UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35813

ORAMED PHARMACEUTICALS INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		98-0376008
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1185 Avenue of the Americas, Third Floor, New York, NY		10036
(Address of Principal Executive Offices)		(Zip Code)

844-967-2633

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, par value $0.012		ORMP		The Nasdaq Capital Market, Tel Aviv Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of November ~~10, 2022,~~9, 2023, there were ~~39,114,736~~40,338,979 shares of the issuer’s common stock, $0.012 par value per share, outstanding.

ORAMED PHARMACEUTICALS INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		1

ITEM 1 - FINANCIAL STATEMENTS		1

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		1820

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		2430

ITEM 4 - CONTROLS AND PROCEDURES		2430

PART II - OTHER INFORMATION		2531

ITEM 1A. – RISK FACTORS		31

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		32

ITEM 6 - EXHIBITS		2533

On February 28, 2022, the Board of Directors approved a change of the Company’s fiscal year from the period beginning on September 1 and ending on August 31 to the period beginning on January 1 and ending on December 31. As a result, the Company filed a transition report on Form 10-Q with the Securities and Exchange Commission on March 30, 2022 that included financial information for the transition period from September 1, 2021 through December 31, 2021. Subsequent to that report, the Company’s fiscal year now begins on January 1 and ends on December 31. This Quarterly Report on Form 10-Q is the Company’s third quarterly report in its new fiscal year, and reports financial results for the three and nine month periods ended September 30, 2022.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our” and the “Company” mean Oramed Pharmaceuticals Inc. and our wholly-owned subsidiaries, unless otherwise indicated. All dollar amounts refer to U.S. Dollars unless otherwise indicated.

On September 30, ~~2022,~~2023, the exchange rate between the New Israeli Shekel, or NIS, and the dollar, as quoted by the Bank of Israel, was NIS ~~3.543~~3.824 to $1.00. Unless indicated otherwise by the context, statements in this Quarterly Report on Form 10-Q that provide the dollar equivalent of NIS amounts or provide the NIS equivalent of dollar amounts are based on such exchange rate.

Cautionary Statement Regarding Forward-Looking Statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities ~~laws.~~laws and the Israeli securities law. Words such as “expects,” “anticipates,” “intends,” “plans,” “planned expenditures,” “believes,” “seeks,” “estimates,” “considers” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this 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, to be materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements include, among other statements, statements regarding the following:

●

our comprehensive analysis of data from our ORA-D-013-1 Phase 3 trial to understand if there is a path forward for our oral insulin candidate;

●

our plan to evaluate potential strategic opportunities;

●

our ability to recover the proceeds and/or collateral under the Note (as defined herein) and related agreements;

●

the fluctuating market price and liquidity and the common stock of Scilex Holding Company, or Scilex, underlying the warrants;

●

the possibility that the anticipated benefits of the Transaction (as defined herein) are not realized when expected or at all, including as a result of the impact of, or problems arising from, the ability of Scilex to repay the Note and the ability of the Company to realize the value of the warrants;

●

our exposure to potential litigation;

●

our ability to enhance value for our stockholders;

●

the expected development and potential benefits from our ~~products in treating diabetes;~~products;

●

the prospects of entering into additional license agreements, or other partnerships or forms of cooperation with other companies or medical institutions;

●

the ability of Oramed and Hefei Tianhui Incubator of Technologies Co. Ltd. to reach agreement on a definitive joint venture agreement and the transactions contemplated by the term sheet;

●

future milestones, conditions and royalties under ~~the~~our license ~~agreement with Hefei Tianhui Incubator of Technologies Co., Ltd., or HTIT, as well as our disagreements with HTIT;~~agreements;

●

~~expected timing~~the potential of ~~a clinical trial for~~ the ~~potential~~ Oravax Medical Inc., or Oravax, vaccine ~~and its potential~~ to protect against ~~COVID-19;~~the coronavirus, or COVID-19 pandemic;

●

~~our consideration of ways in which our shareholders could benefit more directly from Oravax, including the potential issuance of some of our shares in Oravax to our shareholders as a dividend;~~

●

our research and development plans, including ~~pre-clinical~~preclinical and clinical trials plans and the timing of enrollment, obtaining results and conclusion of ~~trials, and our expectation to file a Biologics License Application, or BLA, thereafter;~~trials;

●

our belief that our technology has the potential to deliver medications and vaccines orally that today can only be delivered via injection;

●

the competitive ability of our technology based on product efficacy, safety, patient convenience, reliability, value and patent position;

●

the potential market demand for our products;

●

our ability to obtain patent protection for our intellectual property;

●

our expectation that ~~in upcoming years~~ our research and development expenses ~~net,~~ will continue to be our major expenditure;

●

our expectations regarding our short- and long-term capital requirements;

●

our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; and

●

information with respect to any other plans and strategies for our ~~business; and~~business.

●

~~our expectations regarding the impact of COVID-19, including on our clinical trials and operations.~~

Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended ~~August~~December 31, ~~2021,~~2022, or our Annual Report, as filed with the Securities and Exchange Commission, or the SEC, on ~~November 24, 2021,~~March 6, 2023, as well as those discussed elsewhere in our Annual Report 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 Quarterly Report 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 Quarterly Report 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.

iiiii

PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, ~~2022~~2023

TABLE OF CONTENTS

		Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets		2
Statements of comprehensive loss		3
Statements of changes in stockholders’ equity		~~4-5~~4
Statements of cash flows		6
Notes to financial statements		~~7-17~~7-19

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

	September 30,			December 31,			September 30,			December 31,
	2022			2021			2023			2022
Assets

CURRENT ASSETS:
Cash and cash equivalents	$	33,196		$	27,456		$	5,468		$	40,464
Short-term deposits		121,119			111,077			120,158			111,513
Marketable securities		5,234			7,747			-			3,743
Investments at fair value								49,413			-
Prepaid expenses and other current assets		623			1,657			666			1,389
Total current assets		160,172			147,937			175,705			157,109

LONG-TERM ASSETS:
Long-term deposits		2			25,094			6			7
Long-term investments		2,700			-
Investments at fair value								47,406			-
Marketable securities		-			3,875			2,535			-
Other non-marketable equity securities								3,524			2,700
Amounts funded in respect of employee rights upon retirement		23			26			26			24
Property and equipment, net		535			388			923			815
Operating lease right-of-use assets		1,005			500			768			987
Total long-term assets		4,265			29,883			55,188			4,533
Total assets	$	164,437		$	177,820		$	230,893		$	161,642

Liabilities and stockholders’ equity

CURRENT LIABILITIES:
Accounts payable, accrued expenses and other liabilities	$	4,205		$	4,535
Accounts payable and accrued expenses							$	2,561		$	4,158
Short-term borrowings								75,363			-
Deferred revenues		2,022			2,703			-			1,340
Payable to related parties		70			-			-			1
Operating lease liabilities		228			130			251			247
Total current liabilities		6,525			7,368			78,175			5,746

LONG-TERM LIABILITIES:
Long-term deferred revenues		4,000			3,340			4,000			4,000
Employee rights upon retirement		21			22			27			21
Provision for uncertain tax position		11			11			11			11
Operating lease liabilities		672			370			389			647
Other liabilities		61			99			61			61
Total long-term liabilities		4,765			3,842			4,488			4,740

COMMITMENTS (note 2)
COMMITMENTS (note 3)

Equity

EQUITY ATTRIBUTABLE TO COMPANY’S STOCKHOLDERS:
Common stock, $0.012 par value (60,000,000 authorized shares; 39,113,236 and 38,158,792 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)		470			459
Common stock, $0.012 par value (60,000,000 authorized shares; 40,282,688 and 39,563,888 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively)								484			476
Additional paid-in capital		307,876			292,514			319,540			314,417
Accumulated deficit		(154,538	)		(126,520	)		(170,892	)		(163,081	)
Total stockholders’ equity		153,808			166,453			149,132			151,812
Non-controlling interests		(661	)		157			(902	)		(656	)
Total equity		153,147			166,610			148,230			151,156
Total liabilities and equity	$	164,437		$	177,820		$	230,893		$	161,642

The accompanying notes are an integral part of the condensed consolidated financial statements.

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

(UNAUDITED)

	Nine months ended				Three months ended					Nine months ended					Three months ended
	September 30,		September 30,		September 30,		September 30,			September 30,			September 30,		September 30,			September 30,
	2022		2021		2022		2021			2023			2022		2023			2022
REVENUES	$	2,022		2,022	$	682		682		$	1,340		$	2,022	$	-		$	682
RESEARCH AND DEVELOPMENT EXPENSES		20,362		15,452		5,347		6,086			7,205			20,362		957			5,347
SALES AND MARKETING EXPENSES		1,433		172		463		172			(287	)		1,433		(663	)		463
GENERAL AND ADMINISTRATIVE EXPENSES		11,085		4,937		3,061		1,909			6,314			11,085		2,599			3,061
OPERATING LOSS		30,858		18,539		8,189		7,485			11,892			30,858		2,893			8,189

FINANCIAL INCOME (EXPENSE), NET		1,930		1,031		1,036		(51	)
INTEREST EXPENSES											826			-		826			-
FINANCIAL INCOME, NET											4,510			1,930		435			1,036
LOSS BEFORE TAX EXPENSES		28,928		17,508		7,153		7,536			8,208			28,928		3,284			7,153
TAX EXPENSES		100		-		100		-			-			100		-			100
NET LOSS FOR THE PERIOD	$	29,028		17,508	$	7,253		7,536
NET LOSS										$	8,208		$	29,028	$	3,284		$	7,253
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		1,010		764		193		279			397			1,010		62			193
NET LOSS ATTRIBUTABLE TO STOCKHOLDERS		28,018		16,744		7,060		7,257		$	7,811		$	28,018	$	3,222		$	7,060
LOSS PER SHARE

BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK	$	0.72	$	0.54	$	0.18	$	0.21		$	0.19		$	0.72	$	0.08		$	0.18
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK		38,856,514		31,097,270		39,100,231		34,539,487			40,246,515			38,856,514		40,445,896			39,100,231

The accompanying notes are an integral part of the condensed consolidated financial statements.

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

U.S. Dollars in thousands

(UNAUDITED)

Common Stock Additional
paid-in Accumulated Total
stockholders’ Non-
controlling Total
Shares $ capital deficit equity interests equity
In thousands
BALANCE AS OF DECEMBER 31, 2021 38,158 $ 459 $ 292,514 $ (126,520 ) $ 166,453 $ 157 $ 166,610
CHANGES DURING THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2022:
ISSUANCE OF COMMON STOCK, NET 770 9 7,336 - 7,345 - 7,345
EXERCISE OF WARRANTS AND OPTIONS 34 (* ) 42 - 42 - 42
STOCK-BASED COMPENSATION 151 2 8,767 - 8,769 - 8,769
STOCK-BASED COMPENSATION OF SUBSIDIARY 192 192
TAX WITHHOLDINGS RELATED TO STOCK-BASED COMPENSATION SETTLEMENTS - - (783 ) - (783 ) - (783 )
NET LOSS - - - (28,018 ) (28,018 ) (1,010 ) (29,028 )
BALANCE AS OF SEPTEMBER 30, 2022 39,113 $ 470 $ 307,876 $ (154,538 ) $ 153,808 $ (661 ) $ 153,147

	Common Stock					Additional paid-in		Accumulated			Total stockholders’			Non- controlling			Total
	Shares		$			capital		deficit			equity			interests			equity
	In thousands
BALANCE AS OF DECEMBER 31, 2022		39,564	$	476		$	314,417	$	(163,081	)	$	151,812		$	(656	)	$	151,156
CHANGES DURING THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2023:
ISSUANCE OF COMMON STOCK, NET		193		2			2,426		-			2,428			-			2,428
SHARES ISSUED FOR SERVICES		3		(*	)		9		-			9			-			9
STOCK-BASED COMPENSATION		523		6			2,688		-			2,694			-			2,694
STOCK-BASED COMPENSATION OF SUBSIDIARY		-		-			-		-			-			151			151
NET LOSS		-		-			-		(7,811	)		(7,811	)		(397	)		(8,208	)
BALANCE AS OF SEPTEMBER 30, 2023		40,283	$	484		$	319,540	$	(170,892	)	$	149,132		$	(902	)	$	148,230

	Common Stock					Additional paid-in			Accumulated			Total stockholders’			Non- controlling			Total
	Shares		$			capital			deficit			equity			interests			equity
	In thousands
BALANCE AS OF DECEMBER 31, 2021		38,158	$	459		$	292,514		$	(126,520	)	$	166,453		$	157		$	166,610
CHANGES DURING THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2022:
ISSUANCE OF COMMON STOCK, NET		770		9			7,336			-			7,345			-			7,345
EXERCISE OF WARRANTS AND OPTIONS		34		(*	)		42			-			42			-			42
STOCK-BASED COMPENSATION		151		2			8,767			-			8,769			-			8,769
STOCK-BASED COMPENSATION OF SUBSIDIARY																192			192
TAX WITHHOLDINGS RELATED TO STOCK-BASED COMPENSATION SETTLEMENTS		-		-			(783	)		-			(783	)		-			(783	)
NET LOSS		-		-			-			(28,018	)		(28,018	)		(1,010	)		(29,028	)
BALANCE AS OF SEPTEMBER 30, 2022		39,113	$	470		$	307,876		$	(154,538	)	$	153,808		$	(661	)	$	153,147

(*)

~~Less~~Represents an amount of less than $1$1.

Common Stock Additional
paid-in Accumulated Total
stockholders’ Non-
controlling Total
Shares $ capital deficit equity interests equity
In thousands
BALANCE AS OF DECEMBER 31, 2020 26,660 $ 320 $ 138,587 $ (99,938 ) $ 38,969 $ - $ 38,969
CHANGES DURING THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2021:
ISSUANCE OF COMMON STOCK, NET 5,860 70 74,673 - 74,743 - 74,743
EXERCISE OF WARRANTS AND OPTIONS 3,164 38 21,458 - 21,496 - 21,496
STOCK-BASED COMPENSATION - - 2,896 - 2,896 - 2,896
ASSET ACQUISITION - - 1,045 - 1,045 1,495 2,540
NET LOSS - - - (16,744 ) (16,744 ) (764 ) (17,508 )
BALANCE AS OF SEPTEMBER 30, 2021 35,684 $ 428 $ 238,659 $ (116,682 ) $ 122,405 $ 731 $ 123,136

The accompanying notes are an integral part of the condensed consolidated financial statements.

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

U.S. Dollars in thousands

(UNAUDITED)

Common Stock Additional
paid-in Accumulated Total
stockholders’ Non-
controlling Total
Shares $ capital deficit equity interests equity
In thousands
BALANCE AS OF JUNE 30, 2022 38,564 $ 463 $ 300,712 $ (147,478 ) $ 153,697 $ (660 ) $ 153,037
CHANGES DURING THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2022:
ISSUANCE OF COMMON STOCK, NET 493 6 4,371 - 4,377 - 4,377
EXERCISE OF WARRANTS AND OPTIONS 30 (* ) 42 - 42 - 42
STOCK-BASED COMPENSATION 26 1 2,857 - 2,858 - 2,858
STOCK-BASED COMPENSATION OF SUBSIDIARY 192 192
TAX WITHHOLDINGS RELATED TO STOCK-BASED COMPENSATION SETTLEMENTS - - (106 ) - (106 ) - (106 )
NET LOSS - - - (7,060 ) (7,060 ) (193 ) (7,253 )
BALANCE AS OF SEPTEMBER 30, 2022 39,113 $ 470 $ 307,876 $ (154,538 ) $ 153,808 $ (661 ) $ 153,147

	Common Stock				Additional paid-in		Accumulated			Total stockholders’			Non- controlling			Total
	Shares		$		capital		deficit			equity			interests			equity
	In thousands
BALANCE AS OF JUNE 30, 2023		40,219	$	484	$	318,732	$	(167,670	)	$	151,546		$	(891	)	$	150,655
CHANGES DURING THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2023:
SHARES ISSUED FOR SERVICES		3		(*)		7		-			7			-			7
STOCK-BASED COMPENSATION		61		(*)		801		-			801			-			801
STOCK-BASED COMPENSATION OF SUBSIDIARY		-		-		-		-			-			51			51
NET LOSS		-		-		-		(3,222	)		(3,222	)		(62	)		(3,284	)
BALANCE AS OF SEPTEMBER 30, 2023		40,283	$	484	$	319,540	$	(170,892	)	$	149,132		$	(902	)	$	148,230

~~(*)~~

~~Less than $1~~

	Common Stock				Additional paid-in			Accumulated			Total stockholders’			Non- controlling			Total
	Shares		$		capital			deficit			equity			interests			equity
	In thousands
BALANCE AS OF JUNE 30, 2022		38,564	$	463	$	300,712		$	(147,478	)	$	153,697		$	(660	)	$	153,037
CHANGES DURING THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2022:
ISSUANCE OF COMMON STOCK, NET		493		6		4,371			-			4,377			-			4,377
EXERCISE OF WARRANTS AND OPTIONS		30		(*)		42			-			42			-			42
STOCK-BASED COMPENSATION		26		1		2,857			-			2,858			-			2,858
STOCK-BASED COMPENSATION OF SUBSIDIARY		-				-			-			-			192			192
TAX WITHHOLDINGS RELATED TO STOCK-BASED COMPENSATION SETTLEMENTS		-		-		(106	)		-			(106	)		-			(106	)
NET LOSS		-		-		-			(7,060	)		(7,060	)		(193	)		(7,253	)
BALANCE AS OF SEPTEMBER 30, 2022		39,113	$	470	$	307,876		$	(154,538	)	$	153,808		$	(661	)	$	153,147

Common Stock Additional
paid-in Accumulated Total
stockholders’ Non-
controlling Total
Shares $ capital deficit equity interests equity
In thousands
BALANCE AS OF JUNE 30, 2021 32,513 $ 390 $ 198,730 $ (109,425 ) $ 89,695 $ 1,010 $ 90,705
CHANGES DURING THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2021:
ISSUANCE OF COMMON STOCK, NET 1,573 19 27,584 - 27,603 - 27,603
EXERCISE OF WARRANTS AND OPTIONS 1,598 19 11,065 - 11,084 - 11,084
STOCK-BASED COMPENSATION 1,280 - 1,280 - 1,280
NET LOSS - - - (7,257 ) (7,257 ) (279 ) (7,536 )
BALANCE AS OF SEPTEMBER 30, 2021 35,684 $ 428 $ 238,659 $ (116,682 ) $ 122,405 $ 731 $ 123,136

~~ORAMED PHARMACEUTICALS INC.~~

~~INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~U.S. dollars in thousands~~

~~(UNAUDITED)~~

Nine months ended
September 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (29,028 ) $ (17,508 )
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation 41 69
Non-cash expense for acquired in-process research and development - 1,040
Exchange differences and interest on deposits and held to maturity bonds (933 ) 429
Changes in fair value of investments 494 (732 )
Stock-based compensation 8,961 2,896
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 1,034 128
Accounts payable, accrued expenses and related parties (330 ) 1,875
Net changes in operating lease (105 ) -
Deferred revenues (21 ) (2,022 )
Liability for employee rights upon retirement (1 ) -
Other liabilities 32 (74 )
Total net cash used in operating activities (19,856 ) (13,899 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of held to maturity securities - (8,593 )
Purchase of short-term deposits (111,500 ) (6,000 )
Investment in long-term deposits - (25,000 )
Proceeds from short-term deposits 128,000 9,500
Proceeds from maturity of held to maturity securities 5,336 6,065
Long-term investments (2,700 ) -
Proceeds from sale of mutual funds - 3,029
Funds in respect of employee rights upon retirement 3 -
Purchase of property and equipment (188 ) (55 )
Total net cash provided by (used in) investing activities 18,951 (21,054 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of issuance costs 7,345 74,743
Proceeds from exercise of warrants and options 42 21,496
Transaction with non-controlling interests - 1,500
Tax withholdings related to stock-based compensation settlements (783 ) -
Total net cash provided by financing activities 6,604 97,739
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 41 (3 )

INCREASE IN CASH AND CASH EQUIVALENTS 5,740 62,783

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27,456 21,630
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33,196 $ 84,413

(A) SUPPLEMENTARY DISCLOSURE ON CASH FLOWS -
Interest received $ 906 $ 505
(B) SUPPLEMENTARY DISCLOSURE ON CASH FLOWS -
Recognition of operating lease right of use assets and liabilities $ 678 $ -
(C) ASSET ACQUISITION TRANSACTION (see note 8) -
In-process research and development - 1,040
Transaction with non-controlling interests - 1,500
Additional paid in capital - (1,045 )
Non-controlling interests $ - $ (1,495 )

The accompanying notes are an integral part of the condensed consolidated financial statements.

ORAMED PHARMACEUTICALS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(UNAUDITED)

	Nine months ended
	September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(8,208	)	$	(29,028	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation		143			41
Exchange differences and interest on deposits and held to maturity bonds		(2,042	)		(933	)
Changes in fair value of investments		(191	)		494
Stock-based compensation		2,845			8,961
Shares issued for services		9			-
Gain on amounts funded in respect of employee rights upon retirement		(2	)		-
Accrued interest on short-term borrowings to maturity		813			-
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		726			1,034
Accounts payable, accrued expenses and related parties		(1,601	)		(330	)
Net changes in operating lease		(35	)		(105	)
Deferred revenues		(1,340	)		(21	)
Liability for employee rights upon retirement		6			(1	)
Other liabilities		-			32
Total net cash used in operating activities		(8,877	)		(19,856	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term deposits		(91,369	)		(111,500	)
Proceeds from short-term deposits		84,760			128,000
Proceeds from maturity of held to maturity securities		3,375			5,336
Long-term investments		(99,550	)		(2,700	)
Funds in respect of employee rights upon retirement		-			3
Purchase of property and equipment		(251	)		(188	)
Total net cash provided by (used in) investing activities		(103,035	)		18,951
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of issuance costs		2,428			7,345
Loans received		99,550			-
Loans paid		(25,000	)		-
Proceeds from exercise of warrants and options		-			42
Tax withholdings related to stock-based compensation settlements		-			(783	)
Total net cash provided by financing activities		76,978			6,604
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(62	)		41

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(34,996	)		5,740

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		40,464			27,456
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,468		$	33,196

(A) SUPPLEMENTARY DISCLOSURE ON CASH FLOWS -
Interest received	$	3,393		$	906
Interest paid	$	(14	)	$	-
(B) SUPPLEMENTARY DISCLOSURE ON CASH FLOWS -
Recognition of operating lease right-of-use assets and liabilities	$	-		$	678

The accompanying notes are an integral part of the condensed 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)

~~(UNAUDITED)~~

NOTE 1 - ~~SIGNIFICANT ACCOUNTING POLICIES:~~GENERAL:

~~General:~~

Incorporation and Operations

Oramed Pharmaceuticals Inc. (collectively with its subsidiaries, the “Company”, unless the context indicates otherwise), a Delaware corporation, was incorporated on April 12, 2002.

On February 17, 2006, the Company entered into an agreement with Hadasit Medical Services and Development Ltd. to acquire the provisional patent related to an orally ingestible insulin capsule to be used for the treatment of individuals with diabetes.

~~On May 14, 2007, the Company incorporated a wholly-owned subsidiary in Israel, Oramed Ltd. (the “Subsidiary”), which is engaged in research and development.~~

On July 30, 2019, the Subsidiary incorporated a wholly-owned subsidiary in Hong Kong, Oramed HK Limited (the “Hong Kong Subsidiary”). As of September 30, 2022, the Hong Kong Subsidiary has no operations.

On March 18, 2021, the Company entered into a license agreement (the “Oravax License Agreement”) with Oravax Medical Inc. (“Oravax”) and into a stockholders agreement (the “Stockholders Agreement”) with Akers Biosciences Inc. (“Akers”), Premas Biotech Pvt. Ltd. (“Premas”), Cutter Mill Capital LLC (“Cutter Mill”) and Run Ridge LLC (“Run Ridge”). According to the Stockholders Agreement, Oravax issued 1,890,000 shares of its capital stock to the Company, representing 63% of the issued and outstanding share capital of Oravax ~~on a fully diluted basis,~~ as of the date of issuance. Consequently, Oramed consolidates Oravax in its consolidated financial statements since that time.

On November 23, 2021, Oravax incorporated a wholly-owned subsidiary in Israel, Oravax Medical Ltd., which is engaged in research and development. Effective January 1, 2022, Oravax transferred its rights and obligations under the Oravax License Agreement to Oravax Medical Ltd.

~~Change in Fiscal Year~~

On ~~February 28, 2022,~~January 11, 2023, the ~~Board of Directors approved a change of~~Company announced that the ~~Company’s fiscal year from the period beginning on September 1~~ORA-D-013-1 Phase 3 trial did not meet its primary and ~~ending on August 31 to the period beginning on January 1 and ending on December 31.~~secondary endpoints. As a result, the Company ~~filed~~terminated this trial and a ~~transition report~~parallel Phase 3, ORA-D-013-2 clinical trial. As these results are considered a triggering event, the Company evaluated all of its long lived assets which include fixed assets and operating lease right-of-use assets in the first quarter of 2023 and concluded that no impairment was required. The Company recently 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 as body mass index (BMI), baseline HbA1c, age, gender and body weight, responded well to oral insulin. These subsets exhibited an over 1% placebo adjusted, statistically significant, reduction in HbA1c. The Company is currently considering if there is a path forward for its oral insulin candidate, based on ~~Form 10-Q~~this analysis. Concurrently, the Company is examining its existing pipeline and has commenced an evaluation process of potential strategic opportunities, with the ~~Securities and Exchange Commission on March 30, 2022 that included financial information~~goal of enhancing value for the ~~transition period from September 1, 2021 through December 31, 2021. Subsequent to that report, the~~ Company’s ~~fiscal year now begins on January 1 and ends on December 31.~~stockholders.

3)b.

Development and Liquidity Risks

The Company is engaged in research and development in the biotechnology field for innovative pharmaceutical solutions, including an orally ingestible insulin capsule to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules for delivery of other polypeptides, and has not generated significant revenues from its operations. Following 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 currently incurring lower research and development and sales and marketing expenses.

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

NOTE 1 - GENERAL (continued):

Based on the Company’s current cash resources and commitments, the Company believes it will be able to maintain its current planned ~~development~~ activities and the corresponding level of expenditures for at least the next 12 months, although no assurance can be given that the Company will not need additional funds prior to such time. If there are unexpected increases in its operating expenses, the Company may need to seek additional financing during the next 12 months. ~~Successful completion of~~The Company may also need additional funds to realize the Company’s development programs and its transition to normal operations is dependent upon obtaining necessary regulatory approvals from the U.S. Food and Drug Administration prior to selling its products within the United States, obtaining foreign regulatory approvals to sell its products internationally, or entering into licensing agreements with third parties. There can be no assurance that the Company will receive regulatory approval of anydecisions 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.

~~In addition~~

On August 7, 2023, the Company entered into a Stock Purchase Agreement, as subsequently amended on August 9, 2023 and August 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 in 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 the Debtors and was intended to be used by the Company as a credit for the consideration for the Purchased Securities, with an additional $5,000 in cash to be paid by the Company at closing. Thereafter, the Company and Sorrento continued discussions and negotiations relating to the ~~foregoing, based on~~sale contemplated under the ~~Company’s current assessment,~~Sorrento SPA.

On September 21, 2023, the Company ~~does not expect any material impact on its development timeline~~entered into and ~~its liquidity due~~consummated the transactions contemplated by a Securities Purchase Agreement (the “Scilex SPA”) with Scilex and Acquiom Agency Services LLC. Pursuant to ~~COVID-19. However,~~the Scilex SPA, in exchange for Scilex assuming outstanding obligations of Sorrento 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 Scilex owned by Sorrento, Scilex (i) issued to the Company ~~has experienced approximately six~~(A) a Senior Secured Promissory Note due 18 months from the date of ~~delays~~issuance in ~~clinical trials due~~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 ~~slow-downs~~the principal amount of ~~recruitment for trials generally. The~~the Note, (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 ~~may experience~~borrowed an aggregate of $99,550 pursuant to loan agreements from Israel Discount Bank Ltd. For further ~~delays if the pandemic worsens and continues for an extended period of time and it is continuing to assess the effect on its operations by monitoring the status of COVID-19.~~

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 ~~POLICIES~~ POLICIES:~~(continued):~~

b.a.

Condensed consolidated financial statements preparation

The condensed consolidated financial statements included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) 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 ~~August~~December 31, ~~2021~~2022 (the ~~“2021~~“2022 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 ~~2021~~2022 Form 10-K. The results for interim periods are not necessarily indicative of a full fiscal year’s results.

c.b.

Loss per common share

Basic and diluted net loss per share of common stock are computed by dividing the net 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 unvested RSUs have been excluded from the calculation of the diluted loss per share because all such securities are anti-dilutive for all periods presented. The weighted average number of common stock options, warrants and RSUs excluded from the calculation of diluted net loss was ~~3,557,200~~3,745,590 and ~~4,736,797~~3,557,200 for the nine month periods ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively, and ~~3,715,540~~3,845,271 and ~~3,644,428~~3,715,540 for the three month periods ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively.

d.c.

Revenue recognition

HTIT

On November 30, 2015, the Company entered into a Technology License Agreement, ~~(the “TLA”),~~ with Hefei Tianhui Incubator of Technologies Co. Ltd. (“HTIT”) and on December 21, 2015, the parties entered into an Amended and Restated Technology License Agreement that was further amended by the parties on June 3, 2016 and July 24, 2016 (the “HTIT License Agreement”). The HTIT License Agreement and a stock purchase agreement, dated November 30, 2015, between the Company and HTIT (the “SPA”) were considered a single arrangement with multiple deliverables. The Company allocated the total consideration of $49,500 between the HTIT License Agreement and the SPA according to their fair value, as follows: $10,617 was allocated to the issuance of common stock (less issuance expenses of $23), based on the quoted price of the Company’s shares on the closing date of the SPA on December 28, 2015, and $38,883 was allocated to the HTIT License Agreement.

Under Accounting Standard Codification, (“ASC”) 606, the Company identified a single performance obligation in the agreement and determined that the license and services are not distinct as the license and services are highly dependent on each other. In other words, HTIT cannot benefit from the license without the related services, and vice versa.

Since the customer benefits from the services as the entity performs, revenue is recognized over time through the expected product submission date in June 2023, using the input method. The Company used the input method to measure the process for the purpose of recognizing revenue, which approximates the straight line attribution. The Company used significant judgment when it determined the product submission date.

Under ASC 606, the consideration that the Company would be entitled to upon the achievement of contractual milestones, which are contingent upon the occurrence of future events, are a form of variable consideration. When assessing the portion, if any, of such milestones-related consideration to be included in the transaction price, the Company first assesses the most likely outcome for each milestone and excludes the consideration related to milestones of which the occurrence is not considered the most likely outcome.

~~ORAMED PHARMACEUTICALS INC.~~

~~NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(UNAUDITED)~~

~~NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES~~ ~~(continued):~~

The Company then evaluates if any of the variable consideration determined in the first step is constrained by including in the transaction price variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company used significant judgment when it determined the first step of variable consideration.

The potential future royalty consideration is also considered a form of variable consideration under ASC 606 as it is based on a percentage of potential future sales of the Company’s products. However, the Company applies the sales-based royalty exception and accordingly will recognize the sales-based royalty amounts when the related sale has occurred. To date, the Company has not recognized any royalty-related revenue.

As of September 30, ~~2022,~~2023, an aggregate amount of $22,382 was allocated to the HTIT License Agreement, all of which were received through the balance sheet date. Through September 30, ~~2022,~~2023, the Company ~~has~~ recognized revenue associated with this agreement in the aggregate amount of ~~$18,361,~~$20,382, of which ~~$682~~$1,340 was recognized in the ~~quarter~~nine month period ended September 30, ~~2022,~~2023, and deferred the remaining amount of ~~$4,022,~~$2,000, which is presented as long-term deferred revenues on the condensed consolidated balance sheet.

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

Medicox

On ~~September 1,~~November 13, 2022, the Company entered into a ~~non-binding memorandum of~~distribution license agreement (“~~MOA”~~Medicox License Agreement”) with Medicox Co., Ltd. (“Medicox”) ~~setting out basic commercial understandings between the parties that would form the basis of a definitive distribution license agreement that would grant~~. The Medicox ~~the~~License Agreement grants Medicox an exclusive ~~right and~~ license to apply for regulatory approval ~~for~~ and distribute ORMD-0801 in the Republic of Korea. For further details, see note 3a.

Under ASC 606, the Company identified Medicox as a customer and the Medicox License Agreement as a contract with a customer.

The Company identified a performance obligation in the Medicox License Agreement to stand-ready and provide Medicox with support in its commercialization efforts in the Republic of Korea. This performance obligation includes a non-distinct distribution license for ORMD-0801, which the Company views a predominant item in the combined performance obligation. The Company concluded that the license is not distinct, as no party other than the Company is capable of providing related services to Medicox, and both the license and related services are necessary for the customer to obtain a regulatory approval in the Republic of Korea. In addition, the agreement covers the terms of future manufacturing services, that are contingent on the completion and success of the commercialization efforts.

The Medicox License Agreement contains a fixed consideration of $2,000, which was received by the Company in fiscal year 2022 and is presented under long-term deferred revenues as of September 30, 2023. It also contains variable consideration of contractual milestone payments and sales-based royalties.

The Company’s ~~proprietary ORMD-0801 product, currently in development,~~obligation to stand-ready and support Medicox will be recognized on a straight-line basis over the period the Company expects to provide support to Medicox. As of September 30, 2023, this support has not commenced, and no revenue was recognized from the Medicox License Agreement.

If Medicox proceeds with the regulatory approval process in the Republic of Korea, for a period of ten years, subject to complying with agreed distribution targets. The definitive agreement would include a transfer price per capsule, as well as milestone and royalty payments upon achievement of certain targets and events. The MOA includes an undertaking by the Company expects most of the revenue to be recognized at a later stage. The Company notes that ~~it will~~its Phase 3 trial did not ~~engage in negotiations with or enter into any~~meet its primary and secondary endpoints. If Medicox chooses to terminate the agreement ~~with~~as a ~~third party for~~result of the ~~grant~~outcome of ~~distribution and license rights to~~ the ~~Company’s proprietary ORMD-0801 product in the Republic of Korea until December 15, 2022. In consideration for this undertaking, Medicox has made a non-refundable payment of $2,000 to~~applicable Phase 3 trials, the Company ~~which was deferred as a contract liability (deferred revenue) as of September 30, 2022 until the potential execution of a definitive agreement. Aside from the foregoing undertaking~~expects to accelerate revenue recognition and confidentiality obligations, the MOA is otherwise a non-binding document prepared for discussion purposes only and the execution of a definitive agreement is conditioned upon the mutual acceptance by the parties.recognize it at such time.

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

e.d.

Recently ~~issued~~adopted accounting pronouncements ~~not yet adopted~~

Financial instruments – credit losses

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the ~~current~~ incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance ~~will be~~became effective for the fiscal year beginning after December 15, 2022, including interim periods within that year. The ~~adoption~~Company adopted the provisions of this ~~guidance is not expected to have a significant~~update as of January 1, 2023, with no material impact on ~~the Company’s~~its consolidated financial statements.

~~NOTE 2 - COMMITMENTS:~~

In March 2011, the Subsidiary sold shares of its investee company, Entera Bio Ltd. (“Entera”) to DNA GROUP (T.R.) Ltd. (formerly D.N.A Biomedical Solutions Ltd.) (“DNA”), retaining 117,000 ordinary shares (after giving effect to a stock split by Entera in July 2018). In consideration for the shares sold to DNA, the Company received, among other payments, ordinary shares of DNA (see also note 4).e.

Fair value

~~As part of this agreement,~~The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the ~~Subsidiary entered~~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 ~~a patent transfer agreement (the “Patent Transfer Agreement”), according to~~three broad levels, which the Subsidiary assigned to Entera all of its rights to a patent application related to the oral administration of proteins that it has licensed to Entera since August 2010, in return for royalties of 3% of Entera’s net revenues and a license back of that patent application for use in respect of diabetes and influenza. are described as follows:

Level 1:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2:

Observable prices that are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3:

Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

As of September 30, ~~2022, Entera had not paid any royalties~~2023, the fair value of marketable equity securities as 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 held to maturity bonds as presented in note 4 and of the Closing Penny Warrant as presented in note 7 were based on a Level 2 measurement. The fair value of the investment in non-marketable equity securities as presented in note 5, of the Subsequent Penny Warrants as presented in note 7 and of the Note as presented in note 7 were based on a Level 3 measurement.

As of September 30, 2023, the carrying amounts of cash equivalents, short-term deposits, Short-Term Borrowings and accounts payable approximate their fair values due to the Subsidiary. On December 11, 2018, Entera announced that it had entered into a research collaboration and license agreement with Amgen, Inc. (“Amgen”). To the extent that the license granted to Amgen results in net revenues as defined in the Patent Transfer Agreement, the Subsidiary will be entitled to the aforementioned royalties. As partshort-term maturities 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~~these instruments.

The amounts funded in respect of ~~the patent that was sold to Entera in March 2011.~~

employee rights are stated at cash surrender value which approximates its fair value.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(UNAUDITED)

NOTE 23 - COMMITMENTS~~(continued)~~:

b.a.

~~According to the HTIT~~Medicox License Agreement the Company granted HTIT an exclusive commercialization license in the territory of the People’s Republic of China, Macau and Hong Kong (the “Territory”), related to the Company’s oral insulin capsule, ORMD-0801 (the “Product”). Pursuant to the HTIT License Agreement, HTIT will conduct, at its own expense, certain pre-commercialization and regulatory activities with respect to the Subsidiary’s technology and ORMD-0801 capsule, and will pay to the Subsidiary (i) royalties of 10% on net sales of the related commercialized products to be sold by HTIT in the Territory (“Royalties”), and (ii) an aggregate of $37,500, of which $3,000 was payable immediately, $8,000 will be paid subject to the Company entering into certain agreements with certain third parties, and $26,500 will be paid upon achievement of certain milestones and conditions. In the event that the Company does not meet certain conditions, the Royalties rate may be reduced to a minimum of 8%. Following the final expiration of the Company’s patents covering the technology in the Territory in 2033, the Royalties rate may be reduced, under certain circumstances, to 5%.

The royalty payment obligation shall apply during the period of time beginning upon the first commercial sale of the Product in the Territory, and ending upon the later of (i) the expiration of the last-to-expire licensed patents in the Territory; and (ii) 15 years after the first commercial sale of the Product in the Territory (the “Royalty Term”).

~~The HTIT License Agreement shall remain in effect until the expiration of the Royalty Term. The HTIT License Agreement contains customary termination provisions.~~

Among others, the Company’s involvement through the product submission date will include consultancy for the pre-commercialization activities in the Territory, as well as advisory services to HTIT on an ongoing basis.

~~As of September 30,~~On November 13, 2022, the Company ~~has received milestone payments~~entered the Medicox License Agreement with Medicox.

The Medicox License Agreement grants Medicox an exclusive license to apply for regulatory approval and distribute ORMD-0801 in the Republic of Korea. The Medicox License Agreement is for ten years, but the parties have the right to terminate it upon 180 days’ notice.

Medicox will comply with agreed distribution targets and will purchase ORMD-0801 at an aggregate amount of $20,500 as follows: the initial payment of $3,000 was received in January 2016. Following the achievement of certain milestones, the second and third payments of $6,500 and $4,000, respectively, were received in July 2016, the fourth milestone payment of $4,000 was received in October 2016 and the fifth milestone payment of $3,000 was received in January 2019.

~~On August 21, 2020,~~agreed upon transfer price per capsule. In addition, Medicox will pay the Company ~~received a letter from HTIT, disputing certain pending payment obligations of HTIT under the TLA. The payment obligation being disputed is $6,000, out~~up to $15,000 in developmental milestones, $2,000 of which ~~only an amount of $2,000 has~~have already been received by the Company, and ~~has been included~~up to 15% royalties on gross sales. Medicox will also be responsible for obtaining a regulatory approval in ~~deferred revenue in each~~the Republic of Korea.

The Company is currently evaluating with Medicox a path forward to continue its collaboration, following the results of the consolidated balance sheets as of September 30, 2022 and December 31, 2021. The Company wholly disputes the claims made by HTIT and has been engaged in discussions and exchanges with HTIT in an attempt to clarify and resolve disagreements between the parties regarding milestone payments and work plan implementation.ORA-D-013-1 Phase 3 trial.

In addition, on November 30, 2015, the Company entered into the SPA with HTIT, according to which, the Company issued 1,155,367 shares of common stock to HTIT for $12,000. The transaction closed on December 28, 2015.

The HTIT License Agreement and the SPA were considered a single arrangement with multiple deliverables. The Company allocated the total consideration of $49,500 between the HTIT License Agreement and the SPA according to their fair value, as follows: $10,617 was allocated to the issuance of common stock (less issuance expenses of $23), based on the quoted price of the Company’s shares on the closing date of the SPA on December 28, 2015, and $38,883 was allocated to the HTIT License Agreement. The Company determined that revenues are recognized over time through the expected product submission date in June 2023.

In July 2015, according to the letter of intent signed between the parties or their affiliates, HTIT’s affiliate paid the Subsidiary a non-refundable amount of $500 as a no-shop fee. The no-shop fee was deferred and the related revenue is recognized over the estimated term of the HTIT License Agreement.

For the Company’s revenue recognition policy, see note ~~1d.~~2c.

~~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~~ ~~(continued):~~

On December 18, 2017, the Subsidiary entered into an agreement with a vendor for the process development and production of one of its oral capsule ingredients in the amount of $2,905 that will be paid over the term of the engagement and based on the achievement of certain development milestones, of which $1,592 was recognized in research and development expenses through September 30, 2022.

On September 2, 2020 (effective as of January 15, 2020), the Subsidiary entered into a CRO Services Agreement with a third party to retain it as a clinical research organization (“CRO”) for the Subsidiary’s phase 3 clinical trial for its oral insulin. The CRO Services Agreement was amended effective May 26, 2022 and as consideration for its services, the Subsidiary will pay the CRO a total amended amount of $22,684 during the term of the engagement and based on achievement of certain milestones, of which $15,280 was recognized in research and development expenses through September 30, 2022.

On September 16, 2020 (effective as of January 15, 2020), the Subsidiary entered into a CRO Services Agreement with a third party to retain it as a CRO for the Subsidiary’s phase 3 clinical trial for its oral insulin. The CRO Services Agreement was amended effective May 26, 2022 and as consideration for its services, the Subsidiary will pay the CRO a total amended amount of $15,796 during the term of the engagement and based on achievement of certain milestones, of which $7,357 was recognized in research and development expenses through September 30, 2022.

On December 2, 2021, the Subsidiary entered into an addendum (the “Addendum”) to the current lease agreement for its facilities in Israel. The Addendum refers to the lease of an additional space of 264 square meters for a period of 60 months commencing February 1, 2022. The Subsidiary has the option to extend the period for another 60 months. The annual lease payment, including management fees, is approximately NIS 435 (approximately $123). As security for its obligation under the Addendum, the Company provided a bank guarantee in an amount equal to three monthly lease payments. For accounting purposes, the lease commenced on February 1, 2022 as the Subsidiary did not have access to the space until that date.

g.b.

Grants from the Israel Innovation Authority (“IIA”)

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

At the time the grants were received, successful development of the related projects was not assured. The total amount received through September 30, ~~2022~~2023 was $2,208 ($~~2,530~~2,553 including interest).

As of September 30, ~~2022,~~2023, the liability to the IIA was ~~$133.~~

h.$59.

~~Legal expenses~~

Following the Company’s 2019 annual meeting of stockholders, a complaint was filed in the Court of Chancery of the State of Delaware against the Company and the members of the Board of Directors. On April 27, 2022, the Court of Chancery of the State of Delaware approved the terms of a settlement between the Company and the plaintiff in the complaint, awarding the plaintiff an amount of $850 in attorneys’ fees, which was paid on April 28, 2022 and included in general and administrative expenses in the first quarter of 2022. All other details of the settlement were previously agreed by the parties and acted upon at the Company’s 2021 annual meeting of stockholders.

~~Investment in Diasome Pharmaceuticals, Inc.~~

On August 26, 2022, the Company entered into a stock purchase agreement with Diasome Pharmaceuticals, Inc. (“Diasome”) 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 on a diluted basis. The stock 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 the current round contingent upon Diasome achieving certain milestones.

The Company will account for the investment under the measurement alternative in ASC 321, whereby the equity investment is recorded at cost, less impairment. The carrying amount will be subsequently remeasured to its fair value in accordance with the provisions of ASC 820 when observable price changes occur as of the date the transaction occurred, or it is impaired. Any adjustments to the carrying amount are recorded in net income.

Diasome is the developer of Hepatocyte Directed Vesicles (HDV™), a liver targeting system in development for drugs used to treat diabetes. When combined with insulin, HDV™ enables preferential insulin delivery to liver hepatocytes in order to reduce the risk of hypoglycemia in patients.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM 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. Fair value is based on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:

~~Level 1:~~

~~Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.~~

~~Level 2:~~

~~Observable prices that are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.~~

~~Level 3:~~

~~Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.~~

As of September 30, 2022, the assets measured at fair value are comprised of equity securities (Level 1). The fair value of held to maturity bonds as presented in note 4 was based on a Level 2 measurement.

~~As of September 30, 2022, the carrying amounts of cash equivalents, short-term deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.~~

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

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 ~~Entera and in~~the Transferred Warrants (as defined herein; for further details, see note 7). As of December 31, 2022, marketable securities also included held to maturity securities.

~~Composition:~~Composition

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Short-term:
DNA (see b below)	$	584	$	863	$	-	$	352
Entera (see c below)		122		337		-		85
Held to maturity securities (see d below)		4,528		6,547		-		3,306
	$	5,234	$	7,747	$	-	$	3,743
Long-term:
Held to maturity securities (see d below)	$	-	$	3,875
DNA (see b below)					$	450	$	-
Entera (see c below)						85		-
Transferred Warrants (see note 7)						2,000		-
	$	5,234	$	11,622	$	2,535	$	-

DNA

The DNA 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 nine month period ended September 30, 2023, the Company did not sell any of DNA’s ordinary shares. As of September 30, ~~2022,~~2023, the Company owns approximately 1.4% of DNA’s outstanding ordinary shares.

The cost of the securities as of both September 30, ~~2022~~2023 and December 31, ~~2021~~2022 was $595.

~~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~~ ~~(continued):~~

Entera

Entera ordinary shares have been traded on ~~The~~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)).

Held to maturity securities

The ~~amortized cost and estimated fair value of~~Company did not have any held to maturity securities as of September 30, ~~2022, were as follows:~~2023.

September 30, 2022
Amortized
cost Gross
unrealized
gains (losses) Estimated
fair value Average
yield to
maturity
rate
Short-term:
Commercial bonds $ 4,485 $ (129 ) $ 4,356 1.05 %
Accrued interest 43 - 43
$ 4,528 $ (129 ) $ 4,399

The amortized cost and estimated fair value of held to maturity securities as of December 31, ~~2021,~~2022, were as follows:

	December 31, 2022
	Amortized cost		Gross unrealized gains (losses)			Estimated fair value		Average yield to maturity rate
Short-term:
Commercial bonds	$	3,258	$	(82	)	$	3,176		1.07	%
Accrued interest		48		-			48
	$	3,306	$	(82	)	$	3,224

December 31, 2021
Amortized
cost Gross
unrealized
gains (losses) Estimated
fair value
Average
yield to
maturity
rate

Short-term:
Commercial bonds $ 6,432 $ (115 ) $ 6,317 1.37 %
Accrued interest 115 - 115

Long-term 3,875 (29 ) 3,846 1.20 %
$ 10,422 $ (144 ) $ 10,278

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

NOTE 5 – NON-MARKETABLE EQUITY SECURITIES:

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 stock 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 the current round contingent upon Diasome achieving certain milestones.

The Company accounts for the investment under the measurement alternative in ASC 321 “Investments – Equity Securities,” whereby the equity investment is recorded at cost, less impairment. The carrying amount is subsequently remeasured to its fair value in accordance with the provisions of ASC 820 “Fair Value Measurement” when observable price changes occur as of the date the transaction occurred, or it is impaired. Any adjustments to the carrying amount are recorded in the statements of comprehensive loss.

The Company’s non-marketable equity securities are an investment in a company without a readily determinable fair value. As of September 30, 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 - FINANCING:

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 September 30, 2023, $25,000 was repaid under the Short-Term Borrowings.

The aggregate remaining annual principal payments on debt until maturity are as follows:

	Annual Principal Payments
2023	$	25,000
2024		49,550
Total	$	74,550

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:

Scilex Transaction

On 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 aggregate of 4,500,000 shares of common stock of Scilex, par value $0.0001 per share (“Scilex Common Stock”), 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 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, the Company and Sorrento mutually agreed to terminate the Sorrento SPA and to release all claims the Company and Sorrento may have against one another, and Scilex completed the acquisition of the Purchased Securities.

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 the principal amount of the 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) $5,000 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 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 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 Closing Date, Scilex will also be required to pay a 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, the Company has the right to designate one non-voting observer to attend meetings of the board of directors and committees of Scilex and its subsidiaries.

~~Held~~

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

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 ~~maturity securities~~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 ~~mature during~~expire on the ~~12 months from~~date that is the ~~balance sheet~~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 ~~included~~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 54.80% to 55.25%.

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 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 September 30, 2023, the fair value of the Transaction was $98,819, split between the Note ($80,404, of which $49,413 is presented under short-term investments at fair value and $30,991 is presented under long-term investments at fair value), the Closing Penny Warrant ($6,300), the Subsequent Penny Warrants ($10,115), both presented under long-term investments at fair value and the Transferred Warrants ($2,000) presented under long-term marketable securities. ~~Held~~This resulted in a loss of $3,056, attributed mainly to ~~maturity securities with maturity dates~~the change in fair value of ~~more than one year are considered long-term marketable securities.~~the Warrants. The difference between the Note’s fair value and aggregate unpaid principal balance (which includes interest payable on maturity) is $21,826.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(UNAUDITED)

NOTE 58 - STOCKHOLDERS’ EQUITY:

On September 1, 2021, the Company entered into a controlled equity offering agreement (the “Cantor Equity Distribution Agreement”) with Cantor Fitzgerald & Co., as agent, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $100,000, through a sales agent, subject to certain terms and conditions. Any shares sold will be sold pursuant to ~~our~~the Company’s effective shelf registration statement on Form S-3 including a prospectus dated July 26, 2021 and prospectus supplement dated September 1, 2021. The Company paid the sales agent a cash commission of 3.0% of the gross proceeds of the sale of any shares sold through the sales agent under the Cantor Equity Distribution Agreement. As of September 30, ~~2022~~2023 and November ~~10, 2022, 1,334,695~~9, 2023, 1,971,447 shares were issued under the Cantor Equity Distribution Agreement for aggregate net proceeds of ~~$19,664.~~$26,253.

On November 3, 2021, the Company entered into a securities purchase agreement with several institutional and accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell, in a registered direct offering (the “Offering”), an aggregate of 2,000,000 shares of the Company’s common stock to the Purchasers for an offering price of $25.00 per share. The closing of the sale of the shares occurred on November 5, 2021. The net proceeds to the Company from the Offering, after deducting the placement agent’s fees and expenses and the Company’s Offering expenses, were approximately $46,375.

~~The following are the significant stock options transactions with employees and board members made during the nine months ended September 30, 2022:~~

~~On January 3, 2022,~~April 17, 2023, the Company granted an aggregate of 150,000 shares of the Company’s common stock to its President and Chief Executive Officer. The total fair value of these shares on the date of grant was $2,084, using the quoted closing market share price of $13.89 on the Nasdaq Capital Market on the date of grant.

~~On January 3, 2022, the Company granted an aggregate of 207,500~~868,500 RSUs representing a right to receive shares of the Company’s common stock to ~~the Company’s employees~~executive officers and board members of the Board of Directors as follows: 63,000 to the President and Chief Executive Officer; 42,000 to the Chief Scientific Officer; 21,000 to the Chief Operating and Business Officer, 19,000 to the Chief Financial Officer and Treasurer, 19,000 to the Chief Commercial Officer, 18,000 to the Chief Legal Officer and Secretary (effective as of the time his employment with the Company commenced on January 9, 2022), an aggregate of 24,000 to four board members and 1,500 to an employee.Company. The RSUs will vest in ~~four~~twelve equal ~~annual instalments on each of January~~quarterly installments starting May 1, ~~2023, 2024, 2025 and 2026.~~2023. The total fair value of these RSUs on the date of grant was ~~$2,849,~~$1,980, using the quoted closing market share price of $13.89 on the Nasdaq Capital Market on the date of grant and $12.03 for the Chief Legal Officer’s grant (equivalent to the closing price of the Company’s common stock on January 10, 2022 which represents the first trading date after his employment with the Company commenced).

On January 3, 2022, the Company granted options to purchase an aggregate of 321,500 shares of the Company’s common stock to the Company’s employees and board members at an exercise price of $13.89 per share (equivalent to the closing price of the Company’s common stock on the date of grant) as follows: 107,000 to the President and Chief Executive Officer; 72,000 to the Chief Scientific Officer; 36,000 to the Chief Operating and Business Officer, 32,000 to the Chief Financial Officer and Treasurer and 32,000 to the Chief Commercial Officer, an aggregate of 40,000 to four board members and 2,500 to an employee. The options will vest in four equal annual instalments on each of January 1, 2023, 2024, 2025 and 2026. These options expire on January 3, 2032. The fair value of all these options on the date of grant was $2,630, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $13.89; dividend yield of 0% for all years; expected volatility of 63.05%; risk-free interest rates of 1.46%; and expected term of 6.25 years.

On January 3, 2022, the Company granted options to purchase an aggregate of 30,000 shares of the Company’s common stock to the Company’s Chief Legal Officer and Secretary (effective as of the time his employment with the Company commenced on January 9, 2022), at an exercise price of $12.03 per share (equivalent to the closing price of the Company’s common stock on January 10, 2022 which represents the first trading date after his employment with the Company commenced). The options will vest in four equal annual instalments on each of January 1, 2023, 2024, 2025 and 2026. These options expire on January 3, 2032. The fair value of all these options on the date of grant was $214, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $12.03; dividend yield of 0% for all years; expected volatility of 63.22%; risk-free interest rates of 1.60%; and expected term of 6.25 years.

~~ORAMED PHARMACEUTICALS INC.~~

~~NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(UNAUDITED)~~

~~NOTE 5 - STOCKHOLDERS’ EQUITY~~ ~~(continued):~~

On May 2, 2022, the Company granted 4,500 RSUs representing a right to receive shares of the Company’s common stock to Mr. Yadin Rozov, a member of the Company’s board of directors. The RSUs will vest in four equal annual instalments on each of May 2, 2023, 2024, 2025 and 2026. The total fair value of these RSUs on the date of grant was $23, using the quoted closing market share price of $5.14 on the Nasdaq Capital Market on the last trading day before the date of grant.

On May 2, 2022, the Company granted options to purchase an aggregate of 7,500 shares of the Company’s common stock to Mr. Yadin Rozov, a member of the Company’s board of directors, at an exercise price of $5.14 per share (equivalent to the closing price of the Company’s common stock on the last trading day before the date of grant). The options will vest in four equal annual instalments on each of May 2, 2023, 2024, 2025 and 2026. These options expire on May 2, 2032. The fair value of all these options on the date of grant was $24, using the Black Scholes option-pricing model and was based on the following assumptions: stock price of $5.14; dividend yield of 0% for all years; expected volatility of 65.26%; risk-free interest rates of 3.03% and expected term of 6.26 years.

On July 28, 2022, the Company granted an aggregate of 404,100 RSUs representing a right to receive shares of the Company’s common stock to the Company’s executive officers, employees and board members. The RSUs granted to certain employees, executive officers and board members will vest in three equal annual instalments on each of January 1, 2024, 2025 and 2026 and the RSUs granted to certain employees will vest in three equal annual instalments on each of January 1, 2023, 2024 and 2025. The total fair value of these RSUs on the date of grant was $3,423, using the quoted closing market share price of $8.47$2.28 on the Nasdaq Capital Market on the date of grant.

h.3.

On July 28, 2022, the Company granted 34,000 shares of the Company’s common stock to each of the Company’s President and Chief Executive Officer and Chief Scientific Officer. These shares vested in full on August 1, 2022. The total fair value of these shares on the date of grant was $576, using the quoted closing market share price of $8.47 on the Nasdaq Capital Market on the date of grant.

~~On July 28, 2022,~~April 17, 2023, the Company granted an aggregate of ~~175,500~~245,500 performance based RSUs (“PSUs”) representing a right to receive shares of the Company’s common stock to executive officers of the Company. The PSUs vested on May 26, 2023, upon the Company’s executive officers. The PSUs will vest in two instalments upon achievement of the following milestones: (i) two thirds shall vest upon receipt of positive topline data in the first oral insulin Phase 3 clinical trial (675 patients in the U.S. under protocol ORA-D-013-1);common stock achieving and ~~(ii) one third shall vest upon completion of enrollment of the second oral insulin Phase 3 clinical trial (450 patients in the U.S., E.U. and Israel under protocol ORA-D-013-2) by June 30, 2023.~~maintaining a specified price per share. The total fair value of these PSUs on the date of grant was ~~$1,486,~~$550, using the Monte-Carlo model.

On May 1, 2023, the Company granted an aggregate of 20,000 RSUs representing a right to receive shares of the Company’s common stock to a board member. The RSUs will vest in twelve quarterly installments starting May 1, 2023. The total fair value of these RSUs on the date of grant was $49, using the quoted closing market share price of ~~$8.47~~$2.45 on the Nasdaq Capital Market on the date of grant.

j.5.

~~On September 18, 2022, Oravax granted~~During the third quarter of 2023, 86,500 stock options and 110,917 unvested RSUs were forfeited, due to ~~purchase~~termination of the employment of an ~~aggregate~~executive officer, resulting in a reversal of ~~328,318 shares of Oravax’s common stock to employees~~$663 in sales and board members of Oravax and to other service providers at an exercise price of $3.91 per share. The options will vest in four annual instalments as follows: the first instalment vested immediately on the grant date and the remaining three instalments will vest on each of December 31, 2022, 2023 and 2024. These options expire on September 18, 2032. The fair value of these options on the date of grant was $665, using the Black Scholes option pricing model and was based on the following assumptions: stock price of $3.91; dividend yield of 0% for all years; expected volatility of 52.87%; risk-free interest rates of 3.62%; and expected term of 5.49 years.

marketing expenses.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(UNAUDITED)

NOTE 69 - ~~LEASES~~LEASES:

The right-of-use asset and lease liability are initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. The Company’s incremental borrowing rate is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located.

The Company has various operating leases for office space and vehicles that expire through 2027. Below is a summary of ~~our~~the Company’s operating right-of-use assets and operating lease liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Operating right-of-use assets	$	1,005	$	500	$	768	$	987

Operating lease liabilities, current		228		130		251		247
Operating lease liabilities long-term		672		370		389		647
Total operating lease liabilities	$	900	$	500	$	640	$	894

Lease payments for the Company’s right-of-use assets over the remaining lease periods as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
2022	$	68		$	155
2023		270			140			67			291
2024		270			140			267			291
2025		210			93			210			228
2026		123			-			114			124
2027		10			-			9			10
Total undiscounted lease payments		951			528			667			944
Less: Interest*		(51	)		(28	)		(27	)		(50	)
Present value of lease liabilities	$	900		$	500		$	640		$	894

Future lease payments were discounted by 3%-5.75% interest rate.

ORAMED PHARMACEUTICALS INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(UNAUDITED)

NOTE 710 - RELATED PARTY TRANSACTIONS:

On July 1, 2008, the ~~Subsidiary~~Company’s wholly-owned subsidiary, Oramed Ltd. (the “Subsidiary”), entered into two consulting agreements with KNRY Ltd. (“KNRY”), an Israeli company owned by the Chief Scientific Officer, whereby the President and Chief Executive Officer and the Chief Scientific Officer, through KNRY, provide services to the Company (the “Consulting Agreements”). The Consulting Agreements are both terminable by either party upon 140 days prior written notice. The Consulting Agreements, as amended, provide that KNRY will be reimbursed for reasonable expenses incurred in connection with the performance of the Consulting Agreements and that the monthly consulting fee paid to the President and Chief Executive Officer and the Chief Scientific Officer is NIS 146,705 ($~~41)~~38) and NIS 106,400 ($~~30)~~28), respectively.

In addition to the Consulting Agreements, based on a relocation cost analysis, the Company ~~pays~~paid for certain direct costs, related taxes and expenses incurred in connection with the relocation of the President and Chief Executive Officer to the U.S. During the nine months ended September 30, ~~2022,~~2023, there were no such relocation expenses, ~~were $201,~~ compared to ~~$198~~$201 for the nine months ended September 30, ~~2021.~~

~~NOTE 8 - ASSET ACQUISITION TRANSACTION~~2022.

~~On March 18, 2021,~~Following the Company entered into the Oravax License Agreement and into the Stockholders Agreement with Oravax. On that date, Oravax’s assets were (1) in process research and development of COVID-19 vaccine technology; and (2) $1,500 to be received in cash. According to the Stockholders Agreement, Oravax issued 1,890,000 shares of its capital stock to the Company, representing 63%relocation of the issued and outstanding share capital of Oravax, on a fully diluted basis, as of the date of issuance, for which we paid $1,500. Consequently, the Company consolidates Oravax in its consolidated financial statements since that time. In addition, under the terms of the Oravax License Agreement, the Company has licensed out to Oravax certain patent rights, know-how and information related to the Company’s oral drug delivery technology with respect to the combination with the COVID-19 vaccine technology.

In consideration for the grant of the License, the Oravax License Agreement provides that the Company will receive (i) royalties equal to 7.5% on net sales, as defined in the Oravax License Agreement, of each product commercialized by Oravax, its affiliates and permitted sublicensees related to the License during the term specified in the Oravax License Agreement, (ii) sublicensing fees equal to 15% of any non-sales-based consideration received by Oravax from a permitted sublicensee and (iii) other payments ranging between $25,000 to $100,000, based on certain sales milestones being achieved by Oravax. The parties further agreed to establish a development and steering committee, which will consist of three members, of which two members will be appointed by the Company, that will oversee the ongoing research, development, clinical and regulatory activity with respect to the Oravax product. Akers contributed $1,500 in cash to Oravax and a license agreement to the Oravax product which includes a maximum of 2.5% royalties of all net sales. Effective January 1, 2022, Oravax transferred its rights and obligations under the Oravax License Agreement to its wholly-owned subsidiary, Oravax Medical Ltd.

Concurrently with the execution and delivery of the Oravax License Agreement, the Company entered into the Stockholders Agreement with Akers, Premas, Cutter Mill, and Run Ridge, entities controlled by Michael Vasinikovich and Craig Schwabe, former members of Cystron Biotech LLC (“Cystron,” and collectively with Akers, Premas, Cutter Mill and Run Ridge, the “Stockholders Parties”). Pursuant to the Stockholders Agreement, among other things, the Company has the right to appoint two out of the three members to the board of directors of Oravax (the “Oravax Board”), one of which is the Company’s Chief Executive Officer who will serve as the chairman of the Oravax Board, conditioned upon the Company maintaining certain ownership thresholds. Akers has the right, until the third anniversary of the Stockholders Agreement effective date, to appoint one member to the Oravax Board. Oravax’s common stock held by the Stockholders Parties is subject to certain transfer restrictions. In addition, the Stockholders Parties have certain rights of participation in future financings as well as rights of first refusal and co-sale related to future potential transactions. Nadav Kidron, the Company’s President and Chief Executive Officer ~~was one~~to the State of Israel, the Company entered into two agreements with the President and Chief Executive Officer, replacing his above-mentioned consulting agreement through KNRY, substantially on the same terms, in order to allocate his time and services between the Company and the Subsidiary.

Effective November 1, 2022, the Company entered into a consulting agreement with Shnida Ltd., whereby the President and Chief Executive Officer, through Shnida Ltd., provides services as President and Chief Executive Officer of the ~~former members~~Company. The agreement is terminable by either party upon 140 days prior written notice. The agreement provides that Shnida Ltd. will be reimbursed for reasonable expenses incurred in connection with performance of ~~Cystron.~~the agreement and that the President and Chief Executive Officer will receive a monthly consulting fee of NIS 88,023 ($23), plus value added tax. Pursuant to the 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, pursuant to which the President and Chief Executive Officer receives gross monthly salary of NIS 46,901 ($12) 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.

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 and our Transition Report on Form 10-Q for the transition period from September 1, 2021 to December 31, 2021.~~Report.

Overview of Operations

We are a pharmaceutical company ~~currently~~ engaged in the research and development of innovative pharmaceutical solutions with a technology platform that ~~delivers protein orally instead of by injection. Our first drug candidate is an oral insulin capsule to be used~~allows for the ~~treatment~~oral delivery of ~~type 2 diabetes. We utilize clinical research organizations, or CROs, to conduct our clinical trials.~~therapeutic proteins.

~~Through our research and development efforts, we~~We have ~~successfully~~ developed an oral dosage form intended to withstand the harsh environment of the stomach and effectively deliver active biological insulin or other ~~proteins, such as Glucagon-like peptide-1, or GLP-1, leptin, and others.~~proteins. The excipients in the formulation are not intended to modify the proteins chemically or biologically, and the dosage form is designed to be safe to ingest.

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. We ~~plan~~recently 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 as body mass index (BMI), baseline HbA1c, age, gender and body weight, responded well to ~~continue~~oral insulin. We are currently considering if there is a path forward for our oral insulin candidate, based on this analysis. 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 the Sorrento SPA, with Sorrento Therapeutics, Inc., or Sorrento, to ~~conduct clinical trials~~acquire certain equity securities of Scilex Holding Company, or Scilex, 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 ~~show~~be used by us as a credit for the ~~effectiveness~~consideration for the Purchased Securities, with an additional $5 million in cash to be paid by us at closing. Thereafter, we and Sorrento continued discussions and negotiations relating to the sale contemplated under the Sorrento SPA.

Securities Purchase Agreement

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 the date of issuance in the principal amount of $101,875,000, or 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 the Scilex Common Stock and containing certain restrictions on exercisability or the 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.

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.

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.

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.

We were issued four Subsequent Penny Warrants, each for 2,125,000 shares of Scilex Common Stock, which shall vest and become exercisable on the date that is the later of (i) March 19, 2024, June 17, 2024, September 15, 2024 or December 14, 2024, respectively, or the Subsequent Penny Warrant Vesting Date, and (ii) the earliest of (A) March 14, 2025, (B) the date on which the 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 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 Note is repaid in full. We may exercise the Penny Warrants by means of a “cashless exercise.”

The Penny Warrants may not be exercised if we, together with our ~~technology.~~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 we may increase or decrease such limitation upon 61 days’ prior notice to Scilex.

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

Registration Rights Agreement

In connection with the Scilex SPA, on September 21, 2023, we entered into a registration rights agreement with Scilex, pursuant to which Scilex granted the Company certain registration rights applicable to the resale of the shares underlying the Warrants and agreed to pay liquidated damages equal to the product of 2.0% multiplied by the sum of (x) the aggregate principal amount outstanding under the Note and (y) the aggregate Exercise Price (as defined in the Closing Warrant) of the Closing (capped at 12%) of the aggregate subscription amount.

Oral Insulin

Our proprietary flagship product, an orally ingestible insulin capsule, or ORMD-0801, allows insulin to travel from the gastrointestinal tract via the portal vein to the liver, revolutionizing the manner in which insulin is delivered. This novel mode of delivery closely mimics the human body’s delivery of endogenous insulin.

~~Phase 2b Trial:~~ In February 2020, we announced positive topline data from the second and final cohort of our Phase 2b trial. Treatment with ORMD-0801 at all doses demonstrated an excellent safety profile, with no serious drug-related adverse events and with no increased frequency of hypoglycemic episodes or weight gain compared to placebo.

~~Phase 3 Trial~~Type 2 Diabetes: We ~~are currently conducting two concurrent~~conducted the ORA-D-013-1 Phase 3 ~~trials in~~trial on patients with type 2 diabetes, or ~~T2D. These trials involve about 1,125 patients and are aimed at providing evidence of ORMD-0801’s safety and efficacy in~~ T2D, patients over a treatment period of 6 and 12 months, respectively. A geographically diverse patient population is being recruited from multiple sites throughout the United States, Europe, United Kingdom and Israel. Our Phase 3 trial is composed of two protocols:

~~ORA-D-013-1~~~~: This trial is currently being conducted on T2D patients~~ with inadequate glycaemic control who ~~are currently~~were on two or three oral glucose-lowering agents. This trial recruited 710 patients from over 90 clinical sites located throughout the U.S. Patients were randomized 2:2:1:1 (ORMD-0801 8mg once daily for 12 months; ORMD-0801 8mg twice daily for 12 months; Placebo for 6 months / ORMD-0801 8mg once daily for 6 months; Placebo for 6 months / ORMD-0801 8mg twice daily for 6 months) in this double-dummy trial. Capsules were taken 45 minutes before breakfast and prior to bedtime. The primary endpoint of the trial iswas to evaluate the efficacy of our 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. ~~We initiated this~~On January 11, 2023, we announced that the ORA-D-013-1 Phase 3 trial ~~in December 2020. We completed enrollment in May 2022.~~

~~ORA-D-013-2~~~~: This~~did not meet its primary and secondary endpoints. Following the results of the ORA-D-013-1 Phase 3 trial, ~~includes~~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 ~~are~~were attempting to manage their condition with either diet alone or with diet and metformin. ~~A total~~We recently completed an analysis of ~~450 patients are being recruited through 70 sites in~~ the United States and between 12 and 16 sites in Western Europe and Israel. Patients are being randomized 1:1 into two cohorts dosed with: 8 mg ORMD-0801 at night; and placebo at night. The primary endpoint is to evaluate the efficacy of ORMD-0801 compared to placebo in improving glycaemic control as assessed by HbA1c over a 26-week treatment period, with a secondary efficacy endpoint of assessing the change from baseline in fasting plasma glucose at 26 weeks. We initiated this trial in the United States in March 2021. As of July 2022, 50% of the 450 patients planned for this trial were enrolled and randomized.

~~We expect to receive the efficacy~~ data from the ~~trials after~~ORA-D-013-1 Phase 3 trial and found that subpopulations of patients ~~have completed the first 6 months of treatment. Safety will be further monitored~~with pooled specific parameters, such as ~~patients will be exposed~~body mass index (BMI), baseline HbA1c, age, gender and body weight, responded well to ~~the drug~~oral insulin. These subsets exhibited an over ~~an additional 6 months (total 12 months). Topline efficacy data~~1% placebo adjusted, statistically significant, reduction in HbA1c. We are currently considering if there is a path forward for the ORA-D-013-1 trial is expected in January 2023 and we anticipate filing a BLA with the U.S. Food and Drug Administration, or FDA, in 2024 or 2025. A BLA would grant us at least 12 years of marketing exclusivity from the date of approval in the United States.

~~HTIT License~~~~. On November 30, 2015, we entered into a Technology License Agreement, or the TLA, with HTIT, and~~our oral insulin candidate, based 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.~~this analysis.

On August ~~21, 2020, we received~~2, 2023, Oramed signed a ~~letter~~non-binding term sheet with Hefei Tianhui Incubator of Technologies Co. Ltd., or HTIT, to establish a joint venture, or the JV, based on Oramed’s oral drug delivery technology. The proposed JV would focus on the development and worldwide commercialization of innovative products based on Oramed’s oral insulin and POD™ (Protein Oral Delivery) pipeline and HTIT’s manufacturing capabilities and technologies. The JV is subject to the execution of a binding definitive agreement.

The JV would be responsible for developing, marketing and commercializing drug products globally, focusing on Oramed’s oral insulin and POD™ technology, as well as other assets in the Oramed pipeline. The parties intend for the JV to initiate a Phase 3 oral insulin trial in the United States.

Oramed and HTIT would initially hold equal shares in the JV, with each owning 50% of the equity. The Board of Directors would initially consist of equal representation from HTIT ~~disputing certain pending payment obligations~~and Oramed, ensuring that both parties have an equal say in decision-making. As part of the JV, HTIT ~~under the TLA. We wholly dispute said claims and we are in discussions with HTIT in~~will make an ~~attempt to reach a mutually agreeable solution. For further information, see note 2.b. to our interim condensed consolidated financial statements.~~initial investment of $60 million, while Oramed will invest $10 million.

NASH ~~trial:~~ In December 2020, we initiated a double blind, placebo controlled clinical trial of our oral insulin capsule, ORMD-0801, for the treatment of non-alcoholic steatohepatitis, or NASH, in type 2 diabetes. This 30 patient multi-center trial is comprised of five clinical sites: three in the United States and two in Israel. The trial was designed to measure change and percent change in MRI-PDFF from baseline to week 12. In March 2022, we completed patient enrollment.: On September 13, 2022, we reported positive top line results from ~~this~~a double blind, placebo controlled clinical trial of ORMD-0801 for the treatment of non-alcoholic steatohepatitis, or NASH, in T2D, demonstrating that ORMD-0801 was safe and well tolerated at 8 mg twice daily dosing, meeting the primary endpoint of no difference in adverse events for ORMD-0801 compared to placebo. The trial also evaluated the effectiveness of ORMD-0801 in reducing liver fat content over the 12-week treatment period by observing several independent measures. All the measurements showed a consistent clinically meaningful trend in favor of ORMD-0801.

~~Oral Glucagon-Like Peptide-1~~

~~Oral GLP-1, is an incretin hormone, which stimulates the secretion of insulin from the pancreas. In addition to~~ We are currently evaluating our ~~flagship product, the~~path forward for ORMD-0801 ~~insulin capsule, we use our technology~~ for ~~an orally ingestible GLP-1 capsule, or ORMD-0901.~~

In June 2021, we initiated a trial in T2D patients in the United States under an Investigational New Drug application filed with the FDA. Data from this trial is expected in the fourth quarter of 2022.NASH.

Oral Vaccine

On March 18, 2021, we ~~entered into~~formed Oravax Medical Inc., or Oravax, a ~~license agreement, or the Oravax License Agreement, with Oravax, our~~ 63% owned joint venture ~~pursuant~~ to which we granted to Oravax an exclusive, worldwide license of our rights in certain patents and related intellectual property relating to our proprietary oral delivery technology to further develop, manufacture and commercialize oral vaccines for COVID-19 and other novel coronaviruses based on Premas Biotech Pvt. Ltd.’s ~~or Premas’s,~~ proprietary vaccine technology involving a triple antigen virus like particle, or the Oravax product, which was previously owned by Cystron Biotech LLC, and later acquired by Akers Biosciences Inc., or Akers. Effective January 1, 2022, Oravax transferred its rights and obligations under the Oravax License Agreement to its wholly-owned subsidiary, Oravax Medical Ltd. For further details regarding the Oravax License Agreement, see note 8 to our interim condensed consolidated financial statements.particle.

In October 2021, Oravax’s oral COVID-19 vaccine received clearance from the South African Health Products Regulatory Authority to initiate a Phase 1 trial and subsequently to commence patient enrollment in a first in human, Phase 1 clinical trial, for its oral COVID-19 vaccine and on December 14, 2021, Oravax screened and enrolled the first participant in a Phase 1 clinical trial of its oral virus-like particle (VLP) COVID-19 vaccine in Johannesburg, South Africa. The trial protocol calls for two cohorts each comprised of 12 participants. The South African Health Products Regulatory Authority (SAPHRA) requires a 42-day safety waiting period once the last patient in Cohort A completes enrollment and dosing, after which Cohort B may commence enrollment and dosing. Due to several factors, including the fact that many volunteers did not qualify during screening due to prior asymptomatic COVID-19 infection and other conditions, the rate of enrollment was slower than anticipated and as a result, we added an additional clinical site. On October 11, 2022, Oravax reported positive preliminary Phase 1 data for Cohort A of ~~this~~a Phase 1 clinical trial, meeting primary and secondary endpoints of safety and immunogenicity. ~~The~~These results ~~from Cohort A~~ included significant antibody response (2-6 fold over baseline) as measured by multiple markers of immune response to VLP vaccine antigens observed in the majority of the patients dosed, and no safety issues were observed, including mild symptoms. ~~We expect~~ Cohort B ~~to complete~~completed dosing in January 2023. Cohort B measured Immunoglobulin G, or IGG against the ~~fourth quarter~~spike (S) protein, showing positive IGG in approximately 55% of ~~2022 as well, with data expected in~~ the ~~first half of 2023.~~patients dosed. We are currently evaluating our path forward for Oravax’s oral vaccines for COVID-19.

Impact of Current Events

On ~~December 29, 2021, Oravax signed a cooperation~~October 7, 2023, the State of Israel was attacked by and ~~purchase agreement for an initial pre-purchase~~subsequently declared war on Hamas. As of ~~10 million doses of oral COVID-19 vaccines with Tan Thanh Holdings~~November 9, 2023, we believe that there is no immediate risk to ~~commercialize the vaccine in Southeast Asia.~~our business operations related to these events.

~~COVID-19 Impact~~

We do not expect any material impact on our development timeline and our liquidity due to COVID-19. However, we have experienced approximately six months of delays in clinical trials due to slow-downs of recruitment for trials generally. We may experience further delays if the pandemic worsens and continues for an extended period of time and we are continuing to assess the effect on our operations by monitoring the status of COVID-19.

Results of Operations

Comparison of nine and three month periods ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022

The following table summarizes certain statements of operations data of the Company for the nine and three month periods ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022 (in thousands of dollars except share and per share data):

	Nine months ended				Three months ended					Nine months ended					Three months ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023			September 30, 2022		September 30, 2023			September 30, 2022
Revenues	$	2,022	$	2,022	$	682	$	682		$	1,340		$	2,022	$	-		$	682
Cost of revenues		-		-		-		-			-			-		-			-
Research and development expenses		20,362		15,452		5,347		6,086			7,205			20,362		957			5,347
Sales and marketing expenses		1,433		172		463		172			(287	)		1,433		(663	)		463
General and administrative expenses		11,085		4,937		3,061		1,909			6,314			11,085		2,599			3,061
Financial income (expense), net		1,930		1,031		1,036		(51	)
Interest expenses											826			-		826			-
Financial income, net											4,510			1,930		435			1,036
Taxes on income		100		-		100		-			-			100		-			100
Net loss for the period	$	29,028	$	17,508	$	7,253	$	7,536		$	8,208		$	29,028	$	3,284		$	7,253
Basic and diluted loss per share of common stock	$	0.72	$	0.54	$	0.18	$	0.21		$	0.19		$	0.72	$	0.08		$	0.18
Weighted average shares of common stock outstanding used in computing basic and diluted loss per share of common stock		38,856,514		31,097,270		39,100,231		34,539,487			40,246,515			38,856,514		40,445,896			39,100,231

Revenues

Revenues consist of proceeds related to the Amended and Restated Technology License Agreement, dated December 21, 2015, between the Company and HTIT, or as further amended by the parties on June 3, 2016 and July 24, 2016 the HTIT License Agreement, that are recognized on a cumulative basis when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, through the expected product submission date by HTIT of June 2023, using the input method.

Revenues ~~were~~for the nine month period ended September 30, 2023 decreased by 34% to $1,340,000, compared to $2,022,000 for the nine month ~~periods~~period ended September 30, ~~2022 and September 30, 2021.~~2022. The decrease was mainly due to recognition of revenues until the product submission date by HTIT of June 2023.

~~Revenues~~There were no revenues for the three month period ended September 30, 2023 while revenues were $682,000 for the three month ~~periods~~period ended September 30, ~~2022 and September 30, 2021.~~2022. The decrease was mainly due to recognition of revenues until the product submission date by HTIT of June 2023.

Cost of Revenues

Cost of revenues consists of royalties related to the HTIT License Agreement that will be paid over the term of the HTIT License Agreement in accordance with revenue recognition accounting and the Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 1984, as amended, including any regulations or investment tracks promulgated thereunder.

There was no cost of revenues for the three and nine month periods ended September 30, ~~2022~~2023 and September 30, ~~2021.~~2022.

Research and Development Expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, employee benefits, costs of materials, supplies, the cost of services provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of manufacturing drugs for use in research and preclinical development. All costs associated with research and development are expensed as incurred.

Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials.

Clinical activities, which relate principally to clinical sites and other administrative functions to manage our clinical trials, are performed primarily by CROs. CROs typically perform most of the start-up activities for our trials, including document preparation, site identification, screening and preparation, pre-trial visits, training and program management.

Clinical trial and ~~pre-clinical~~preclinical trial expenses include regulatory and scientific consultants’ compensation and fees, research expenses, purchase of materials, cost of ~~capsule~~ manufacturing of the oral insulin and exenatide capsules, payments for patient recruitment and treatment, as well as salaries and related expenses of research and development staff.

Research and development expenses for the nine month period ended September 30, ~~2022 increased~~2023 decreased by ~~32%~~65% to ~~$20,362,000,~~$7,205,000, compared to ~~$15,452,000~~$20,362,000 for the nine month period ended September 30, ~~2021.~~2022. The ~~increase~~decrease was mainly due to ~~higher~~lower expenses related to ~~our~~the Phase 3 ~~clinical trials.~~trials that were terminated and to performance equity awards that expired because they did not meet their performance conditions during the period ended September 30, 2023. Stock-based compensation expenses for the nine month period ended September 30, ~~2022~~2023 were ~~$1,907,000,~~$805,000, compared to ~~$1,169,000~~$1,907,000 during the nine month period ended September 30, ~~2021.~~2022. This ~~increase~~decrease was mainly due to performance equity awards ~~granted to employees in 2022, and equity awards granted by Oravax to employees and board members of Oravax and to other service providers in~~that expired because they did not meet their performance conditions during the period ended September ~~2022.~~30, 2023.

Research and development expenses for the three month period ended September 30, ~~2022~~2023 decreased by ~~12%~~82% to ~~$5,347,000,~~$957,000, compared to ~~$6,086,000~~$5,347,000 for the three month period ended September 30, ~~2021.~~2022. The decrease was mainly due to lower ~~research and development~~ expenses ~~in Oravax in~~related to the ~~third quarter of 2022.~~Phase 3 trials that were terminated. Stock-based compensation expenses for the three month period ended September 30, ~~2022~~2023 were ~~$771,000,~~$390,000, compared to ~~$495,000~~$771,000 during the three month period ended September 30, ~~2021.~~2022. This ~~increase~~decrease was mainly due to performance equity awards ~~granted~~that expired because they did not meet their performance conditions during the period ended September 30, 2023.

Following the results of the ORA-D-013-1 Phase 3 trial, which did not meet its primary and secondary endpoints, we terminated both ORA-D-013-1 and ORA-D-013-2 Phase 3 clinical trials. We recently 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 responded well to ~~employees in 2022,~~oral insulin. We are currently considering if there is a path forward for our oral insulin candidate, based on this analysis. We are also examining our existing pipeline and ~~equity awards granted by Oravax to employees and board members~~have commenced an evaluation process of ~~Oravax and to other service providers in September 2022.~~potential strategic opportunities, with the goal of enhancing value for our stockholders.

Government grants

In the nine month periods ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, we did not recognize any research and development grants. As of September 30, ~~2022,~~2023, we had incurred liabilities to pay royalties to the Israel Innovation Authority of the Israeli Ministry of Economy and Industry of ~~$133,000.~~$59,000.

Sales and Marketing Expenses

Sales and marketing expenses include the salaries and related expenses of our commercial functions, consulting ~~costs~~expenses and other general ~~costs. We anticipate that our commercial activities will increase in the future towards and following potential approval of our planned BLA submission for ORMD-0801.~~

Sales and marketing expenses for the nine month period ended September 30, 2022 increased by 733% to $1,433,000, compared to $172,000 for the nine month period ended September 30, 2021. The increase was mainly due to stock-based compensation expenses, salary related expenses and consulting expenses, mainly resulting from hiring our Chief Commercial Officer. Stock-based compensation costs for the nine month period ended September 30, 2022 were $887,000, compared to $142,000 during the nine month period ended September 30, 2021. This increase was mainly due to equity awards granted to an employee during fiscal years 2021 and 2022.expenses.

~~Sales~~We recorded sales and marketing income of $287,000 for the nine month period ended September 30, 2023, compared to expenses of $1,433,000 for the nine month period ended September 30, 2022. This was primarily due to termination of the employment of an executive officer, which led to the forfeiture of his unvested options and RSUs, resulting in a reversal of the previously recorded expense. We recorded stock-based compensation income of $440,000 for the nine month period ended September 30, 2023, compared to expenses of $887,000 for the nine month period ended September 30, 2022. This was mainly due to termination of the employment of an executive officer, which led to the forfeiture of his unvested options and RSUs.

We recorded sales and marketing income of $663,000 for the three month period ended September 30, ~~2022 increased by 169% to $463,000,~~2023 compared to ~~$172,000~~expenses of $463,000 for the three month period ended September 30, ~~2021. The increase~~2022. This was primarily due to termination of the employment of an executive officer, which led to the forfeiture of his unvested options and RSUs, resulting in a reversal of the previously recorded expense. We recorded stock-based compensation ~~expenses and consulting expenses. Stock-based compensation costs~~income of $663,000 for the three month period ended September 30, ~~2022 were $303,000,~~2023, compared to ~~$142,000~~expenses of $463,000 for the three month period ended September 30, ~~2021.~~2022. This ~~increase~~ was ~~mainly~~primarily due to ~~equity awards granted~~termination of the employment of an executive officer, which led to ~~an employee during fiscal years 2021~~the forfeiture of his unvested options and ~~2022.~~RSUs.

General and Administrative Expenses

General and administrative expenses include the salaries and related expenses of our management, consulting ~~costs,~~expenses, legal and professional fees, travel expenses, business development ~~costs,~~expenses, insurance expenses and other general ~~costs.~~expenses.

General and administrative expenses for the nine month period ended September 30, ~~2022 increased~~2023 decreased by ~~125%~~43% to ~~$11,085,000,~~$6,314,000 compared to ~~$4,937,000~~$11,085,000 for the nine month period ended September 30, ~~2021.~~2022. The ~~increase~~decrease was mainly due to ~~higher~~lower stock-based compensation expenses, lower legal, ~~expenses~~insurance and ~~salary~~public relations and investor relations expenses. Stock-based compensation ~~costs~~expenses for the nine month period ended September 30, ~~2022~~2023 were ~~$6,167,000,~~$2,480,000, compared to ~~$1,588,000~~$6,167,000 for the nine month period ended September 30, ~~2021.~~2022. This ~~increase~~decrease was mainly due to equity awards that were granted ~~to directors, officers~~ and ~~employees~~vested in the first quarter of 2022 and to performance equity awards ~~granted by Oravax to employees and board members of Oravax and to other service providers in~~that expired because they did not meet their performance conditions during the period ended September ~~2022.~~30, 2023.

General and administrative expenses for the three month period ended September 30, ~~2022 increased~~2023 decreased by ~~60%~~15% to ~~$3,061,000~~$2,599,000 compared to ~~$1,909,000~~$3,061,000 for the three month period ended September 30, ~~2021.~~2022. The ~~increase~~decrease was mainly due to ~~higher~~lower stock-based compensation expenses, partially offset by higher legal and ~~salary~~consulting expenses. Stock-based compensation ~~costs~~expenses for the three month period ended September 30, ~~2022~~2023 were ~~$1,977,000,~~$1,125,000, compared to ~~$644,000~~$1,977,000 for the three month period ended September 30, ~~2021.~~2022. This ~~increase~~decrease was mainly due to equity awards granted to directors and officers ~~and other employees~~ in ~~2022, and equity awards granted by Oravax to employees and board members~~the third quarter of ~~Oravax and to other service providers in September~~ 2022.

Interest Expenses

Interest expenses were $826,000 for the three and nine month periods ended September 30, 2023, while there were no interest expenses for the three and nine month periods ended September 30, 2022. The increase was mainly due to interest on the Short-Term Borrowings.

Financial Income, ~~(Expense),~~ Net

Net financial income ~~was~~increased by 134% to $4,510,000 for the nine month period ended September 30, 2023, compared to $1,930,000 for the nine month period ended September 30, ~~2022, compared to $1,031,000 for the nine month period ended September 30, 2021.~~2022. The increase was mainly due to interest from ~~short~~short-term bank deposits and ~~long-term bank deposits,~~revaluation of non-marketable equity securities, partially offset by ~~loss from~~fees incurred as part of the Transaction and revaluation of the ~~shares we hold~~Transaction (mainly from the change in ~~Entera and DNA.~~fair value of the Warrants).

Net financial income ~~was~~decreased by 58% to $435,000 for the three month period ended September 30, 2023, compared to net financial income of $1,036,000 for the three month period ended September 30, ~~2022, compared to a net expense of $51,000 for the three month period ended September 30, 2021.~~2022. The ~~increase~~decrease was mainly due to fees incurred as part of the Transaction and revaluation of the Transaction (mainly from the change in fair value of the Warrants), partially offset by interest from ~~short and long-term~~short-term bank deposits.

Basic and Diluted Loss Per Share of Common Stock

Basic and diluted loss per share of common stock for the nine month period ended September 30, ~~2022 increased~~2023 decreased by ~~33%~~74% to ~~$0.72,~~$0.19, compared to ~~$0.54~~$0.72 for the nine month period ended September 30, ~~2021.~~2022. The ~~increase~~decrease in loss per share was mainly due to ~~the higher~~lower net loss ~~together with a higher number of weighted average shares of common stock~~resulting from the changes set forth above in the nine month period ended September 30, ~~2022~~2023 compared to the nine month period ended September 30, ~~2021.~~2022.

Basic and diluted loss per share of common stock for the three month period ended September 30, ~~2022~~2023 decreased by ~~14%~~56% to ~~$0.18,~~$0.08, compared to ~~$0.21~~$0.18 for the three month period ended September 30, ~~2021.~~2022. The decrease in loss per share was mainly due to ~~a higher number of weighted average shares of common stock~~lower net loss resulting from the changes set forth above in the three month period ended September 30, ~~2022~~2023 compared to the three month period ended September 30, ~~2021.~~2022.

Weighted Average Shares of Common Stock Outstanding

Weighted average shares of common stock outstanding for the nine month period ended September 30, ~~2022~~2023 were ~~38,856,514,~~40,246,515, compared to ~~31,097,270~~38,856,514 for the nine month period ended September 30, ~~2021.~~2022. The increase was mainly due to shares issued in connection with our controlled equity ~~offering and registered direct~~ offering.

Weighted average shares of common stock outstanding for the three month period ended September 30, ~~2022~~2023 were ~~39,100,231,~~40,445,896, compared to ~~34,539,487~~39,100,231 for the three month period ended September 30, ~~2021.~~2022. The increase was mainly due to shares issued in connection with our controlled equity offering during the fourth quarter of 2022 and ~~registered direct offering.~~the first quarter of 2023.

Liquidity and Capital Resources

From inception through September 30, ~~2022,~~2023, we have incurred losses in an aggregate amount of ~~$154,538,000.~~$170,892,000. During that period and through September 30, ~~2022,~~2023, we have financed our operations through several private placements of our common stock, as well as public offerings of our common stock, raising a total of ~~$248,769,000,~~$255,375,000, net of transaction costs. During that period, we also received cash consideration of ~~$27,981,000~~$28,001,000 from the exercise of warrants and options. We expect to seek ~~to obtain~~ additional financing through similar sources in the future, as needed. As of September 30, ~~2022,~~2023, we had ~~$33,196,000~~$5,468,000 of available cash ~~$121,119,000~~and $120,158,000 of short-term bank ~~deposits and $5,234,000 of marketable securities.~~deposits.

From inception through September 30, ~~2022,~~2023, we have not generated significant revenues from our operations. Management continues to evaluate various financing alternatives for funding new strategic activities, future research and development activities and general and administrative expenses through fundraising in the public or private equity markets. Although there is no assurance that we will be successful with those initiatives, management believes that it will be able to secure the necessary financing as a result of future third party investments. Following 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 currently incurring lower research and development and sales and marketing expenses.

Based on our current cash resources and commitments, we believe we will be able to maintain our current planned ~~development~~ activities and the corresponding level of expenditures for at least the next 12 months, although no assurance can be given that we will not need additional funds prior to such time.

If there are unexpected increases in our operating expenses, we may need to seek additional financing during the next 12 months. ~~Successful completion~~We may also need additional funds to realize the decisions made as part of our development programs and our transition to normal operations is dependent upon obtaining necessary regulatory approvals from the FDA prior to selling our products within the United States, obtaining foreign regulatory approvals to sell our products internationally, or entering into licensing agreements with third parties. There can be no assurance that we will receive regulatory approval of any of our product candidates, and a substantial amount of time may pass before we achieve a level of revenues adequate to support our operations, if at all. We also expect to incur substantial expenditures in connection with the regulatory approval process for each of our product candidates during their respective developmental periods. Obtaining marketing approval will be directly dependent on our ability to implement the necessary regulatory steps required to obtain marketing approval in the United States and in other countries.strategic review process. We cannot predict the outcome of these activities.

On August 9, 2023, we entered into the Senior DIP Loan Agreement with the Debtors in the principal amount of $100,000,000.

On the Closing Date, we entered into and consummated the Transaction. 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 us (A) the Note, (B) the Closing Penny Warrant, and (C) the Subsequent Penny Warrants, and (ii) caused the Transferred Warrants to be transferred to us. 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 the Company and Sorrento may have against one another, and Scilex completed the acquisition of the Purchased Securities.

On August 8, 2023, we borrowed an aggregate of $99,550,000 pursuant to loan agreements from Israel Discount Bank Ltd., or 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%, are secured by certificates of deposits issued by Israel Discount Bank Ltd. having an aggregate face amount of $99,550,000. The net proceeds of the Short-Term Borrowings were used to fund the Note. The Short-Term Borrowings are paid in one payment of principal and interest at each respective maturity. As of September 30, 2023, $25,000,000 was repaid under the Short-Term Borrowings.

As of September 30, 2023, our total current assets were $175,705,000 and our total current liabilities were $78,175,000. On September 30, 2023, we had a working capital surplus of $97,530,000 and an accumulated loss of $170,892,000. As of December 31, 2022, our total current assets were ~~$160,172,000~~$157,109,000 and our total current liabilities were ~~$6,525,000.~~$5,746,000. On ~~September 30,~~December 31, 2022, we had a working capital surplus of ~~$153,647,000~~$151,363,000 and an accumulated loss of ~~$154,538,000. As of~~$163,081,000. The decrease in working capital from December 31, ~~2021, our total current assets were $147,937,000~~2022 to September 30, 2023 was mainly due to a decrease in cash and ~~our total current liabilities were $7,368,000. On December 31, 2021, we had a working capital surplus of $140,569,000~~cash equivalents, marketable securities, partially offset by an increase in short term deposits and ~~an accumulated loss of $126,520,000.~~accounts payable and accrued expenses.

During the nine month period ended September 30, ~~2022,~~2023, cash and cash equivalents ~~were $33,196,000, compared~~decreased to ~~$27,456,000~~$5,468,000, from $40,464,000 as of December 31, ~~2021.~~2022. The ~~increase~~decrease was mainly due to the reasons described below.

Operating activities used cash of ~~$19,856,000~~$8,877,000 in the nine month period ended September 30, ~~2022,~~2023, compared to ~~$13,899,000~~$19,856,000 used in the nine month period ended September 30, ~~2021.~~2022. Cash used in operating activities primarily consisted of research and development, sales and marketing and general and administrative expenses and changes in stock-based compensation expenses, interest on deposits, interest paid on Short-Term Borrowings, accounts payable and ~~prepaid~~accrued expenses.

Investing activities used cash of $103,035,000 in the nine month period ended September 30, 2023, compared to cash provided ~~cash~~by investing activities of $18,951,000 in the nine month period ended September 30, ~~2022, compared to cash~~2022. Cash used ~~in investing activities of $21,054,000 in the nine month period ended September 30, 2021. Cash provided~~ by investing activities in the nine month period ended September 30, ~~2022~~2023 consisted primarily of our investment in the ~~proceeds from short-term deposits~~Transaction and ~~from held to maturity securities, partially offset by~~ the purchase of short-term ~~deposits. Cash used in investing activities in the nine month period ended September 30, 2021 consisted primarily of the investing in long and short-term~~ deposits, ~~and the purchase of held to maturity securities,~~ partially offset by ~~the~~ proceeds from ~~bonds held to maturity and from redemption of short-term deposits.~~short term investing activities.

Financing activities provided cash of ~~$6,604,000~~$76,978,000 in the nine month period ended September 30, ~~2022,~~2023, compared to ~~$97,739,000~~$6,604,000 provided in the nine month period ended September 30, ~~2021.~~2023. Cash provided by financing activities consisted primarily of proceeds from the ~~issuance of our common stock and from the exercise of warrants and options.~~Short-Term Borrowings.

On September 1, 2021, we entered into a controlled equity offering agreement, or the Cantor Equity Distribution Agreement, with Cantor Fitzgerald & Co., as agent, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $100,000,000, through a sales agent, subject to certain terms and conditions. Any shares sold will be sold pursuant to our effective shelf registration statement on Form S-3 including a prospectus dated July 26, 2021 and prospectus supplement dated September 1, 2021. We paid the sales agent a cash commission of 3.0% of the gross proceeds of the sale of any shares sold through the sales agent under the Cantor Equity Sales Agreement. As of ~~November 10, 2022, 1,334,695~~September 30, 2023, 1,971,447 shares were issued under the Cantor Equity Distribution Agreement for aggregate net proceeds of ~~$19,664,000.~~$26,253,000.

On November 3, 2021, we entered into a securities purchase agreement with several institutional and accredited investors, or the Purchasers, pursuant to which we agreed to sell, in a registered direct offering, or the Offering, an aggregate of 2,000,000 shares of our common stock to the Purchasers for an offering price of $25.00 per share. The closing of the sale of the shares occurred on November 5, 2021. The net proceeds to us from the Offering, after deducting the placement agent’s fees and expenses and the Company’s Offering expenses, were approximately $46,375,000.

On August 26, 2022, we entered into a stock purchase agreement with Diasome Pharmaceuticals, Inc., or Diasome, pursuant to which we purchased shares of Series B preferred stock of Diasome for an aggregate purchase price of approximately $2,700,000. Following the purchase, we hold less than 5% of the issued and outstanding stock of Diasome on a diluted basis. The stock purchase agreement provides us with the option to purchase additional preferred shares of stock on a pro rata basis at similar terms to the terms and conditions of the current round contingent upon Diasome achieving certain milestones.

Critical accounting policies and estimates

Our critical accounting policies are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual ~~Report.~~Report, except as mentioned below.

Our investment in the Transferred Warrants is accounted for as derivatives measured at fair value.

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

The fair value of the Note and the Penny Warrants is impacted by our assumptions regarding the possibility of an early repayment of the Note, in accordance with the terms of the Note.

Planned Expenditures

We ~~invest~~have invested heavily in research and development, and we expect that in the upcoming years our research and development expenses will continue to be our major operating expense.

Following the results of the Phase 3 trials for our oral insulin capsule candidate, ORMD-0801 and the current strategic review initiated by the Company, our obligations may change significantly.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in our exposure to market risk during the quarter ended September 30, ~~2022.~~2023. For a discussion of our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report.

ITEM 4 - CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2022.~~2023. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A - Risk Factors

An investment in our securities involves a high degree of risk. You should consider carefully the following information about these risks, together with the other risks contained under the heading “Item 1A. Risk Factors” in our Annual Report before making an investment decision. Our business, prospects, financial condition and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in “Item 1A. Risk Factors” are forward-looking statements. The following risk factors are not the only risk factors facing the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

Risks Related to Our Business

If we fail to establish a joint venture with HTIT, if such joint venture is not successful or if we fail to realize the benefits we anticipate from such joint venture, we may not be able to capitalize on the full market potential of our drug products and technology.

On August 2, 2023, we signed a non-binding term sheet with HTIT to establish a joint venture, or the JV, based on Oramed’s oral drug delivery technology. The JV is subject to the execution of a binding definitive agreement and there can be no assurances, that we will enter into the binding and definitive agreements with HTIT in a particular time period, or at all, or on terms similar to those set forth in the non-binding term sheet, or that if such definitive agreements are entered into, that the JV will receive the necessary regulatory approvals for the Phase 3 oral insulin trial in the United States or that our drug products and our technology will be developed and commercialized successfully. In addition, the JV will subject us to a number of risks including risks relating to the lack of full control of the JV, potential disagreements with HTIT about how to manage the JV that may result in the delay or termination of the commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources, conflicting interests of the JV, and the JV and its business not being profitable.

While we believe that our board representation, voting rights and other contractual rights with respect to the JV will serve to mitigate some of these risks, we may have disagreements with the other directors and HTIT that could impair our ability to influence the JV to act in a manner that we believe is in the best interests of our Company.

We have lent a substantial amount of funds to Scilex. In the event that Scilex is unable to service its obligations under and defaults on the Note, it could have a material adverse effect on our business.

On September 21, 2023, we were issued the Note in an aggregate principal amount of $101,875,000 by Scilex pursuant to the Scilex SPA. The Note matures on March 21, 2025 and is payable in six principal installments, with the first installment payable on December 21, 2023. Interest under the Note accrues at a fluctuating per annum interest rate equal to the sum of (1) the greater of (x) four percent (4%) and (y) Term SOFR (as defined in the Note) and (2) eight and one half percent (8.5%), payable in-kind on a monthly basis.

There is no guarantee that Scilex will be able to service its repayment obligations under the Note. Although the Note is secured by a first priority security interest in and liens on all of the assets of Scilex and its subsidiaries, no assurance can be made that Scilex will be able to repay the Note when due. In such an event, we could lose all or a substantial portion of our loan investment. Additionally, Scilex has disclosed in its periodic reports filed with the SEC that there is substantial doubt about its ability to continue as a going concern. If Scilex is unable to continue as a going concern or defaults on the Note, we may be unable to recover some or all of the principal amount of the Note, which could have a material adverse affect on our business, financial condition and results of operations.

We may have difficulty realizing the full value of the 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 certain members of Scilex management engage 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 Subsequent Penny Warrants will vest and become exercisable on the date that is the later of (i) Subsequent Penny Warrant Vesting Date, and (ii) the earliest of (A) March 14, 2025, (B) the date on which the Note has been repaid in full and (C) the Management Sale Trigger Date, if any. Each Subsequent Penny Warrant will expire on the date that is the fifth anniversary of the issuance date; provided that, if the 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 Note is repaid in full.

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

Because of the foregoing restrictions on exercisability of the Closing Penny Warrant and the Subsequent Penny Warrants, and exercise price of the Transferred Warrants, we may not be able to exercise the Warrants for shares of Scilex Common Stock at a time when it would be financially beneficial for us to do so. Accordingly, there is no guarantee that we will be able to realize the full or any value of the Warrants.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 15, 2023, we issued 3,000 shares of our common stock to Corporate Profile, LLC, or Corporate Profile, in payment of a portion of the consulting fee for investor relations services owed to Corporate Profile pursuant to a Letter Agreement, dated August 3, 2023, between us and Corporate Profile.

We issued these shares pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 6 – EXHIBITS

Number		Exhibit

~~3.1~~10.1+		~~Third Amended~~Securities Purchase Agreement, dated September 21, 2023 by and ~~Restated By-laws~~between Scilex Holding Company and Oramed Pharmaceuticals Inc. (incorporated by reference from our current report on Form 8-K filed September ~~19, 2022)~~26, 2023).

10.2		Senior Secured Promissory Note, dated September 21, 2023 issued to Oramed Pharmaceuticals Inc. by Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.3		Warrant No. ORMP CS-1 to Purchase Common Stock of Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.4		Warrant No. ORMP CS-2 to Purchase Common Stock of Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.5		Warrant No. ORMP CS-3 to Purchase Common Stock of Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.6		Warrant No. ORMP CS-4 to Purchase Common Stock of Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.7		Warrant No. ORMP CS-5 to Purchase Common Stock of Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.8		Scilex Holding Company Specimen Warrant Certificate (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.9		Registration Rights Agreement, dated September 21, 2023, by and between Oramed Pharmaceuticals Inc. and Scilex Holding Company (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.10+		Subsidiary Guarantee, dated September 21, 2023, by and among Oramed Pharmaceuticals, Acquiom Agency Services LLC, Scilex Holding Company, and certain subsidiaries of Scilex Holding Company party thereto (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.11		Security Agreement, dated September 21, 2023, by and among Oramed Pharmaceuticals, Acquiom Agency Services LLC, Scilex Holding Company, and certain subsidiaries of Scilex Holding Company party thereto (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

10.12		Mutual Termination and Release Agreement, dated September 21, 2023, by and between Sorrento Therapeutics, Inc. and Oramed Pharmaceuticals, Inc. (incorporated by reference from our current report on Form 8-K filed September 26, 2023).

31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15(d)-14(a) under the Securities Exchange Act of 1934, as amended.

32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

101.1*		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2022~~2023 formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

104.1*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith

Furnished herewith

Certain exhibits and similar attachments to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted exhibit or other attachment will be furnished supplementally to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ORAMED PHARMACEUTICALS INC.

Date: November ~~10, 2022~~9, 2023	By:	/s/ Nadav Kidron
		Nadav Kidron
		President and Chief Executive Officer

Date: November ~~10, 2022~~9, 2023	By:	/s/ David Silberman
		David Silberman
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

2634

iso4217:USD xbrli:shares

	September 30, 2022
	Amortized cost		Gross unrealized gains (losses)			Estimated fair value		Average yield to maturity rate
Short-term:
Commercial bonds	$	4,485	$	(129	)	$	4,356		1.05	%
Accrued interest		43		-			43
	$	4,528	$	(129	)	$	4,399

	December 31, 2021
	Amortized cost		Gross unrealized gains (losses)			Estimated fair value		Average yield to maturity rate
Short-term:
Commercial bonds	$	6,432	$	(115	)	$	6,317		1.37	%
Accrued interest		115		-			115

Long-term		3,875		(29	)		3,846		1.20	%
	$	10,422	$	(144	)	$	10,278