ORAMED PHARMACEUTICALS INC. 10-Q

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 March 31, 2024 ☐ 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 May 9, 2024, there were 40,628,924 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 18 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28 ITEM 4 - CONTROLS AND PROCEDURES 28 PART II - OTHER INFORMATION 29 ITEM 6 - EXHIBITS 29 As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Oramed” 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 March 31, 2024, the exchange rate between the New Israeli Shekel, or NIS, and the dollar, as quoted by the Bank of Israel, was NIS 3.681 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. i 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 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 and plans to move forward with a protocol for a new Phase 3 clinical trial to be submitted to the U.S. Food and Drug Administration, or FDA; ● 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 from Scilex Holding Company, or Scilex; ● the fluctuating market price and liquidity of the common stock of Scilex underlying the warrants we hold; ● the possibility that the anticipated benefits of the Scilex 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; ● the ability of Oramed, Hefei Tianhui Biotech Co., Ltd., or HTIT Biotech, and Technowl Limited to reach agreement and enter into additional agreements within a three-month period of the signing of the JV Agreement (as defined herein), and the ability of the parties to succeed in the goals set out for the joint venture; ● our exposure to potential litigation; ● our ability to enhance value for our stockholders; ● the expected development and potential benefits from our products; ● the prospects of entering into additional license agreements, or other partnerships or forms of cooperation with other companies or medical institutions; ● future milestones, conditions and royalties under our license agreements; ● the potential of the Oravax Medical Inc., or Oravax, vaccine to protect against the coronavirus, or COVID-19; ● our research and development plans, including preclinical and clinical trials plans and the timing of enrollment, obtaining results and conclusion of trials; ii ● 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 our research and development expenses 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. 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, or our Annual Report, as filed with the Securities and Exchange Commission, or the SEC, on March 6, 2024, 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. iii PART I – FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ORAMED PHARMACEUTICALS INC. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2024 TABLE OF CONTENTS Page CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: Balance sheets 2 Statements of comprehensive income (loss ) 3 Statements of changes in stockholders’ equity 4 Statements of cash flows 5 Notes to financial statements 6-17 1 ORAMED PHARMACEUTICALS INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) March 31, December 31, 2024 2023 Assets CURRENT ASSETS: Cash and cash equivalents $ 18,576 $ 9,055 Short-term deposits 80,285 95,279 Investments at fair value 77,733 57,713 Prepaid expenses and other current assets 501 537 Total current assets 177,095 162,584 LONG-TERM ASSETS: Long-term deposits 7 7 Investments at fair value 19,544 51,035 Marketable securities 2,026 1,807 Other non-marketable equity securities 3,524 3,524 Amounts funded in respect of employee rights upon retirement 29 27 Property and equipment, net 819 873 Operating lease right-of-use assets 608 694 Total long-term assets 26,557 57,967 Total assets $ 203,652 $ 220,551 Liabilities and stockholders’ equity CURRENT LIABILITIES: Accounts payable and accrued expenses $ 1,267 $ 1,609 Short-term borrowings 32,034 51,013 Payable to related parties 1 325 Operating lease liabilities 254 267 Total current liabilities 33,556 53,214 LONG-TERM LIABILITIES: Long-term deferred revenues 4,000 4,000 Employee rights upon retirement 29 28 Provision for uncertain tax position 11 11 Operating lease liabilities 272 342 Other liabilities 63 63 Total long-term liabilities 4,375 4,444 COMMITMENTS (note 3) Equity EQUITY ATTRIBUTABLE TO COMPANY’S STOCKHOLDERS: Common stock, $ 0.012 par value ( 60,000,000 authorized shares; 40,519,160 and 40,338,979 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively) 487 485 Additional paid-in capital 322,172 320,892 Accumulated deficit ( 156,020 ) ( 157,556 ) Total stockholders’ equity 166,639 163,821 Non-controlling interests ( 918 ) ( 928 ) Total equity 165,721 162,893 Total liabilities and equity $ 203,652 $ 220,551 The accompanying notes are an integral part of the condensed consolidated financial statements. 2 ORAMED PHARMACEUTICALS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) U.S. Dollars in thousands (except share and per share data) (UNAUDITED) Three months ended March 31, 2024 2023 REVENUES $ - $ 666 RESEARCH AND DEVELOPMENT EXPENSES ( 1,179 ) ( 4,427 ) SALES AND MARKETING EXPENSES - ( 184 ) GENERAL AND ADMINISTRATIVE EXPENSES ( 1,783 ) ( 1,263 ) OPERATING LOSS ( 2,962 ) ( 5,208 ) INTEREST EXPENSES ( 592 ) - FINANCIAL INCOME, NET 5,088 1,597 NET INCOME (LOSS) $ 1,534 $ ( 3,611 ) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS ( 2 ) ( 216 ) NET INCOME (LOSS) ATTRIBUTABLE TO STOCKHOLDERS $ 1,536 $ ( 3,395 ) BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK $ 0.04 $ ( 0.08 ) DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK $ 0.04 $ ( 0.08 ) WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK 40,835,953 40,041,258 WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK 41,564,007 40,041,258 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 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, 2023 40,339 $ 485 $ 320,892 $ ( 157,556 ) $ 163,821 $ ( 928 ) $ 162,893 CHANGES DURING THE THREE MONTH PERIOD ENDED MARCH 31, 2024 STOCK-BASED COMPENSATION 180 2 1,280 - 1,282 - 1,282 STOCK-BASED COMPENSATION OF SUBSIDIARY - - - - - 12 12 NET INCOME - - - 1,536 1,536 ( 2 ) 1,534 BALANCE AS OF MARCH 31, 2024 40,519 $ 487 $ 322,172 $ ( 156,020 ) $ 166,639 $ ( 918 ) $ 165,721 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 THREE MONTH PERIOD ENDED MARCH 31, 2023 ISSUANCE OF COMMON STOCK, NET 193 2 2,428 - 2,430 - 2,430 STOCK-BASED COMPENSATION 213 3 120 - 123 - 123 STOCK-BASED COMPENSATION OF SUBSIDIARY - - - - - 50 50 NET LOSS - - - ( 3,395 ) ( 3,395 ) ( 216 ) ( 3,611 ) BALANCE AS OF MARCH 31, 2023 39,970 $ 481 $ 316,965 $ ( 166,476 ) $ 150,970 $ ( 822 ) $ 150,148 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 ORAMED PHARMACEUTICALS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands (UNAUDITED) Three months ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,534 $ ( 3,611 ) Adjustments required to reconcile net income (loss) to net cash used in operating activities: Depreciation 56 37 Exchange differences and interest on deposits and held to maturity bonds ( 5 ) ( 1,267 ) Changes in fair value of investments ( 3,748 ) ( 65 ) Stock-based compensation 1,294 173 Gain on amounts funded in respect of employee rights upon retirement ( 2 ) - Accrued interest on short-term borrowings to maturity 21 - Changes in operating assets and liabilities: Prepaid expenses and other current assets 36 ( 34 ) Accounts payable, accrued expenses and related parties ( 666 ) ( 103 ) Net changes in operating lease 3 ( 16 ) Deferred revenues - ( 666 ) Liability for employee rights upon retirement 1 5 Other liabilities - ( 2 ) Total net cash used in operating activities ( 1,476 ) ( 5,549 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short-term deposits ( 4,000 ) ( 19,000 ) Proceeds from short-term deposits 19,000 4,500 Proceeds from maturity of held to maturity securities - 1,496 Proceeds from long-term investments 15,000 - Purchase of property and equipment ( 2 ) ( 199 ) Total net cash provided by (used in) investing activities 29,998 ( 13,203 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net of issuance costs - 2,430 Loans repaid ( 19,000 ) - Total net cash provided by (used in) financing activities ( 19,000 ) 2,430 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 1 ) ( 38 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,521 ( 16,360 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,055 40,464 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,576 $ 24,104 (A) SUPPLEMENTARY DISCLOSURE ON CASH FLOWS - Interest received $ 1,341 $ 308 Interest paid $ ( 571 ) $ - The accompanying notes are an integral part of the condensed consolidated financial statements. 5 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: a. 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 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., Premas Biotech Pvt. Ltd., Cutter Mill Capital LLC and Run Ridge LLC. 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 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. On January 11, 2023, the Company announced that the ORA-D-013-1 Phase 3 trial did not meet its primary and secondary endpoints. As a result, the Company terminated this trial and a 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 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. Based on this analysis, the Company is working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA. On January 22, 2024, the Company and its wholly-owned subsidiary, Oramed Ltd., entered into a joint venture agreement (the “JV Agreement”), with Hefei Tianhui Biotech Co., Ltd. (“HTIT Biotech”) and Technowl Limited, a wholly-owned indirect subsidiary of HTIT Biotech (“HTIT Sub” and together with HTIT Biotech, “HTIT”), pursuant to which, subject to the terms and conditions set forth in the JV Agreement, the parties will establish a joint venture (the “JV”), based on the Company’s oral drug delivery technology. The JV will focus on the development and worldwide commercialization of innovative products based on the Company’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 the Company is currently working on to initiate a Phase 3 oral insulin trial in the United States. The Company and HTIT will initially hold equal shares in the JV, with each owning 50 % of the equity. The board of directors will initially consist of equal representation from HTIT and the Company. HTIT will contribute to the JV $ 70,000 in cash, while the Company will contribute $ 20,000 (comprised of $ 10,000 in cash and $ 10,000 in shares of the Company’s common stock that will be subject to certain registration rights) and will transfer intellectual property related to its oral insulin and POD™ technology, as well as other assets in the Company’s pipeline. HTIT will have an option to invest additional funds into the JV up to an aggregate amount of $ 20,000 , thereby increasing its equity holdings and granting the right to increase its board representation. The Company will be entitled to receive a 3 % royalty on gross revenues of the JV generated from Company-related assets. The consummation of the JV Agreement is subject to and contingent upon the parties entering into additional agreements within a three-month period from the signature of the JV Agreement, including an asset transfer agreement for the transfer of the Company’s intellectual property to the JV, a commercial supply agreement for the manufacture and supply of products by HTIT to the JV, as well as other documents and agreements to regulate the relationship of the parties and the JV to be formed pursuant to the JV Agreement. There is no assurance that the parties will complete and sign these additional agreements within the agreed timeline or at all. If such agreements are not signed within the agreed timeframe, then either party may apply a 30-day extension, after which the JV Agreement may be terminated and voided by either party. The 30-day extension was applied by the Company on April 18, 2024 and will last until May 22, 2024. Thereafter, the consummation of the JV transaction is further subject to the satisfaction or waiver of certain other closing conditions within a three-month period following the completion of the aforesaid ancillary agreements. If the closing conditions are not met within the agreed timeframe, then either party may apply a 30-day extension, after which the JV Agreement may be terminated and voided by either party. In addition, completion of the transactions contemplated under the JV Agreement is subject to the satisfaction or waiver of customary and certain other closing conditions. 6 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): 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. Based on the Company’s current cash resources and commitments, the Company believes it will be able to maintain its current planned 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. The Company may also need additional funds to realize the decisions made as part of its strategic review process. The Company cannot predict the outcome of these activities. 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 sale contemplated under the Sorrento SPA. On September 21, 2023, the Company entered into and consummated the transactions contemplated by a Securities Purchase Agreement (the “Scilex SPA”) with Scilex and Acquiom Agency Services LLC. Pursuant to the Scilex SPA, in exchange for Scilex assuming outstanding obligations of 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 (A) a Senior Secured Promissory Note due 18 months from the date of issuance in the principal amount of $ 101,875 (the “Note”), which includes accrued and unpaid interest of $ 875 under the Senior DIP Loan Agreement and $ 1,000 of fees added to the principal amount of the 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 borrowed an aggregate of $ 99,550 pursuant to loan agreements from Israel Discount Bank Ltd. For further details, see note 6. 7 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: 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 December 31, 2023 (the “2023 Form 10-K”). These condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair statement of the results of the periods presented. Certain information and disclosures normally included in annual consolidated financial statements have been omitted in this interim period report pursuant to the rules and regulations of the Securities and Exchange Commission. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the 2023 Form 10-K. The results for interim periods are not necessarily indicative of a full fiscal year’s results. b. Earnings (loss) per common share Basic net earnings (loss) per common share are computed by dividing the net earnings (loss) attributable to stockholders for the period by the weighted average number of shares of common stock outstanding for each period, including vested restricted stock units (“RSUs”). Outstanding stock options, warrants and RSUs have been excluded from the calculation of the diluted loss per share because all such securities are anti-dilutive for the three month period ended March 31, 2023. For the diluted earnings per share calculation for the three month period ended March 31, 2024, the weighted average number of shares outstanding during the three month period ended March 31, 2024 is adjusted for the potential dilution that could occur in connection with employee share-based payment, using the treasury stock method. The weighted average number of stock options, warrants and RSUs that has been excluded from the calculation of the diluted income per share as of March 31, 2024 was 4,846,474 shares. The weighted average number of stock options, warrants and RSUs excluded from the calculation of diluted net loss was 3,357,911 for the three month period ended March 31, 2023. 8 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): c. Recently issued accounting pronouncements, not yet adopted In November 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures.” This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280 “Segment Reporting”. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements related disclosures. In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures. d. Fair value The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows: 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 March 31, 2024, 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 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 March 31, 2024, the carrying amounts of cash equivalents, short-term deposits, Short-Term Borrowings (as defined herein) 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. 9 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 3 - COMMITMENTS : a. Medicox License Agreement On November 13, 2022, the Company entered into a distribution license agreement (“Medicox License Agreement”) with Medicox Co., Ltd. (“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 agreed upon transfer price per capsule. In addition, Medicox will pay the Company up to $ 15,000 in developmental milestones, $ 2,000 of which have already been received by the Company, and up to 15 % royalties on gross sales. Medicox will also be responsible for obtaining a regulatory approval in the Republic of Korea. The Company is currently evaluating with Medicox a path forward to continue its collaboration, following the results of the ORA-D-013-1 Phase 3 trial. 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 SOFR. At the time the grants were received, successful development of the related projects was not assured. The total amount received through March 31, 2024 was $ 2,213 ($ 2,570 including interest). As of March 31, 2024, the liability to the IIA was $ 59 . 10 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 4 - MARKETABLE SECURITIES: The Company’s marketable securities include investments in equity securities of DNA GROUP (T.R.) Ltd. (formerly D.N.A Biomedical Solutions Ltd.) (“DNA”), Entera Bio Ltd. (“Entera”), and the Transferred Warrants (as defined herein; for further details, see note 7). a. Composition March 31, 2024 December 31, 2023 Long-term: DNA (see b below) $ 367 $ 297 Entera (see c below) 195 70 Transferred Warrants (see note 7) 1,464 1,440 $ 2,026 $ 1,807 b. 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 three month periods ended March 31, 2024 and March 31, 2023, the Company did not sell any of DNA’s ordinary shares. As of March 31, 2024, the Company owns approximately 1.4 % of DNA’s outstanding ordinary shares. The cost of the securities as of both March 31, 2024 and December 31, 2023 was $ 595 . c. Entera Entera ordinary shares have been traded on the Nasdaq Capital Market since June 28, 2018. The Company measures the investment at fair value from such date, since it has a readily determinable fair value (prior to such date the investment was accounted for as a cost method investment (amounting to $ 1 )). 11 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 5 - OTHER 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 that round contingent upon Diasome achieving certain milestones. The Company accounts for the investment under the measurement alternative in Accounting Standards Codification (“ASC”) 321 “Investments – Equity Securities,” whereby the equity investment is recorded at cost, 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 income or loss. The Company’s non-marketable equity securities are an investment in a company without a readily determinable fair value. During fiscal year 2023, the Company recorded an $ 824 increase in value due to the closing in June 2023 of a Series C investment round in Diasome. The change was recorded using the transaction price of similar securities issued by Diasome, adjusted for contractual rights and obligations of the securities held by the Company. NOTE 6 - SHORT-TERM BORROWINGS: On August 8, 2023, the Company borrowed an aggregate of $ 99,550 pursuant to loan agreements from Israel Discount Bank Ltd. (the “Short-Term Borrowings”). The Short-Term Borrowings mature on dates ranging from August 11, 2023 to May 24, 2024, bear interest ranging from 6.66 % to 7.38 %, and are secured by certificates of deposits issued by Israel Discount Bank Ltd. having an aggregate face amount of $ 99,550 . The net proceeds of the Short-Term Borrowings were used to fund the Note (for further details, see note 7). The Short-Term Borrowings are paid in one payment of principal and interest at each respective maturity. As of March 31, 2024, $ 70,146 was repaid under the Short-Term Borrowings. The aggregate remaining annual principal payments on debt until maturity is $ 30,550 . 12 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. The Note The principal of the Note issued on September 21, 2023 is $ 101,875 , which includes accrued and unpaid interest of $ 875 under the Senior DIP Loan Agreement and $ 1,000 of fees added to 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. Pursuant to the terms of the Note, the Company received the first principal payment of $ 5,000 on December 21, 2023 and the second principal payment of $ 15,000 prior to March 21, 2024. On May 2, 2024, the Company received a payment of approximately $ 9,600 from Scilex in accordance with the mandatory prepayment requirements under the Note. 13 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 certain exceptions in connection with financings or similar transactions. The exercise price of the Closing Penny Warrant is $ 0.01 per share, subject to adjustment. Subsequent Penny Warrants Scilex issued four Subsequent Penny Warrants to the Company, each for 2,125,000 shares of Scilex Common Stock, one of which shall vest and become exercisable on the date that is the later of (i) each of March 19, 2024, June 17, 2024, September 15, 2024 or December 14, 2024 (the “Subsequent Penny Warrant Vesting Date”) and (ii) the earliest of (A) March 14, 2025, (B) the date on which the Senior Secured Note has been repaid in full and (C) the Management Sale Trigger Date (as defined therein), if any. Each Subsequent Penny Warrant will expire on the date that is the fifth anniversary of the issuance date; provided that, if the Senior Secured Note is repaid in full prior to the Subsequent Penny Warrant Vesting Date applicable to such Subsequent Penny Warrant, such Subsequent Penny Warrant will expire on the date the Senior Secured Note is repaid in full. The Company may exercise the Penny Warrants by means of a “cashless exercise.” The Penny Warrants may not be exercised if the Company, together with its affiliates, would beneficially own in excess of 9.9 % of the number of shares of Scilex Common Stock outstanding immediately after giving effect to such exercise; provided, that the Company may increase or decrease such limitation upon 61 days’ prior notice to Scilex. Transferred Warrants The Transferred Warrants are listed on the Nasdaq Capital Market, have an exercise price of $ 11.50 per share, are fully exercisable and expire on November 10, 2027 . The Company accounted for the Transferred Warrants as derivatives measured at fair value. The Company elected the fair value option for the Note and the Penny Warrants in order to reduce operational complexity of bifurcating embedded derivatives. Changes in value are recorded under financial income, net and include interest income on the Note. The valuation was performed based on several scenarios which some of them took into account a partial or full early repayment of the Note. Each scenario took into consideration the present value of the Note’s cash flows (including the exit fee and the prepayment premium) and the Warrants’ value. The total value of the Transaction (and of each of its components) was valued on a weighted average of the different scenarios. The discount rate of the Note was based on the B- rating Zero curve in addition to a risk premium which takes into account the credit risk of Scilex and ranged between 53.67 % to 53.92 %. The fair value of the Transferred Warrants was based on their closing price on the Nasdaq Capital Market. The fair value of the Penny Warrants was calculated based on the closing price of the Scilex Common Stock on the Nasdaq Capital Market, taking into account several scenarios which assume a partial or full early repayment of the Note, when applicable. On the Closing Date, the fair value of the Transaction was $ 101,875 . As of March 31, 2024, and following the aforementioned repayments of $ 20,000 , the fair value of the Transaction was $ 98,741 , split between the Note ($ 77,733 , presented under short-term investments at fair value), the Closing Penny Warrant ($ 7,155 ), the Subsequent Penny Warrants ($ 12,389 ), both presented under long-term investments at fair value and the Transferred Warrants ($ 1,464 ) presented under long-term marketable securities. This resulted in a gain of $ 3,552 during the first quarter of 2024, attributed mainly to the change in fair value of the Warrants. The difference between the Note’s fair value and aggregate unpaid principal balance (which includes interest payable on maturity) is $ 7,654 . 14 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 8 - STOCKHOLDERS’ EQUITY: 1. On January 4, 2024, the Company granted an aggregate of 150,000 RSUs representing a right to receive shares of the Company’s common stock to the Company’s board members. The RSUs granted to the board members will vest in three equal annual installments on each of January 1, 2025, 2026 and 2027. The total fair value of these RSUs on the date of grant was $ 359 , using the quoted closing market share price of $ 2.39 on the Nasdaq Capital Market on the date of grant. 2. On January 4, 2024, the Company granted an aggregate of 37,610 RSUs representing a right to receive shares of the Company’s common stock to the Company’s board members. The RSUs granted to certain board members will vest in four quarterly installments on each of April 1, 2024, July 1, 2024, October 1, 2024 and January 1, 2025. The total fair value of these RSUs on the date of grant was $ 90 , using the quoted closing market share price of $ 2.39 on the Nasdaq Capital Market on the date of grant. 3. On January 4, 2024, the Company granted an aggregate of 950,500 RSUs representing a right to receive shares of the Company’s common stock to the Company’s executive officers and one employee. The RSUs granted to executive officers and one employee will vest in twelve equal quarterly installments starting January 8, 2024. The total fair value of these RSUs on the date of grant was $ 2,272 , using the quoted closing market share price of $ 2.39 on the Nasdaq Capital Market on the date of grant. 4. On January 4, 2024, the Company granted an aggregate of 294,000 PSUs representing a right to receive shares of the Company’s common stock to executive officers of the Company. The PSUs shall vest upon the Company’s common stock achieving and maintaining a specified price per share. The total fair value of these PSUs on the date of grant was $ 691 , using the Monte-Carlo model. 5. On January 30, 2024, the Company granted an aggregate of 3,750 RSUs representing a right to receive shares of the Company’s common stock to one of the Company’s board members. The RSUs granted to the board member will vest in four quarterly installments on each of April 1, 2024, July 1, 2024, October 1, 2024 and January 1, 2025. The total fair value of these RSUs on the date of grant was $ 11 , using the quoted closing market share price of $ 2.98 on the Nasdaq Capital Market on the date of grant. 6. On March 18, 2024, the Company entered into an at the market offering agreement (the “ATM Agreement”) with Rodman & Renshaw LLC and StockBlock Securities LLC, as agents, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 75,000 , through the sales agents, 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 March 18, 2024. As of March 31, 2024 and through May 9, 2024, no shares were issued under the ATM Agreement. 15 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 9 - LEASES: The Company has various operating leases for office space and vehicles that expire through 2027. Below is a summary of the Company’s operating right-of-use assets and operating lease liabilities as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Operating right-of-use assets $ 608 $ 694 Operating lease liabilities, current 254 267 Operating lease liabilities long-term 272 342 Total operating lease liabilities $ 526 $ 609 Lease payments for the Company’s right-of-use assets over the remaining lease periods as of March 31, 2024 and December 31, 2023 are as follows: March 31, 2024 December 31, 2023 2024 200 282 2025 217 222 2026 118 120 2027 10 10 Total undiscounted lease payments 545 634 Less: Interest* ( 19 ) ( 25 ) Present value of lease liabilities $ 526 $ 609 * Future lease payments were discounted by 3 %- 5.75 % interest rate. 16 ORAMED PHARMACEUTICALS INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS U.S. Dollars in thousands (except share and per share data) (UNAUDITED) NOTE 10 - RELATED PARTY TRANSACTIONS: On July 1, 2008, the Company’s wholly-owned subsidiary, Oramed Ltd. (the “Subsidiary”), entered into a consulting agreement with KNRY Ltd. (“KNRY”), an Israeli company owned by the Chief Scientific Officer, whereby the Chief Scientific Officer, through KNRY, provides services to the Company (the “Consulting Agreement”). The Consulting Agreement is terminable by either party upon 140 days prior written notice. The Consulting Agreement, as amended, provide that KNRY will be reimbursed for reasonable expenses incurred in connection with the performance of the Consulting Agreement and the monthly consulting fee paid to the Chief Scientific Officer is NIS 117,040 ($ 32 ). 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 Company. The agreement is terminable by either party upon 140 days prior written notice. The agreement, as amended, provides that Shnida Ltd. will be reimbursed for reasonable expenses incurred in connection with performance of the agreement and that the President and Chief Executive Officer will receive a monthly consulting fee of NIS 96,825 ($ 26 ), plus value added tax. Pursuant to 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, as amended, pursuant to which the President and Chief Executive Officer receives gross monthly salary of NIS 51,591 ($ 14 ) in consideration for his services as President and Chief Executive Officer of the Subsidiary. In addition, the President and Chief Executive Officer is provided with a cellular phone and a company car pursuant to the terms of his agreement. 17 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. Overview of Operations We are a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions with a technology platform that allows for the oral delivery of therapeutic proteins. We have developed an oral dosage form intended to withstand the harsh environment of the stomach and effectively deliver active biological insulin or other proteins. The 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. 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 body mass index, or BMI, baseline HbA1c and age, responded well to oral insulin. Based on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA. We are additionally examining our existing pipeline and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing value for our stockholders. Scilex Transaction On August 7, 2023, we entered into a Stock Purchase Agreement, as subsequently amended on August 9, 2023 and August 21, 2023, or the Sorrento SPA, with Sorrento Therapeutics, Inc., or Sorrento, to acquire certain equity securities of 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 be used by us as a credit for the consideration for the Purchased Securities, with an additional $5,000,000 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. 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. 18 Pursuant to the terms of the Scilex SPA, Scilex agreed to certain restrictions on additional issuances of equity securities. In connection with the Transaction, we and Sorrento mutually agreed to terminate the Sorrento SPA and to release all claims we and Sorrento may have against one another, and Scilex completed the acquisition of the Purchased Securities. Senior Secured Promissory Note The Note matures on March 21, 2025 or upon an uncured event of default, subject to certain mandatory prepayments, and bears interest at a rate per annum equal to Term SOFR (as defined in the Note) plus 8.5% (subject to a Term SOFR floor of 4.0%), to be paid in-kind, by being capitalized and added to the principal amount of the Note on a monthly basis. The Scilex SPA provides for principal payments of (i) $5 million on December 21, 2023, (ii) $15 million on March 21, 2024, and (iii) $20 million on each of June 21, 2024, September 21, 2024, and December 21, 2024, and for the entire remaining principal balance of the Note to be paid on March 21, 2025. If the Note is not repaid in full on or prior to March 21, 2024, an exit fee equal to $3,056,250 shall be payable upon repayment of the Note in full. The Note constitutes senior secured indebtedness of Scilex and is guaranteed by all existing or future formed, direct and indirect, domestic subsidiaries of Scilex and is secured by a first priority security interest in and liens on all of the assets of Scilex, subject to customary and mutually agreed permitted liens and except for certain specified exemptions. Mandatory prepayments under the Note are required following the earlier of (a) April 1, 2024 and (b) the date upon which certain of Scilex’s outstanding indebtedness is repaid in full). Voluntary prepayments may be made at Scilex’s discretion; provided that, if made prior to the one-year anniversary of the Closing Date, Scilex will also be required to pay a customary 50% interest make-whole on the portion of the Note so prepaid. The Note includes customary events of default, upon which the Note will bear interest at a default rate of Term SOFR plus 15.0%, which shall be payable in-kind, by being capitalized and added to the principal amount of the Note on a monthly basis. If the Note is accelerated upon an event of default, Scilex is required to repay the principal amount of the Note at a mandatory default rate of 125% of such principal amount (together with 100% of accrued and unpaid interest thereon and all other amounts due in respect of the Note). Until the obligations under the Note are repaid in full, we have the right to designate one non-voting observer, to attend meetings of the board of directors and committees of Scilex and its subsidiaries. Pursuant to the terms of the Note, we received the first principal payment of $5 million on December 21, 2023 and the second principal payment of $15 million prior to March 21, 2024. On May 2, 2024, we received a payment of approximately $9.6 million from Scilex in accordance with the mandatory prepayment requirements under the Note. Warrants The Closing Penny Warrant will be exercisable upon the earliest of (i) March 14, 2025, (ii) the date on which the Note has been repaid in full and (iii) the Management Sale Trigger Date (as defined therein), if any, and will expire on the date that is the fifth anniversary of the issuance date. For purposes of the Penny Warrants, the Management Sale Trigger Date is generally the first date that either Dr. Henry Ji, Scilex’s Executive Chairperson, or Mr. Jaisim Shah, Scilex’s Chief Executive Officer and President and a member of Scilex’s Board of Directors, engages in certain sales or other similar transfers of shares of Scilex Common Stock or other of Scilex’s or any of its subsidiaries’ securities, subject to certain exceptions as are customary for lock-up agreements executed by directors and officers in connection with financings or similar transactions. The exercise price of the Closing Penny Warrant is $0.01 per share, subject to adjustment. Oral Insulin Type 2 Diabetes : We conducted the ORA-D-013-1 Phase 3 trial on patients with type 2 diabetes, or T2D, with inadequate glycaemic control who were on two or three oral glucose-lowering agents. The primary endpoint of the trial was 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. On January 11, 2023, we announced that the ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints. Following the results of the ORA-D-013-1 Phase 3 trial, we also terminated the ORA-D-013-2 Phase 3 trial, a second Phase 3 trial that included T2D patients with inadequate glycaemic control who were attempting to manage their condition with either diet alone or with diet and metformin. In 2023, we completed an analysis of the data from the ORA-D-013-1 Phase 3 trial and found that subpopulations of patients with pooled specific parameters, such as BMI, baseline HbA1c and age, responded well to oral insulin. These subsets exhibited an over 1% placebo adjusted, statistically significant, reduction in HbA1c. Based on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA. 19 Joint Venture Agreement : On January 22, 2024, Oramed and its wholly-owned subsidiary, Oramed Ltd., entered into a joint venture agreement, or the JV Agreement, with HTIT Biotech and Technowl Limited, a wholly-owned indirect subsidiary of HTIT Biotech, or HTIT Sub, and together with HTIT Biotech, HTIT, pursuant to which, subject to the terms and conditions set forth in the JV Agreement, the parties will establish a joint venture, or the JV, based on 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. Oramed and HTIT will initially hold equal shares in the JV, with each owning 50% of the equity. The board of directors will initially consist of equal representation from HTIT and Oramed. HTIT will contribute to the JV $70 million in cash, while Oramed will contribute $20 million (comprised of $10 million in cash and $10 million in shares of Oramed common stock that will be subject to certain registration rights) and will transfer intellectual property related to its oral insulin and POD™ technology, as well as other assets in the Oramed pipeline. HTIT will have an option to invest additional funds into the JV up to an aggregate amount of $20 million, thereby increasing its equity holdings and board representation. Oramed will be entitled to receive a 3% royalty on gross revenues of the JV generated from Oramed related assets. The consummation of the JV Agreement is subject to and contingent upon the parties entering into additional agreements within a three-month period, including an asset transfer agreement for the transfer of Oramed’s intellectual property to the JV, a commercial supply agreement for the manufacture and supply of products by HTIT to the JV, as well as other documents and agreements to regulate the relationship of the parties and the JV to be formed pursuant to the JV Agreement. There is no assurance that the parties will complete and sign these additional agreements within the agreed timeline or at all. If such agreements are not signed within the agreed timeframe, then either party may apply a 30-day extension, after which the JV Agreement may be terminated and voided by either party. The 30-day extension was applied by the Company on April 18, 2024 and will last until May 22, 2024. Thereafter, the consummation of the JV transaction is further subject to the satisfaction or waiver of certain other closing conditions within a three-month period following the completion of the aforesaid ancillary agreements. If the closing conditions are not met within the agreed timeframe, then either party may apply a 30-day extension, after which the JV Agreement may be terminated and voided by either party. In addition, completion of the transactions contemplated under the JV Agreement is subject to the satisfaction or waiver of customary and certain other closing conditions. Oral Vaccine On March 18, 2021, we entered into a license agreement, or the Oravax License Agreement, with Oravax, a 63% owned joint venture to commercialize oral vaccines for COVID-19 and other novel coronaviruses based on Premas Biotech Pvt. Ltd.’s proprietary vaccine technology involving a triple antigen virus like particle. 20 In October 2022, Oravax reported positive preliminary Phase 1 data for Cohort A of a Phase 1 clinical trial, meeting primary or secondary endpoints of safety and immunogenicity. These results included significant antibody response (2-6 fold over baseline) as measured by multiple markers of immune response to virus like particle vaccine antigens observed in the majority of the patients dosed, and no safety issues were observed, including mild symptoms. Cohort B completed dosing in January 2023. Cohort B measured Immunoglobulin G, or IGG, against the spike (S) protein, showing positive IGG in approximately 55% of the patients dosed. We are currently evaluating our path forward for Oravax’s oral vaccines for COVID-19. PeriTech Acquisition and License In December 2023, we executed and completed an agreement with PeriTech Pharma Ltd., or PeriTech, acquiring the rights to their film-forming technology tailored for the delivery of topical/dermatology agents. This includes a once-daily over-the-counter treatment for hemorrhoids. The PeriTech pipeline extends its potential applications to include indications such as pruritus ani, anal warts, anal fissures and herpes labialis. We have entered into an exclusive licensing agreement with Genomma Lab Internacional S.A.B. de C.V, or Genomma Labs, pursuant to which we granted Genomma Labs the development and commercialization rights to the PeriTech pipeline, in exchange for a royalty based on net sales. Raw Materials We have purchased, pursuant to separate agreements with third parties, the raw materials required for the manufacturing of our oral capsule. We generally depend upon a limited number of suppliers for the raw materials. Although alternative sources of supply for these materials are generally available, we could incur significant costs and disruptions if we need to change suppliers. The termination of our relationships with our suppliers or the failure of these suppliers to meet our requirements for raw materials on a timely and cost-effective basis could have a material adverse effect on our business, prospects, financial condition and results of operations. Impact of Current Events On October 7, 2023, the State of Israel was attacked by and subsequently declared war on Hamas. Israel has been in an ongoing state of war with Hamas since that time. Following the attack by Hamas, Hezbollah has also launched attacks against Israel and Israel has been responding to these attacks with targeted air strikes. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, such as Iran, will join the hostilities. As of May 9, 2024, we believe that there is no immediate risk to our business operations related to these events. For further information, see “Item 1A. Risk Factors,” under “We are affected by the political, economic and military risks of having operations in Israel” in our Annual Report, as filed with the Securities and Exchange Commission, or the SEC, on March 6, 2024. 21 Results of Operations Comparison of three month periods ended March 31, 2024 and March 31, 2023 The following table summarizes certain statements of operations data of the Company for the three month periods ended March 31, 2024 and March 31, 2023 (in thousands of dollars except share and per share data): Three months ended March 31, 2024 March 31, 2023 Revenues $ - $ 666 Cost of revenues - - Research and development expenses (1,179 ) (4,427 ) Sales and marketing expenses - (184 ) General and administrative expenses (1,783 ) (1,263 ) Interest expenses (592 ) - Financial income, net 5,088 1,597 Net income (loss) for the period $ 1,534 $ (3,611 ) Basic income (loss) per share of common stock $ 0.04 $ (0.08 ) Diluted income (loss) per share of common stock $ 0.04 $ (0.08 ) Weighted average shares of common stock outstanding used in computing basic income (loss) per share of common stock 40,835,953 40,041,258 Weighted average shares of common stock outstanding used in computing diluted income (loss) per share of common stock 41,564,007 40,041,258 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. There were no revenues for the three month period ended March 31, 2024 while revenues were $666,000 for the three month period ended March 31, 2023. The decrease was 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 month periods ended March 31, 2024 and March 31, 2023. 22 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 contract research organizations, or 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 preclinical 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 three month period ended March 31, 2024 decreased by 73% to $1,179,000, compared to $4,427,000 for the three month period ended March 31, 2023. The decrease was mainly due to lower expenses related to the Phase 3 trials that were terminated. Stock-based compensation expenses for the three month period ended March 31, 2024 were $704,000, compared to $17,000 during the three month period ended March 31, 2023. This increase was mainly due equity grants during the period ended March 31, 2024 and to performance equity awards that did not meet their performance conditions during the period ended March 31, 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 oral insulin. Based on this analysis, we are working on a protocol for a new Phase 3 clinical trial to be submitted to the FDA. We are additionally examining our existing pipeline and have commenced an evaluation process of potential strategic opportunities, with the goal of enhancing value for our stockholders. 23 Government grants In the three month periods ended March 31, 2024 and March 31, 2023, we did not recognize any research and development grants. As of March 31, 2024, we had incurred liabilities to pay royalties to the Israel Innovation Authority of the Israeli Ministry of Economy and Industry of $59,000. Sales and Marketing Expenses Sales and marketing expenses include the salaries and related expenses of our commercial functions, consulting expenses and other general expenses. We did not recognize any sales and marketing expenses for the three month period ended March 31, 2024 compared to expenses of $184,000 for the three month period ended March 31, 2023. This was primarily due to the termination of the employment of an executive officer in fiscal year 2023. We did not recognize any stock-based compensation expenses for the three month period ended March 31, 2024, compared to expenses of $88,000 for the three month period ended March 31, 2023. This was primarily due to the termination of the employment of an executive officer. General and Administrative Expenses General and administrative 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 three month period ended March 31, 2024 increased by 41% to $1,783,000 compared to $1,263,000 for the three month period ended March 31, 2023. The increase was mainly due to higher stock-based compensation expenses. Stock-based compensation expenses for the three month period ended March 31, 2024 were $590,000, compared to $67,000 for the three month period ended March 31, 2023. This increase was mainly due to equity grants during the period ended March 31, 2024 and to performance equity awards that did not meet their performance conditions during the period ended March 31, 2023. Interest Expenses Interest expenses were $592 for the three month period ended March 31, 2024, while there were no interest expenses for the three and three month period ended March 31, 2023. The increase was mainly due to interest on the Short-Term Borrowings. 24 Financial Income, Net Net financial income increased by 219% to $5,088,000 for the three month period ended March 31, 2024, compared to $1,597,000 for the three month period ended March 31, 2023. The increase was mainly due to the revaluation of the Transaction and interest from short-term bank deposits. Basic and Diluted Income and Loss Per Share of Common Stock Basic and diluted income per share of common stock for the three month period ended March 31, 2024 was $0.04 per share, compared to a basic and diluted loss of $0.08 per share for the three month period ended March 31, 2023. This was primarily due to the changes discussed above that caused us to have income during the three month period ended March 31, 2024, compared to a loss during the three month period ended March 31, 2023. Weighted Average Shares of Common Stock Outstanding Weighted average shares of common stock outstanding used in computing basic income (loss) per share of common stock for the three month period ended March 31, 2024 were 40,835,953 compared to 40,041,258 for the three month period ended March 31, 2023. The increase was mainly due to RSUs that vested during the three month period ended March 31, 2024. Weighted average shares of common stock outstanding used in computing diluted income (loss) per share of common stock for the three month period ended March 31, 2024 were 41,564,007 compared to 40,041,258 for the three month period ended March 31, 2023. The increase was mainly due to RSUs that vested during the three month period ended March 31, 2024. 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. 25 Liquidity and Capital Resources From inception through March 31, 2024, we have incurred losses in an aggregate amount of $156,020,000. During that period and through March 31, 2024, 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. During that period, we also received cash consideration of $28,001,000 from the exercise of warrants and options. We expect to seek additional financing through similar sources in the future, as needed. As of March 31, 2024, we had $18,576,000 of available cash and $80,285,000 of short-term bank deposits. From inception through March 31, 2024, 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 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. 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 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. 26 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 March 31, 2024, approximately $70,146,000 was repaid under the Short-Term Borrowings. As of March 31, 2024, our total current assets were $177,095,000 and our total current liabilities were $33,556,000. On March 31, 2024, we had a working capital surplus of $143,539,000 and an accumulated loss of $156,020,000. As of December 31, 2023, our total current assets were $162,584,000 and our total current liabilities were $53,214,000. On December 31, 2023, we had a working capital surplus of $109,370,000 and an accumulated loss of $157,556,000. The increase in working capital from December 31, 2023 to March 31, 2024 was mainly due to an increase in cash and cash equivalents and in investments at fair value, together with a decrease in Short-term borrowings partially offset by a decrease in short term deposits. During the three month period ended March 31, 2024, cash and cash equivalents increased to $18,576,000, from $9,055,000 as of December 31, 2023. The increase was mainly due to the reasons described below. Operating activities used cash of $1,476,000 in the three month period ended March 31, 2024, compared to $5,549,000 used in the three month period ended March 31, 2023. 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 the Short-Term Borrowings, accounts payable and accrued expenses. Investing activities provided cash of $29,998,000 in the three month period ended March 31, 2024, compared to cash used in investing activities of $13,203,000 in the three month period ended March 31, 2023. Cash provided by investing activities in the three month period ended March 31, 2024 consisted primarily of proceeds from short term investing activities and a principal repayment of the Note partially offset by the purchase of short-term deposits. Financing activities used cash of $19,000,000 in the three month period ended March 31, 2024, compared to $2,430,000 provided in the three month period ended March 31, 2023. Cash used by financing activities in the three month period ended March 31, 2024, consisted primarily of partial repayment of the Short-Term Borrowings. Cash provided by financing activities in the three month period ended March 31, 2023, consisted primarily of proceeds from the issuance of our common stock. On March 18, 2024, the Company entered into an at the market offering agreement, or the ATM Agreement, with Rodman & Renshaw LLC and StockBlock Securities LLC, as agents, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $75,000,000 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 March 18, 2024. As of March 31, 2024 and through May 9, 2024, no shares were issued under the ATM Agreement. 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. Planned Expenditures We 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. 27 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 March 31, 2024. 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 March 31, 2024. 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 March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 28 PART II – OTHER INFORMATION ITEM 6 - EXHIBITS Number Exhibit 10.1* Representative Form of Indemnification Agreements between Oramed Pharmaceuticals Inc. and each of our directors and officers. 10.2 At The Market Offering Agreement, dated March 18, 2024, by and among the Oramed Pharmaceuticals Inc., Rodman & Renshaw LLC and StockBlock Securities LLC (incorporated by reference from our current report on Form 8-K filed March 18, 2024). 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 March 31, 2024 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 29 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: May 9, 2024 By: /s/ Nadav Kidron Nadav Kidron President and Chief Executive Officer Date: May 9, 2024 By: /s/ David Silberman David Silberman Chief Financial Officer (Principal Financial and Accounting Officer) 30