’19: Phase III study projected initiation (projected completion Q2 ’21)
	Type 1 diabetes					Q3 ’14: Phase IIa study completed Q1 ’18: Clamp study projected initiation (projected completion Q3 ’18) Q4 ’19: Phase III projected initiation (projected completion Q2 ’21)
ORMD-0901 oral GLP-1	Type 2 diabetes					Q2 ’16: Phase Ib non-US study completed Q1 ’18: Pharmacokinetics clinical study projected initiation (projected completion Q3 ’18) H2 ’18: Phase II projected initiation (projected completion Q4 ’19)

Out-Licensed Technology

On November 30, 2015, we, our Israeli subsidiary and HTIT entered into a Technology License Agreement, and on December 21, 2015 these parties entered into an Amended and Restated Technology License Agreement that was further amended by the parties on June 3, 2016 and July 24, 2016, or the License Agreement. According to the License Agreement, we granted HTIT an exclusive commercialization license in the territory of the People’s Republic of China, Macau and Hong Kong, or the Territory, related to our oral insulin capsule, ORMD-0801, or the Product. Pursuant to the License Agreement, HTIT will conduct, at its own expense, certain pre-commercialization and regulatory activities with respect to our technology and ORMD-0801 capsule, and will pay (i) royalties of 10% on net sales of the related commercialized products to be sold by HTIT in the Territory, or Royalties, and (ii) an aggregate of $37.5 million, of which $3 million is payable immediately, $8 million will be paid subject to our entry into certain agreements with certain third parties, and $26.5 million will be payable upon achievement of certain milestones and conditions. In the event that we will not meet certain conditions, the Royalties rate may be reduced to a minimum of 8%. Following the final expiration of our patents covering the technology in the Territory in 2033, the Royalties rate may be reduced, under certain circumstances, to 5%. The royalty payment obligation shall apply during the period of time beginning upon the first commercial sale of the Product in the Territory, and ending upon the later of (i) the final expiration of the last-to-expire licensed patent in the Territory and (ii) 15 years after the first commercial sale of the Product in the Territory, or the Royalty Term. The License Agreement shall remain in effect until the expiration of the Royalty Term. The License Agreement contains customary termination provisions. The initial payment of $3 million was received in January 2016. Following the achievement of certain milestones, the second and third milestone payments of $6.5 million and $4 million, respectively, were received in July 2016, and the fourth milestone payment of $4 million was received in October 2016.

On November 30, 2015, we also entered into a separate Securities Purchase Agreement with HTIT, or the SPA, pursuant to which, in December 2015, we issued to HTIT 1,155,367 shares of our common stock for total consideration of $12 million. In connection with the License Agreement and the SPA, we received a non-refundable payment of $500,000 as a no-shop fee.

Results of Operations

Comparison of three month periods ended November 30, 2017March 31, 2024 and 2016March 31, 2023

The following table summarizes certain statements of operations data of the Company for the three month periods ended November 30, 2017March 31, 2024 and 2016March 31, 2023 (in thousands of dollars except share and per share data):