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Item 7. Management’s Discussion and Analysis

2024-03-06 compared with 2023-03-06 · 310 added, 325 removed, 149 unchanged (81% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion

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Overview of Operations

We are currently a pharmaceutical

company engaged in the research and development of innovative pharmaceutical solutions with a technology platform that allows for the

oral delivery of therapeutic proteins.

Through our research and development

efforts, we have developed an oral dosage form intended to withstand the harsh environment of the stomach and effectively deliver active

biological insulin or other proteins.

The excipients in the formulation are not intended to modify the proteins chemically or biologically,

and the dosage form is designed to be safe to ingest.

We plan to continue to conduct clinical trials to show the effectiveness of our

We are a pharmaceutical company

engaged in the research and development of innovative pharmaceutical solutions with a technology platform that allows for the oral delivery

of therapeutic proteins.

We have developed an oral

dosage form intended to withstand the harsh environment of the stomach and effectively deliver active biological insulin or other proteins.

The 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 and secondary endpoints.

As a result, we have initiated a comprehensive analysis

of the data to understand if there is a path forward for our oral insulin candidate.

Concurrently, we are examining our existing pipeline

and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing value for our stockholders.

Impact of COVID-19

We do not expect any material

impact on our development timeline and our liquidity due to COVID-19.

However, we experienced approximately six months of delays in clinical

trials due to slow-downs of recruitment for trials generally.

On the other hand, Oravax continues to develop its oral vaccine, the demand

for which may be reduced if COVID-19 continues to abate.

We continue to assess the effect on our operations by monitoring the status of

that the ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints.

As a result, we terminated this trial and a parallel

Phase 3, ORA-D-013-2 clinical trial.

In 2023, we completed an analysis of the data from the ORA-D-013-1 Phase 3 trial and found that

subpopulations of patients with pooled specific parameters, such as BMI, baseline HbA1c and age, responded well to oral insulin.

on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA.

We are additionally examining

our existing pipeline and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing value

for our stockholders.

On September 21, 2023, 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.

For further details, see “Item 1 – Business – Description of Business – Scilex Transaction.”

On January 22, 2024, we entered

into the JV Agreement with HTIT, pursuant to which, subject to the terms and conditions set forth in the JV Agreement, the parties will

establish the JV based on Oramed’s oral drug delivery technology.

The JV will 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 parties intend for the JV to use the protocol we are currently working on to initiate a Phase 3 oral

insulin trial in the United States.

For further details, see “Item 1 – Business – Research and Development –

Oral Insulin.”

Results of Operations

The table and discussion that

follows includes a comparison of our results of operations and liquidity and capital resources for the year ended December 31, 2022 and

the year ended December 31, 2021 and the four month periods ended December 31, 2021 and 2020.

For a comparison of our results of operations

and financial condition for the fiscal years ended August 31, 2021 and 2020, see “Item 7.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended August 31,

2021, filed with the SEC on November 24, 2021.

For information regarding the change in 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, see note 1 to our audited

consolidated financial statements.

(dollar amounts in thousands, except share and per share data)

The table and discussion

that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31,

2023 and 2022.

For a comparison of our results of operations and financial condition for the year ended December 31, 2022 and the year

ended December 31, 2021, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”

included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023.

(dollar amounts in thousands, except per share data)

Cost of revenues

Research and development expenses

Sales and marketing expenses

Sales and marketing

General and administrative expenses

Financial income (expense), net

Loss before taxes on income

Interest expenses

Financial income (expenses), net

Income (loss) before taxes on income

Taxes on income

Net loss for the period

Net loss attributable to Company’s stockholders

Net income (loss) for the year

Net income (loss) attributable to Company’s stockholders

Net loss attributable to non-controlling interest

Net loss for the period

Basic and diluted loss per share of common stock

Weighted average shares of common stock outstanding used in computing basic and diluted loss per share of common stock

Net income (loss) for the year

Basic income (loss) per share of common stock

Diluted income (loss) per share of common stock

Weighted average shares of common stock outstanding used in computing basic income (loss) per share of common stock

Weighted average shares of common stock outstanding used in computing diluted income (loss) per share of common stock

Revenues consist of proceeds

related to 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

Revenues for the years ended

December 31, 2022 and 2021 were both $2,703.

Revenues for the four month

periods ended December 31, 2021 and 2020 were both $904.

amount of cumulative revenue recognized will not occur, through the expected product submission date by HTIT of June 2023, using the

input method.

Revenues for the year ended

December 31, 2023 decreased by 50% to $1,340,000, compared to $2,703,000 for the year ended December 31, 2022.

The decrease was mainly

due to recognition of revenues until the product submission date by HTIT in June 2023.

Cost of Revenues

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There was no cost of revenues

for the years ended December 31, 2022 and 2021 and the four month periods ended December 31, 2021 and 2020.

for the years ended December 31, 2023 and 2022.

Research and Development

Research and development expenses

include costs directly attributable to the conduct of research and development programs, including the cost of salaries, employee benefits,

costs of 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.

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.

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

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Clinical trial and pre-clinical

trial expenses include regulatory and scientific consultants’ compensation and fees, research expenses, purchase of materials, cost

of 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 year ended December 31, 2022 increased by 19% to $27,639,000, compared to $23,203,000 for the year ended December 31, 2021.

increase was mainly due to an increase in expenses related to our Phase 3 clinical trials and to stock-based compensation expenses.

compensation expenses for the year ended December 31, 2022, were $3,176,000, compared to $1,598,000 for the year ended December 31, 2021.

The increase was mainly due to new grants in 2022.

Research and development expenses

for the four month period ended December 31, 2021 increased by 31% to $9,037,000, compared to $6,889,000 for the four month period ended

December 31, 2020.

The increase was mainly due to an increase in expenses related to our Phase 3 and NASH clinical trials in addition

to expenses related to in process research and development costs related to Oravax.

Stock-based compensation expenses for the four month

period ended December 31, 2021, were $649,000, compared to $171,000 for the four month period ended December 31, 2020.

The increase was

mainly due to equity awards granted to a consultant and to new grants awarded in 2021.

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 have initiated a comprehensive analysis of the data to understand if there is a path forward for our oral insulin candidate.

examining our existing pipeline and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing

value for our stockholders.

trial expenses include regulatory and scientific consultants’ compensation and fees, research expenses, purchase of materials,

cost of 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 year ended December 31, 2023 decreased by 68% to $8,971,000, compared to $27,639,000 for the year ended December 31,

The decrease was mainly due to a decrease in expenses related to our Phase 3 clinical trials and in stock-based compensation expenses.

Stock-based compensation expenses for the year ended December 31, 2023, were $1,718,000, compared to $3,176,000 for the year ended December

This decrease was mainly due to performance equity awards that expired because they did not meet their performance conditions

during the year ended December 31, 2023 and to awards that were granted and issued during the year ended December 31, 2022.

Following the results of

the ORA-D-013-1 Phase 3 trial, which did not meet its primary or secondary endpoints, we terminated both ORA-D-013-1 and ORA-D-013-2

Phase 3 clinical trials.

In 2023, we completed an analysis of the data from the ORA-D-013-1 Phase 3 trial and found that subpopulations

of patients with pooled specific parameters responded well to oral insulin.

Based on this analysis, we are working on a protocol for

a new Phase 3 clinical trial to be submitted to the FDA.

We are also examining our existing pipeline and have commenced an evaluation

process of potential strategic opportunities, with the goal of enhancing value for our stockholders.

Government Grants

The Government of Israel encourages

research and development projects through the IIA, pursuant to the R&D Law.

Under the R&D Law, a research and development plan

that meets specified criteria is generally eligible for a grant of up to 50% of certain approved research and development expenditures.

The Government of Israel

encourages research and development projects through the IIA, pursuant to the R&D Law.

Under the R&D Law, a research and development

plan that meets specified criteria is generally eligible for a grant of up to 50% of certain approved research and development expenditures.

Each plan must be approved by the IIA.

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In the years ended December

31, 2022 and 2021, the four month periods ended December 31, 2021 and 2020 and the year ended August 31, 2021, we did not recognize any

research and development grants.

As of December 31, 2022, we had incurred liabilities to pay royalties to the Israel Innovation Authority

of the Israeli Ministry of Economy and Industry of $133,000.

31, 2023 and 2022, we did not recognize any research and development grants.

As of December 31, 2023, we had incurred liabilities to pay

royalties to the Israel Innovation Authority of the Israeli Ministry of Economy and Industry of $59,000.

Under the terms of the grants

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to the funded plans, including revenues from licensed ancillary services.

Royalties are generally payable up to a maximum amount equaling

100% of the grants received (dollar linked) with the addition of interest at an annual rate based on the LIBOR rate.

Royalties are generally payable up to a maximum amount equalling

100% of the grants received (dollar linked) with the addition of interest at an annual rate based on the SOFR rate.

The R&D Law generally

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out of Israel, the grant recipient is required to pay royalties at an increased rate, which may be substantial, and the aggregate repayment

amount is increased up to 120%, 150% or 300% of the grant, depending on the portion of the total manufacturing volume that is performed

amount is increased up to 120% or 150% of the grant received (dollar linked) with the addition of interest at an annual rate based on

the SOF R rate, depending on the portion of the total manufacturing volume that is performed

outside of Israel.

The approval we received from the IIA for the License Agreement was subject to payment of increased royalties and an

increased ceiling, all in accordance with the provisions of the R&D Law.

The R&D Law further permits the IIA, among other things,

to approve the transfer of manufacturing rights outside of Israel in exchange for the import of different manufacturing into Israel as

a substitute, in lieu of the increased royalties.

The approval we received from the IIA for the License Agreement was subject to payment of increased royalties and

an increased ceiling, all in accordance with the provisions of the R&D Law.

The R&D Law further permits the IIA, among other

things, to approve the transfer of manufacturing rights outside of Israel in exchange for the import of different manufacturing into

Israel as a substitute, in lieu of the increased royalties.

The R&D Law also provides

that know-how developed under an approved research and development program may not be transferred or licensed to third parties in Israel

without the approval of the research committee.

Such approval is not required for the sale or export of any products resulting from such

research or development.

The R&D Law further provides that the know-how developed under an approved research and development program

that know-how developed under an approved research and development program and any derivatives thereof may not be transferred or licensed

to third parties in Israel without the approval of the research committee, which approval may be subject to the payment of royalties

from the sale.

Such approval is not required for the sale or export of any products resulting from such research or development.

R&D Law further provides that the know-how developed under an approved research and development program and any derivatives thereof

may not be transferred or licensed to any third parties outside Israel absent IIA approval which may be granted in certain circumstances

(a) the grant recipient pays to the IIA a portion of the sale or license price paid in consideration for the purchase or license

of such IIA-funded know-how or the price paid in consideration for the sale of the grant recipient itself, as the case may be, in accordance

with certain formulas included in the R&D Law;

(b) the grant recipient receives know-how from a third party in exchange for its IIA-funded

or (c) such transfer of IIA-funded know-how is made in the context of IIA approved research and development cooperation projects

or consortia.

(a) the grant recipient pays to the IIA a portion of the sale or license price paid in consideration for the purchase or

license of such IIA-funded know-how or the price paid in consideration for the sale of the grant recipient itself, as the case may be,

in accordance with certain formulas included in the tracks published under the R&D Law;

(b) the grant recipient receives know-how

from a third party in exchange for its IIA-funded know-how;

or (c) such transfer of IIA-funded know-how is made in the context of IIA

approved research and development cooperation projects or consortia.

The R&D Law imposes reporting

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the IIA of any change in control of the recipient or a change in the holdings of the means of control of the recipient that results in

a non-Israeli entity becoming an interested party in the recipient, and requires the new non-Israeli interested party to undertake to

the IIA to comply with the R&D Law.

a non-Israeli entity or person becoming an interested party in the recipient, and requires the new non-Israeli interested party to undertake

to the IIA to comply with the R&D Law.

In addition, the rules of the IIA may require the provision of additional information or representations

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other than any ability arising solely from serving as an officer or director of the company.

A person is presumed to have control if such

person holds 50% or more of the means of control of a company.

“Means of control” refers to voting rights or the right to

appoint directors or the chief executive officer.

An “interested party” of a company includes a holder of 5% or more of its

outstanding share capital or voting rights, its chief executive officer and directors, someone who has the right to appoint its chief

executive officer or at least one director, and a company with respect to which any of the foregoing interested parties holds 25% or more

of the outstanding share capital or voting rights or has the right to appoint 25% or more of the directors.

A person is presumed to have control if

such person holds 50% or more of the means of control of a company.

“Means of control” refers to voting rights or the right

to appoint directors or the chief executive officer.

An “interested party” of a company includes a holder of 5% or more of

its outstanding share capital or voting rights, its chief executive officer and directors, someone who has the right to appoint its chief

executive officer or at least one director, and a company with respect to which any of the foregoing interested parties holds 25% or

more of the outstanding share capital or voting rights or has the right to appoint 25% or more of the directors.

Failure to meet the R&D

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Sales and marketing expenses

include the salaries and related expenses of our commercial functions, consulting costs and other general costs.

Sales and marketing expenses for the year ended December 31, 2022 increased

by 106% to $1,851,000, compared to $898,000 for the year ended December 31, 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

expenses for the year ended December 31, 2022 were $1,172,000, compared to $579,000 for the year ended December 31, 2021.

was mainly due to equity awards granted to an employee during 2022.

Sales and marketing expenses

for the four month period ended December 31, 2021 were $898,000, compared to no expenses for the four month period ended December 31,

The increase was mainly due to stock-based compensation expenses, salary related expenses and consulting expenses.

Stock-based compensation

costs for the four month period ended December 31, 2021 were $579,000, compared to no stock-based compensation expenses during the four

month period ended December 31, 2020.

The increase was mainly due to equity awards granted to an employee during 2021.

General and Administrative

include the salaries and related expenses of our commercial functions, consulting costs and other general expenses.

We recorded sales and marketing

income of $287,000 for the year ended December 31, 2023, compared to expenses of $1,851,000 for the year ended December 31, 2022.

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 year ended

December 31, 2023, compared to expenses of $1,172,000 for the year ended December 31, 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.

General and Administrative

expenses include the salaries and related expenses of our management, consulting costs, legal and professional fees, travel expenses,

business development costs, insurance expenses and other general costs.

General and administrative

expenses for the year ended December 31, 2022 increased by 82% to $13,811,000, compared to $7,591,000 for the year ended December 31,

The increase was mainly due to higher stock-based compensation costs, an increase in legal expenses and higher salary expenses due

to the recruitment of new employees in the year ended December 31, 2022, partially offset by lower bonuses in the year ended December

Stock-based compensation expenses for the year ended December 31, 2022 were $7,160,000, compared to $2,368,000 for the year

ended December 31, 2021.

The increase was mainly due to equity awards granted to employees during 2022.

expenses include the salaries and related expenses of our management, consulting expenses, legal and professional fees, travel expenses,

business development expenses, insurance expenses and other general expenses.

General and administrative

expenses for the four month period ended December 31, 2021 increased by 109% to $3,295,000, compared to $1,576,000 for the four month

period ended December 31, 2020.

The increase was mainly due to an increase in stock-based compensation expenses and professional fees

as well as public relations and investor relations expenses.

Stock-based compensation costs for the four month period ended December 31,

2021 were $1,034,000, compared to $242,000 during the four month period ended December 31, 2020.

The increase was mainly due to equity

awards granted to employees during the four month period ended December 31, 2021 and to new award grants during 2021.

Financial Income (Expense),

Net financial income was $2,934,000

for the year ended December 31, 2022, compared to net financial income of $1,068,000 for the year ended December 31, 2021.

is mainly due to interest from short and long-term bank deposits, partially offset by loss from revaluation of the shares we hold in Entera

expenses for the year ended December 31, 2023 decreased by 39% to $8,425,000, compared to $13,811,000 for the year ended December 31,

The decrease was mainly due to lower stock-based compensation costs and legal expenses, partially offset by higher consulting expenses.

Stock-based compensation expenses for the year ended December 31, 2023 were $2,933,000, compared to $7,160,000 for the year ended December

The decrease was mainly due to equity awards granted to employees during 2022, and performance equity awards that did not meet

their performance conditions during the year ended December 31, 2023.

Interest Expenses

Interest expenses were $2,037,000

for the year ended December 31, 2023, while there were no interest expenses for the year ended December 31, 2022.

The increase was mainly

due to interest on the Short-Term Borrowings (as defined herein).

Financial Income, Net

Net financial income was

for the four month period ended December 31, 2021, compared to $237,000 for the four month period ended December 31, 2020.

is mainly due to a decrease in fair value of the ordinary shares of Entera.

Basic and Diluted Loss

Per Share of Common Stock

Basic and diluted loss per

share of common stock for the year ended December 31, 2022 increased by 16% to $0.94, compared to $0.81 for the year ended December 31,

The increase in loss was mainly due to the higher net loss in the year ended December 31, 2022 compared to the year ended December

Basic and diluted loss per

share of common stock for the four month period ended December 31, 2021 increased by 3% to $0.31, compared to $0.30 for the four month

period ended December 31, 2020.

The increase in loss per share was due to a higher net loss and a higher number of weighted average shares

of common stock in the four month period ended December 31, 2021 compared to the four month period ended December 31, 2020.

$22,894,000 for the year ended December 31, 2023, compared to $2,934,000 for the year ended December 31, 2022.

The increase was mainly

due to revaluation of the Transaction (as defined herein), interest from short-term bank deposits and revaluation of non-marketable equity

Basic and Diluted Income

and Loss Per Share of Common Stock

Basic and diluted income per

share of common stock for the year ended December 31, 2023 was $0.14 per share, compared to a basic and diluted loss of $0.94 per share

for the year ended December 31, 2022.

This was primarily due to the changes discussed above that caused us to have income in the year

ended December 31, 2023, compared to a loss in the year ended December 31, 2022.

Weighted Average Shares

of Common Stock Outstanding

Weighted average shares of

common stock outstanding for the year ended December 31, 2022 were 38,997,649, compared to 32,641,288 for the year ended December 31,

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 used in computing

basic income (loss) per share of common stock for the year ended December 31, 2023 were 40,315,068 compared to 38,997,649 for the year

ended December 31, 2022.

The increase was mainly due to RSUs that vested during the year ended December 31, 2023.

Weighted average shares of

common stock outstanding for the four month period ended December 31, 2021 were 37,113,137, compared to 24,394,010 for the four month

period ended December 31, 2020.

The increase was mainly due to shares issued in connection with our controlled equity offering and registered

direct offering.

common stock outstanding used in computing diluted income (loss) per share of common stock for the year ended December 31, 2023 were 40,566,901

compared to 38,997,649 for the year ended December 31, 2022.

The increase was mainly due to RSUs that vested during the year ended December

For the diluted earnings

per share calculation, the weighted average number of shares outstanding during the year is adjusted for the average number of shares

that are potentially issuable in connection with employee share-based payment, using the treasury stock method.

Liquidity and Capital Resources

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December 31, 2023, we have incurred losses in an aggregate amount of $157,556,000.

During that period and through December 31, 2022, we

have financed our operations through several private placements of our common stock, as well as public offerings of our common stock,

During that period and through December 31, 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 $255,384,000, net of transaction costs.

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We expect to seek additional financing through similar sources in the future, as needed.

As of December

31, 2022, we had $40,464,000 of available cash, $111,513,000 of short-term bank deposits, $3,743,000 of marketable securities and $2,700,000

of long-term investments.

December 31, 2023, we had $9,055,000 of available cash and $95,279,000 of short-term bank deposits.

From inception through December

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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 conducted a strategic review process.

As a result, we are currently incurring lower research and development and sales and marketing

We are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA.

Concurrently, we are examining our

existing pipeline and have commenced an evaluation process of potential strategic opportunities.

Based on our current cash

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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 increases in

our operating expenses, we may need to seek additional financing during the next 12 months.

Successful completion 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

Obtaining marketing approval will be directly dependent on our ability to implement the necessary regulatory steps required to

obtain marketing approval in the United States and in other countries.

We may also need additional funds to realize the decisions made

as part of our strategic review process.

are increases in our operating expenses, we may need to seek additional financing during the next 12 months.

We may also need additional

funds to realize the decisions made as part of our 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 September 21, 2023, 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 December 31, 2023, $50,000,000 was repaid under the Short-Term Borrowings.

As of December 31, 2023, our

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loss of $163,081,000.

The increase in working capital surplus from December 31, 2021 to December 31, 2022 was mainly due to an increase

in cash and cash equivalents.

The decrease in working capital surplus from December 31, 2022 to December 31, 2023 was mainly due to the Short-Term

During the year ended December

31, 2022, cash and cash equivalents decreased to $40,464,000 from $77,245,000 as of August 31, 2021.

The decrease was mainly due to the

reasons described below.

31, 2023, cash and cash equivalents decreased to $9,055,000 from $40,464,000 as of December 31, 2022.

The decrease was mainly due to

the reasons described below.

Operating activities used

cash of $27,918,000 in the year ended December 31, 2022, compared to $21,181,000 used in the year ended August 31, 2021.

operating activities consisted mainly of net loss resulting from research and development, general and administrative and sales and marketing

Investing activities provided cash of $30,211,000 in the year ended

December 31, 2022, compared to cash used by investing activities of $23,764,000 in the year ended August 31, 2021.

Cash provided in investing

activities is mainly due to proceeds from short-term investments, partially offset by the acquisition of short-term investments.

cash of $10,295,000 in the year ended December 31, 2023, compared to $27,918,000 used in the year ended December 31, 2022.

in operating activities consisted mainly of changes in fair value of investments partially offset by net loss resulting from research

and development and general and administrative expenses.

Investing activities used

cash of $73,038,000 in the year ended December 31, 2023, compared to cash provided by investing activities of $30,211,000 in the year

ended December 31, 2022.

Cash used in investing activities is mainly due to our investment in the Transaction and the purchase of short-term

deposits, partially offset by the proceeds of short-term deposits.

Financing activities provided

cash of $10,779,000 in the year ended December 31, 2022, compared to $102,892,000 in the year ended August 31, 2021.

cash of $51,978,000 in the year ended December 31, 2023, compared to $10,779,000 in the year ended December 31, 2022.

Cash provided by

financing activities consisted mainly of proceeds from our issuance of common stock and proceeds from exercise of warrants and options.

Our primary financing activities since the beginning of the year ended December 31, 2022 were as follows:

financing activities consisted mainly of the Short-Term Borrowings.

Our primary financing activities since the beginning of the year

ended December 31, 2023, were as follows:

● During the year ended December 31,

4,200 warrants were exercised and 71,607 options were exercised, resulting in the issuance of 38,651 shares of common stock.

of these exercised options, 10,750 options were exercised for cash and 60,857 via a cashless method.

The cash consideration received

for the exercise of options and warrants was $62,490.

During the four month period ended December 31, 2021, 73,800 warrants were

exercised and 18,166 options were exercised for cash, resulting in the issuance of 91,966 shares of common stock.

The cash consideration

received for the exercise of options and warrants was $638,267.

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 we may issue and sell shares of our common stock having an aggregate offering price of up to $100,000,000, through a sales

2023, no warrants and options were exercised.

During the year ended December 31, 2022, 4,200

warrants were exercised and 71,607 options were exercised, resulting in the issuance of 38,651

shares of common stock.

Out of these exercised options, 10,750 options were exercised for

cash and 60,857 via a cashless method.

The cash consideration received for the exercise of

options and warrants was $62,490.

During the year ended December 31, 2023, we received $5,156,000 of income, mainly from interest on short-term and long-term deposits.

During the year ended December 31, 2022, we received $1,844,000 of income, mainly from interest on short-term and long-term deposits.

● 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 we may issue and sell shares

of our 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

As of December 31, 2022 and through March 6, 2023, 1,778,147 and 1,971,447 shares, respectively, were issued under the

Cantor Equity Distribution Agreement for aggregate net proceeds of $23,823,000 and $26,253,000, respectively.

During the four month period

ended December 31, 2021, cash and cash equivalents decreased to $27,456,000 from the $77,245,000 reported as of August 31, 2021, which

is due to the reasons described below.

Operating activities used

cash of $11,122,000 in the four month period ended December 31, 2021, compared to $8,263,000 used in the four month period ended December

Cash used in operating activities primarily consisted of research and development, sales and marketing and general and administrative

expenses, as well as changes in deferred revenue due to the HTIT License Agreement, partially offset by changes in accounts payable and

accrued expenses and stock-based compensation.

Investing activities used

cash of $99,248,000 in the four month period ended December 31, 2021, compared to cash used in investing activities of $2,405,000 in the

four month period ended December 31, 2020.

Cash used in investing activities in the four month period ended December 31, 2021 consisted

primarily of the purchase of short-term deposits.

Cash used in investing activities in the four month period ended December 31, 2020 consisted

primarily of the purchase of short-term deposits, offset by the proceeds from bonds held to maturity.

Financing activities provided

cash of $60,572,000 in the four month period ended December 31, 2021, compared to $13,001,000 provided in the four month period ended

December 31, 2020.

Cash provided by financing activities consisted primarily of proceeds from the issuance of our common stock.

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

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 December 31, 2023 and through March

6, 2024, 1,971,447 shares were issued under the Cantor Equity Distribution Agreement for

aggregate net proceeds of $26,253,000.

Trend Information

Following the results of the

Phase 3 trials for our oral insulin capsule candidate, ORMD-0801, we have initiated a comprehensive analysis of the data to understand

if there is a path forward for our oral insulin candidate.

Concurrently, we are examining our existing pipeline and have commenced an

evaluation process of potential strategic opportunities, with the goal of enhancing value for our stockholders.

At this time, we cannot

foresee how these strategic decisions will impact our financial results and operations in 2023.

Following the results of

the Phase 3 trials for our oral insulin capsule candidate, ORMD-0801, we conducted a comprehensive analysis of the data to understand

if there is a path forward for our oral insulin candidate, and we are working on a protocol for a new Phase 3 clinical trial to be submitted

Conducting this clinical trial, whether independently or as part of the JV with HTIT, will require significant funds and

Concurrently, we are examining our existing pipeline and have commenced an evaluation process of potential strategic opportunities,

with the goal of enhancing value for our stockholders.

At this time, we cannot foresee how these strategic decisions will impact our

financial results and operations in 2024.

Planned Expenditures

We invest 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

As of December 31, 2022, we had expected obligations with respect to an aggregate of approximately $21 million of clinical research

obligations over the next three years.

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.

In previous years, we primarily

invested in research and development.

If we proceed to conduct a new clinical trial for our oral insulin candidate, we expect that in

the upcoming years our research and development expenses will continue to be our major operating expense;

however, if this clinical trial

is conducted through the JV with HTIT, this cost may be borne by the JV.

Following the results of

the Phase 3 trials for our oral insulin capsule candidate, ORMD-0801, the JV with HTIT and the current strategic review initiated by

the Company, our obligations may change significantly.

Critical Accounting Policies

1 unchanged sentence

policies are more fully described in the notes to our accompanying consolidated financial statements.

We believe that the accounting policies

below are critical for one to fully understand and evaluate our financial condition and results of operations.

We believe that the accounting

policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

The discussion and analysis

1 unchanged sentence

generally accepted accounting principles, or GAAP.

The preparation of our consolidated financial statements requires us to make

estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities

at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods.

ongoing basis, we evaluate such estimates and judgments.

We base our estimates on historical experience and on various other factors that

we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of

assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different

assumptions or conditions.

Valuation of RSUs, options

and warrants :

We grant options to purchase shares of our common stock to employees and consultants and have and may in the future

issue warrants in connection with some of our financings and to certain other consultants.

The preparation of our consolidated financial statements requires us to

make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and

liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting

On an ongoing basis, we evaluate such estimates and judgments.

We base our estimates on historical experience and on various

other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about

the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates

under different assumptions or conditions.

Valuation of RSUs,

options and warrants :

We grant options to purchase shares of our common stock to employees and consultants and have and may in

the future issue warrants in connection with some of our financings and to certain other consultants.

We account for share-based

payments to employees, directors and consultants in accordance with the guidance that requires awards classified as equity awards to be

accounted for using the grant-date fair value method.

payments to employees, directors and consultants in accordance with the guidance that requires awards classified as equity awards to

be accounted for using the grant-date fair value method.

The fair value of share-based payment transactions is based on the Black Scholes

6 unchanged sentences

transferred to the customer and collection is reasonably assured.

On November 13, 2022, we

entered into a distribution license agreement with Medicox, or the Medicox License Agreement.

The Medicox License Agreement grants Medicox

an exclusive license to apply for regulatory approval and distribute ORMD-0801 in the Republic of Korea.

Under Accounting Standards

Codification, or ASC, 605 (which was the authoritative revenue recognition guidance applied for all periods prior to September 1, 2018)

given our continuing involvement through the expected product submission by HTIT in June 2023, amounts received relating to the HTIT License

Agreement were recognized over the period from which we were entitled to the respective payment, and the expected product submission date

using a time-based model approach over the periods that the fees were earned.

However, under ASC 606, we

are required to recognize the total transaction price (which includes consideration related to milestones once the criteria for recognition

have been satisfied) using the input method over the period the performance obligation is fulfilled.

Accordingly, once the consideration

associated with a milestone is included in the transaction price, incremental revenue is recognized immediately based on the period of

time that has elapsed towards complete satisfaction of the performance obligation.

Since the customer benefits

from the services as the entity performs, revenue is recognized over time through the expected product submission date by HTIT 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.

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.

On November 13, 2022,

we entered into a distribution license agreement with Medicox, or the Medicox License Agreement.

The Medicox License Agreement grants

Medicox an exclusive license to apply for regulatory approval and distribute ORMD-0801 in the Republic of Korea.

Under ASC 606, we identified

Medicox as a customer and the Medicox License Agreement as a contract with a customer.

Certification, or ASC, 606 “Revenue from Contracts with Customers”, we identified Medicox as a customer and the Medicox License

Agreement as a contract with a customer.

We identified a performance

7 unchanged sentences

and success of the commercialization efforts.

The Medicox License Agreement contains a fixed consideration of $2

million, which was received by Oramed as of December 31, 2022 and is presented under long-term deferred revenues.

It also contains variable

consideration of contractual milestone payments and sales-based royalties.

The Medicox License Agreement

contains a fixed consideration of $2 million, which was received by Oramed as of December 31, 2023 and is presented under long-term deferred

It also contains variable consideration of contractual milestone payments and sales-based royalties.

Our obligation to stand-ready

2 unchanged sentences

31, 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, we expect most of the revenue to be recognized in 2024, going forward.

our Phase 3 trial did not meet its primary and secondary endpoints.

If Medicox chooses to terminate the agreement as a result of the outcome

of the Phase 3 trials, we will accelerate revenue recognition and recognize it in 2023.

If Medicox proceeds with

the regulatory approval process in the Republic of Korea, we expect most of the revenue to be recognized in 2025, going forward.

that our Phase 3 trial did not meet its primary or secondary endpoints.

If Medicox chooses to terminate the agreement as a result of

the outcome of the Phase 3 trials, we will accelerate revenue recognition and recognize it in the relevant period.

Investments at fair

On September 21, 2023.

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.

We accounted for the Transferred

Warrants as derivatives measured at fair value.

We elected the fair value

option for the Note and the Penny Warrants in order to reduce operational complexity of bifurcating embedded derivatives.

value are recorded under financial income, net and include interest income on the Note.

Determining the fair value

of the Note required significant judgment with regards to the expected repayment date of the Note which also impacts the number of Subsequent

Penny Warrants to be issued to us.

The total value of the Transaction (and of each of its components) was valued on a weighted average

of the different scenarios.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis