Oramed Pharmaceuticals Inc.
Annual Report 2011

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark One)xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended August 31, 2011 ooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________Commission file number: 000-50298ORAMED PHARMACEUTICALS, INC.(Exact name of registrant as specified in its charter)Delaware98-0376008(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)Hi-Tech Park 2/5 Givat-RamPO Box 39098Jerusalem 91390 Israel(Address of principal executive offices)(Zip Code)972 2 566 0001(Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Exchange Act: NoneSecurities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x 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 of1934 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 filingrequirements for the past 90 days. Yes x No o  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files. Yes o No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer oAccelerated filer oNon-accelerated filer oSmaller reporting company x(Do not check if a smaller reportingcompany) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No x The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and askedprice of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $17,492,586 based on a price of$0.31, being the last price at which the shares of the Registrant's common stock were sold on the OTC Bulletin Board prior to the end of the most recentlycompleted second fiscal quarter.Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 70,104,583 shares issued andoutstanding as of November 28, 2011. DOCUMENTS INCORPORATED BY REFERENCENone. - 2 - ORAMED PHARMACEUTICALS, INC.FORM 10-KTABLE OF CONTENTSPART I1ITEM 1 - BUSINESS1ITEM 1A – RISK FACTORS15ITEM 1B – UNRESOLVED STAFF COMMENTS26ITEM 2 – PROPERTIES26ITEM 3 - LEGAL PROCEEDINGS26ITEM 4 - REMOVED AND RESERVED.26PART II27ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES27ITEM 6 – SELECTED FINANCIAL DATA28ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS28ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK36ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA36ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE36ITEM 9A – CONTROLS AND PROCEDURES36ITEM 9B – OTHER INFORMATION38PART III39ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE39ITEM 11 - EXECUTIVE COMPENSATION42ITEM 12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS47ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE51ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES52ITEM 15 - EXHIBITS AND FINANCIALSTATEMENTS SCHEDULES53  PART I ITEM 1 - BUSINESS This Annual Report on Form 10-K (including the section regarding Management's Discussion and Analysis of Financial Condition and Resultsof Operations) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identifyforward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this AnnualReport on Form 10-K. Additionally, statements concerning future matters are forward-looking statements. Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements canonly be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties andactual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors thatcould cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “RisksRelated to Our Business” below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance onthese forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to revise or update anyforward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K. Readers are urgedto carefully review and consider the various disclosures made throughout the entirety of this Annual Report on Form 10-K which attempt to advise interestedparties of the risks and factors that may affect our business, financial condition, results of operations and prospects. We file reports with the Securities and Exchange Commission (the “SEC” or the “Commission”). We make available on our website under “InvestorInformation/SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments tothose reports as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. Our website address iswww.oramed.com. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, theSEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that fileelectronically with the SEC, including us. As used in this Annual Report on Form 10-K, the terms “we”, “us”, “our”, the “Company”, and “Oramed” mean Oramed Pharmaceuticals Inc.and our subsidiary, Oramed Ltd., unless otherwise indicated.  DESCRIPTION OF BUSINESS General We are a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions, including an orally ingestibleinsulin capsule or tablet to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules, tablets or pills for delivery of otherpolypeptides. Oral Insulin: We are seeking to revolutionize the treatment of diabetes through our proprietary flagship product, an orally ingestible insulin capsule(ORMD0801) currently in Phase 2 clinical trials. Our technology allows insulin to travel from the gastrointestinal tract via the portal vein to the bloodstream,revolutionizing the manner in which insulin is delivered. It enables its passage in a more physiological manner than current delivery methods of insulin. Through our research and development efforts, we are developing an oral dosage form that will withstand the harsh chemical environment of thestomach or intestines and will be effective in delivering active insulin for the treatment of diabetes. The proteins and vehicles that are added to the insulin inthe formulation process must not modify chemically or biologically, and the insulin and the dosage form must be safe to ingest. Our research and development team has performed numerous animal studies to optimize the composition and functionality of their oral insulin(ORMD0801) modality and to demonstrate its safety and efficacy. Our studies have confirmed the feasibility of lowering blood glucose levels with an orallyadministered form of insulin that is both safe and effective. Our technology is a platform that has the potential to deliver medications and vaccines orally that today can only be delivered via injection. Diabetes: Diabetes is a disease in which the body does not produce or properly use insulin. Insulin is a hormone that causes sugar to be absorbedinto cells, where the sugar is converted into energy needed for daily life. The cause of diabetes is attributed both to genetics (type 1 diabetes) and, most often,to environmental factors such as obesity and lack of exercise (type 2 diabetes). According to the International Diabetes Federation ("IDF"), an estimated 285 million people worldwide suffered from diabetes in 2010. In the UnitedStates there were approximately 26.8 million people with diabetes, or 8.7% of the United States population in 2010. The IDF predicts that the number ofpeople worldwide with diabetes will exceed 435 million in 2030 if the current rate of growth continues unchecked. Diabetes now affects seven percent of the world’s adult population and claims four million lives every year. The disease is a leading cause ofblindness, kidney failure, heart attack, stroke and amputation. Diabetes was estimated to cost the world economy at least $376 billion in 2010, or 11.6% oftotal world healthcare expenditure. By 2030, this number is projected to exceed $490 billion. More than 80% of diabetes spending is in the world’s richestcountries and not in the poorer countries, where over 70% of people with diabetes now live. The regions with the highest comparative prevalence rates are North America, where 10.2% of the adult population has diabetes, followed by theMiddle East and North Africa with 9.3%. The regions with the highest number of people living with diabetes are the Western Pacific, where some 77 millionpeople have diabetes and South East Asia with 59 million. 2 Each year seven million people develop diabetes. The most dramatic increases in type 2 diabetes have occurred in populations where there havebeen rapid and major improvements in living standards, demonstrating the important role played by lifestyle factors and the potential for reversing the globalepidemic. Intellectual Property: We own a portfolio of patents and patent applications covering our technologies and we are aggressively protecting thesetechnology developments on a worldwide basis. Management: We are led by a highly-experienced management team knowledgeable in the treatment of diabetes. Our Chief Medical andTechnology Officer, Miriam Kidron, PhD, is a world-recognized pharmacologist and a biochemist and the innovator primarily responsible for our oral insulintechnology development and know-how. Scientific Advisory Board: Our management team has access to our internationally recognized Scientific Advisory Board whose members arethought-leaders in their respective areas. The Scientific Advisory Board is comprised of Dr. Nir Barzilai, Professor Ele Ferrannini, Professor Avram Hershko,Dr. Derek LeRoith, Dr. John Amatruda and Dr. Michael Berelowitz acting as Chairman. Strategy Short Term Business Strategy We plan to conduct further research and development on the technology covered by the patent application "Methods and Composition for OralAdministration of Proteins", which we acquired from Hadasit Medical Services and Development Ltd. (“Hadasit”), as well as the other patents we have filedsince. Through our research and development efforts, we are seeking to develop an oral dosage form that will withstand the harsh chemical environment ofthe stomach and intestines and will be effective in delivering active insulin for the treatment of diabetes. The enzymes and vehicles that are added to theinsulin in the formulation process must not modify the insulin chemically or biologically, and the dosage form must be safe to ingest. We plan to continue toconduct clinical trials to show the effectiveness of our technology. We intend to conduct the clinical trials necessary to file an Investigational New Drug(“IND”) application with the U.S. Food and Drug Administration (the “FDA”). Additional clinical trials are planned in other countries such as Israel, India andSouth Africa, in order to substantiate our results as well as for purposes of making future filings for drug approval in these countries. We also plan to conductfurther research and development by deploying our proprietary drug delivery technology for the delivery of other polypeptides in addition to insulin, and todevelop other innovative pharmaceutical products. Long Term Business Strategy If our oral insulin capsule or other drug delivery solutions show significant promise in clinical trials, we plan to ultimately seek a strategiccommercial partner, or partners, with extensive experience in the development, commercialization, and marketing of insulin applications and/or other orallydigestible drugs. We anticipate such partner or partners would be responsible for, or substantially support, late stage clinical trials (Phase III) to increase thelikelihood of obtaining regulatory approvals and registrations in the appropriate markets in a timely manner. We further anticipate that such partner, orpartners, would also be responsible for sales and marketing of our oral insulin capsule in these markets. Such planned strategic partnership, or partnerships,may provide a marketing and sales infrastructure for our products as well as financial and operational support for global clinical trials, post marketing studies,label expansions and other regulatory requirements concerning future clinical development in the United States and elsewhere. Any future strategic partner,or partners, may also provide capital and expertise that would enable the partnership to develop new oral dosage form for other polypeptides. While ourstrategy is to partner with an appropriate party, no assurance can be given that any third party would be interested in partnering with us. Under certaincircumstances, we may determine to develop one or more of our oral dosage form on our own, either world-wide or in select territories. 3 Other Planned Strategic Activities In addition to developing our own oral dosage form drug portfolio, we are, on an on-going basis, considering in-licensing and other means ofobtaining additional technologies to complement and/or expand our current product portfolio. Our goal is to create a well-balanced product portfolio thatwill enhance and complement our existing drug portfolio. Product Development Orally Ingestible Insulin: During fiscal year 2007 we conducted several clinical studies of our orally ingestible insulin. The studies were intended toassess both the safety/tolerability and absorption properties of our proprietary oral insulin. Based on the pharmacokinetic and pharmacologic outcomes ofthese trials, we decided to continue the development of our oral insulin product. On November 15, 2007, we successfully completed animal studies in preparation for the Phase 1B clinical trial of our oral insulin capsule(ORMD0801). On January 22, 2008, we commenced the non-FDA approved Phase 1B clinical trials with our oral insulin capsule, in healthy humanvolunteers with the intent of dose optimization. On March 11, 2008, we successfully completed our Phase 1B clinical trials. On April 13, 2008, we commenced a non-FDA approved Phase 2A study to evaluate the safety and efficacy of our oral insulin capsule (ORMD0801)in type 2 diabetic volunteers at Hadassah Medical Center in Jerusalem. On August 6, 2008, we announced the successful results of this trial. In July 2008 we were granted approval by the Institutional Review Board Committee of Hadassah Medical Center in Jerusalem to conduct a non-FDA approved Phase 2A study to evaluate the safety and efficacy of our oral insulin capsule (ORMD0801) on type 1 diabetic volunteers. On September 24,2008, we announced the beginning of this trial. On July 21, 2009 we reported positive results from this trial. On April 21, 2009, we entered into a consulting service agreement with ADRES Advanced Regulatory Services Ltd. (“ADRES”), pursuant to whichADRES will provide services for the purpose of filing an IND application with the FDA for a Phase 2 study according to the FDA requirements. The FDAapproval process and, if approved, registration for commercial use as an oral drug can take several years. In May 2009, we commenced a non-FDA approved Phase 2B study in South Africa to evaluate the safety, tolerability and efficacy of our oral insulincapsule (ORMD0801) on type 2 diabetic volunteers. On May 6, 2010, we reported that the capsule was found to be well tolerated and exhibited a positivesafety profile. No cumulative adverse effects were reported throughout this first study of extended exposure to the capsule. On February 10, 2010, we entered into agreements with Vetgenerics Research G. Ziv Ltd., a clinical research organization, to conduct a toxicologytrial on our oral insulin capsules. On March 23, 2011, we reported that we successfully completed the resulting comprehensive toxicity study for our oralinsulin capsule (ORMD0801). The study was completed under conditions prescribed by the FDA Good Laboratory Practices regulations and is the last studyrequired to be performed before filing an IND filing. 4 On September 14, 2010, we reported the successful results of an exploratory clinical trial testing the effectiveness of our oral insulin capsule(ORMD0801) in type 1 diabetes patients suffering from uncontrolled diabetes. Unstable or labile diabetes is characterized by recurrent, unpredictable anddramatic blood glucose swings often linked with irregular hyperglycemia and sometimes serious hypoglycemia affecting type 1 diabetes patients. Thisnewly completed exploratory study was a proof of concept study for defining a novel indication for ORMD0801. We believe the encouraging results justifyfurther clinical development of ORMD0801 capsule application toward management of uncontrolled diabetes. We intend to file an IND application with the FDA for Phase 2 clinical studies of our orally ingested insulin during the fourth quarter of 2011. If wedo not receive comments from the FDA on our IND application within 30 days from submission, we intend to immediately commence an FDA approvedPhase 2 study to evaluate the safety, tolerability and efficacy of our oral insulin capsule (ORMD0801) on type 2 diabetic volunteers. GLP-1 Analog: On September 16, 2008 we announced the launch of pre-clinical trials of ORMD0901, a GLP-1-analog. The pre-clinical trialsinclude animal studies which suggest that the GLP-1 analog (exenatide-4) when combined with Oramed’s absorption promoters is absorbed through thegastrointestinal tract and retains its biological activity. Glucagon-like peptide-1 (GLP-1) is an incretin hormone - a type of gastrointestinal hormone that stimulates the secretion of insulin from thepancreas. The incretin concept was hypothesized when it was noted that glucose ingested by mouth (oral) stimulated two to three times more insulin releasethan the same amount of glucose administered intravenously. In addition to stimulating insulin release, GLP-1 was found to suppress glucagon release(hormone involved in regulation of glucose) from the pancreas, slow gastric emptying to reduce the rate of absorption of nutrients into the blood stream, andincrease satiety. Other important beneficial attributes of GLP-1 are its effects of increasing the number of beta cells (cells that manufacture and release insulin)in the pancreas and, possibly, protection of the heart. On September 9, 2009, we received approval from the Institutional Review Board (IRB) in Israel to commence human clinical trials of an oral GLP-1analog. The approval was granted after successful pre-clinical results were reported. The trials are being conducted on healthy volunteers at HadassahUniversity Medical Center in Jerusalem. Oramed’s first-in-humans clinical trial is testing the safety and efficacy of ORMD-0901, an encapsulated oral GLP-1analog formulation. The study monitored the responses of healthy males to a single dose delivered 60 minutes before a glucose load. ORMD-0901 was welltolerated by all subjects and demonstrated physiological activity, as extrapolated from ensuing subject insulin levels when compared to those observed aftertreatment with placebo.Raw Materials: Our oral insulin capsule is currently manufactured by Swiss Caps AG, under a Clinical Trial Manufacturing Agreement. On July 5, 2010, our subsidiary, Oramed Ltd., entered into a Manufacturing Supply Agreement ("MSA") with Sanofi-Aventis Deutschland GMBH("sanofi-aventis"). According to the MSA, sanofi-aventis will supply our subsidiary with specified quantities of recombinant human insulin to be used forclinical trials in the United States. The raw materials required for the manufacturing of the capsule are purchased from third parties, under separate agreements. We generally dependupon a limited number of suppliers for the raw materials. Although alternative sources of supply for these materials are generally available, we could incursignificant costs and disruptions in changing suppliers. The termination of our relationships with our suppliers or the failure of these suppliers to meet ourrequirements for raw materials on a timely and cost-effective basis could materially adversely affect our business, prospects, financial condition and results ofoperations. 5 Patents and Licenses We maintain a proactive intellectual property strategy which includes patent filings in multiple jurisdictions, including the United States and othercommercially significant markets. We hold 34 patent applications currently pending with respect to various compositions, methods of production and oraladministration of proteins and exenatide. Expiration dates for pending patents will fall between 2026 and 2028. Consistent with our strategy to seek protection in key markets worldwide, we have been and will continue to pursue the patent applications andcorresponding foreign counterparts of such applications. We believe that our success will depend on our ability to obtain patent protection for ourintellectual property. Our patent strategy is as follows: · Aggressively protect all current and future technological developments to assure strong and broad protection by filing patents and/or continuationsin part as appropriate; · Protect technological developments at various levels, in a complementary manner, including the base technology, as well as specific applicationsof the technology; and · Establish comprehensive coverage in the United States and in all relevant foreign markets in anticipation of future commercializationopportunities. The validity, enforceability, written supports, and breadth of claims in our patent applications involve complex legal and factual questions and,therefore, may be highly uncertain. No assurance can be given that any patents based on pending patent applications or any future patent applications filedby us will be issued, that the scope of any patent protection will exclude competitors or provide competitive advantages to us, that any of the patents thathave been or may be issued to us will be held valid or enforceable if subsequently challenged, or that others will not claim rights in or ownership of thepatents and other proprietary rights held or licensed by us. Furthermore, there can be no assurance that others have not developed or will not develop similarproducts, duplicate any of our technology or design around any patents that have been or may be issued to us. Since patent applications in the United Statesare maintained in secrecy for the initial period of time following filing, we also cannot be certain that others did not first file applications for inventionscovered by our pending patent applications, nor can we be certain that we will not infringe any patents that may be issued to others on such applications. We also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require ouremployees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, board of directors, technical review board andother advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements providethat all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be keptconfidential and not disclosed to third parties except in specific limited circumstances. We also require signed confidentiality or material transfer agreementsfrom any company that is to receive our confidential information. In the case of employees, consultants and contractors, the agreements provide that allinventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be noassurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we wouldhave adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developedby competitors. 6 Our success will also depend in part on our ability to commercialize our technology without infringing the proprietary rights of others. No assurancecan be given that patents do not exist or could not be filed which would have an adverse effect on our ability to market our technology or maintain ourcompetitive position with respect to our technology. If our technology components, products, processes or other subject matter are claimed under otherexisting United States or foreign patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event,we may challenge the validity of such patents or other proprietary rights or we may be required to obtain licenses from such companies in order to develop,manufacture or market our technology. There can be no assurances that we would be able to obtain such licenses or that such licenses, if available, could beobtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses could resultin delays in marketing our proposed technology or the inability to proceed with the development, manufacture or sale of products requiring such licenses,which could have a material adverse effect on our business, financial condition and results of operations. If we are required to defend ourselves againstcharges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we aresuccessful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to thirdparties and force us to curtail or cease the development and commercialization of our technology. Partnerships and Collaborative Arrangements We believe that working together with strategic partners will expedite product formulation, production and approval. On February 17, 2006, we entered into an agreement with Hadasit to provide consulting and clinical trial services. On October 30, 2006, we entered into a Clinical Trial Manufacturing Agreement with Swiss Caps AG (“Swiss”), pursuant to which Swiss currentlymanufactures the oral insulin capsule developed by us. During April 2008, we entered into a five year master services agreement with SAFC, an operating division of Sigma-Aldrich, Inc., a leadingdeveloper, manufacturer and distributor of chemicals and biochemicals, pursuant to which SAFC is providing services for individual projects, which mayinclude strategic planning, expert consultation, clinical trial services, statistical programming and analysis, data processing, data management, regulatory,clerical, project management, central laboratory services, pre-clinical services, pharmaceutical sciences services, and other research and developmentservices. On April 21, 2009, we entered into a consulting service agreement with ADRES, Advanced Regulatory Services Ltd. (“ADRES”), pursuant to whichADRES will provide services for the purpose of filing an IND application with the FDA for a Phase 2 study in accordance with FDA requirements. The FDAapproval process and, if approved, registration for commercial use as an oral drug can take several years. On July 8, 2009 we entered into an additional agreement with Hadasit, to facilitate additional clinical trials to be performed at Hadassah MedicalCenter in Jerusalem. On February 10, 2010, we entered into agreements with Vetgenerics Research G. Ziv Ltd., a clinical research organization (CRO), to conduct atoxicology trial on our oral insulin capsules. 7 On May 2, 2010, we entered into an additional agreement with SAFC Pharma, a division of the Sigma-Aldrich, to develop a process to produce oneof our oral capsule ingredients. On July 5, 2010, our subsidiary, Oramed Ltd., entered into an MSA with Sanofi-Aventis. Pursuant to the MSA, Sanofi-Aventis will supply oursubsidiary with specified quantities of recombinant human insulin to be used for clinical trials in the United States. On May 13, 2011, we entered into a consulting agreement with a third party for a period of 12 months, pursuant to which such consultant willprovide investor relations services and will be entitled to a cash monthly fee of $4,000, that may be increased up to $10,000 upon the completion of a$5,000,000 capital raise by us. In addition, the consultant received a warrant to purchase up to 32,000 of our shares. The warrant has a term of five years andan exercise price of $0.50 per share and will vest in 12 installments during the period from October 2011 to May 2016. On August 15, 2011, we entered into a consulting agreement with a third party for a period of nine months, pursuant to which such consultant willprovide investor relations services and will be entitled to a cash monthly fee of $4,000, and an additional $3,000 in the first month. In addition, theconsultant will be issued 249,000 of our shares in three installments over the engagement period, commencing November 2011. Out-Licensed Technology On June 1, 2010, our subsidiary, Oramed Ltd., entered into a joint venture agreement with D.N.A Biomedical Solutions Ltd. (formerly Laser DetectSystems Ltd), an Israeli company listed on the Tel Aviv Stock Exchange ("D.N.A"), for the establishment of a new company to be called Entera Bio Ltd.("Entera"). Under the terms of a license agreement that was entered into between Oramed and Entera in August 2010, we out-licensed technology to Entera, onan exclusive basis, for the development of oral delivery drugs for certain indications to be agreed upon between the parties. The out-licensed technologydiffers from our main delivery technology that is used for oral insulin and GLP 1 analog and is subject to different patent applications. Entera's initialdevelopment effort is for an oral formulation for the treatment of osteoporosis. The license was royalty-free unless our ownership interest in Entera decreasedto 30% or less of its outstanding share capital, in which case royalties would have been payable with respect to revenues derived from certain indications.Under certain circumstances, Entera may have received ownership of the licensed technology, in which case we would have received a license back on thesame terms. D.N.A initially invested $600,000 in Entera, and Entera was initially owned in equal parts by Oramed and D.N.A. Entera's Chief Executive Officer,Dr. Phillip Schwartz, was granted options to purchase ordinary shares of Entera, reflecting 9.9% of Entera's share capital, upon full exercise. On March 31, 2011, we consummated a transaction with D.N.A, whereby we sold to D.N.A 47% of Entera's outstanding share capital on an undilutedbasis. As consideration for the Entera shares, we received a promissory note issued by D.N.A in the principal amount of $450,000, with an annual interest rateof 0.45%, to be paid within four months after closing, and 8,404,667 ordinary shares of D.N.A, having an aggregate market value of approximately $581,977as of March 31, 2011. The promissory note is secured by a personal guarantee of the D.N.A majority shareholders. In addition, D.N.A invested $250,000 inour private placement investment round, which closed on February 22, 2011, for which it received 781,250 shares of our common stock and five-yearwarrants to purchase 273,438 shares of common stock at an exercise price of $0.50 per share. As part of the transaction with D.N.A, we entered into a patent transfer agreement (to replace the original license agreement upon closing) pursuantto which Oramed assigned to Entera all of its right, title and interest in and to the patent application that it had licensed to Entera in August 2010. Under thisagreement, our subsidiary, Oramed Ltd., is entitled to receive from Entera royalties of 3% of Entera's net revenues (as defined in the agreement) and a licenseback of that patent application for use in respect of diabetes and influenza. On the closing date, Oramed, Entera and D.N.A terminated the joint venture agreement entered into on June 1, 2010 in connection with theformation of Entera. In September 2011, Entera reported successful Phase 1 clinical trial results. We believe the Phase 1 data supports the continued development ofEntera’s oral osteoporosis drug. The Phase 1 clinical trial consisted of twelve healthy patients and was conducted at the Hadasah Medical Center inJerusalem. No adverse events were reported. 8 Government Regulation The Drug Development Process Regulatory requirements for the approval of new drugs vary from one country to another. In order to obtain approval to market our drug portfolio, weneed to go through a different regulatory process in each country in which we apply for such approval. In some cases information gathered during theapproval process in one country can be used as supporting information for the approval process in another country. The U.S. Food and Drug Administration(the “FDA”) compliance requirements are considered to be one of the most stringent worldwide. The following is a summary of the FDA’s requirements. The FDA requires that pharmaceutical and certain other therapeutic products undergo significant clinical experimentation and clinical testing priorto their marketing or introduction to the general public. Clinical testing, known as clinical trials or clinical studies, is either conducted internally by lifescience, pharmaceutical, or biotechnology companies or is conducted on behalf of these companies by contract research organizations. The process of conducting clinical studies is highly regulated by the FDA, as well as by other governmental and professional bodies. Below wedescribe the principal framework in which clinical studies are conducted, as well as describe a number of the parties involved in these studies. Protocols. Before commencing human clinical studies, the sponsor of a new drug or therapeutic product must submit an Investigational New Drug(“IND ”) application, to the FDA. The application contains what is known in the industry as a protocol. A protocol is the blueprint for each drug study. Theprotocol sets forth, among other things, the following: ·who must be recruited as qualified participants; ·how often to administer the drug or product; ·what tests to perform on the participants; and ·what dosage of the drug or amount of the product to give to the participants. Institutional Review Board. An institutional review board is an independent committee of professionals and lay persons which reviews clinicalresearch studies involving human beings and is required to adhere to guidelines issued by the FDA. The institutional review board does not report to theFDA, but its records are audited by the FDA. Its members are not appointed by the FDA. All clinical studies must be approved by an institutional reviewboard. The institutional review board’s role is to protect the rights of the participants in the clinical studies. It approves the protocols to be used, theadvertisements which the company or contract research organization conducting the study proposes to use to recruit participants, and the form of consentwhich the participants will be required to sign prior to their participation in the clinical studies. Clinical Trials. Human clinical studies or testing of a potential product are generally done in three stages known as Phase I through Phase IIItesting. The names of the phases are derived from the regulations of the FDA. Generally, there are multiple studies conducted in each phase. · Phase I. Phase I studies involve testing a drug or product on a limited number of healthy participants, typically 24 to 100 people at a time.Phase I studies determine a product’s basic safety and how the product is absorbed by, and eliminated from, the body. This phase lasts an average of sixmonths to a year. 9 · Phase II. Phase II trials involve testing up to 200 participants at a time who may suffer from the targeted disease or condition. Phase IItesting typically lasts an average of one to two years. In Phase II, the drug is tested to determine its safety and effectiveness for treating a specific illness orcondition. Phase II testing also involves determining acceptable dosage levels of the drug. If Phase II studies show that a new drug has an acceptable rangeof safety risks and probable effectiveness, a company will generally continue to review the substance in Phase III studies. · Phase III. Phase III studies involve testing large numbers of participants, typically several hundred to several thousand persons. Thepurpose is to verify effectiveness and long-term safety on a large scale. These studies generally last two to three years. Phase III studies are conducted atmultiple locations or sites. Like the other phases, Phase III requires the site to keep detailed records of data collected and procedures performed. New Drug Approval. The results of the clinical trials are submitted to the FDA as part of a new drug application (“NDA”). Following the completionof Phase III studies, assuming the sponsor of a potential product in the United States believes it has sufficient information to support the safety andeffectiveness of its product, the sponsor will generally submit an NDA to the FDA requesting that the product be approved for marketing. The application is acomprehensive, multi-volume filing that includes the results of all clinical studies, information about the drug’s composition, and the sponsor’s plans forproducing, packaging and labeling the product. The FDA’s review of an application can take a few months to many years, with the average review lasting 18months. Once approved, drugs and other products may be marketed in the United States, subject to any conditions imposed by the FDA. Phase IV. The FDA may require that the sponsor conduct additional clinical trials following new drug approval. The purpose of these trials, knownas Phase IV studies, is to monitor long-term risks and benefits, study different dosage levels or evaluate safety and effectiveness. In recent years, the FDA hasincreased its reliance on these trials. Phase IV studies usually involve thousands of participants. Phase IV studies also may be initiated by the companysponsoring the new drug to gain broader market value for an approved drug. For example, large-scale trials may also be used to prove effectiveness and safetyof new forms of drug delivery for approved drugs. Examples may be using an inhalation spray versus taking tablets or a sustained-release form of medicationversus capsules taken multiple times per day. The drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number of factors, including theseverity of the illness in question, the availability of alternative treatments, and the risks and benefits demonstrated in the clinical trials. Other Regulations Various Federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory practices, the experimentaluse of animals, the environment and the purchase, storage, movement, import, export, use, and disposal of hazardous or potentially hazardous substances,including radioactive compounds and infectious disease agents, used in connection with our research are applicable to our activities. They include, amongothers, the United States Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the National EnvironmentalPolicy Act, the Toxic Substances Control Act, and Resources Conservation and Recovery Act, national restrictions on technology transfer, import, export,and customs regulations, and other present and possible future local, state, or federal regulation. The Compliance with these and other laws, regulations andrecommendations can be time-consuming and involve substantial costs. In addition, the extent of governmental regulation which might result from futurelegislation or administrative action cannot be accurately predicted and may have a material adverse effect on our business, financial condition, results ofoperations and prospects. 10 Competition Competition in General Competition in the area of biomedical and pharmaceutical research and development is intense and significantly depends on scientific andtechnological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercializetechnological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. Our competitors include majorpharmaceutical, medical products, chemical and specialized biotechnology companies, many of which have financial, technical and marketing resourcessignificantly greater than ours. In addition, many biotechnology companies have formed collaborations with large, established companies to supportresearch, development and commercialization of products that may be competitive with ours. Academic institutions, governmental agencies and other publicand private research organizations are also conducting research activities and seeking patent protection and may commercialize products on their own orthrough joint ventures. We are aware of certain other products manufactured or under development by competitors that are used for the treatment of thediseases and health conditions that we have targeted for product development. We can provide no assurance that developments by others will not render ourtechnology obsolete or noncompetitive, that we will be able to keep pace with new technological developments or that our technology will be able tosupplant established products and methodologies in the therapeutic areas that are targeted by us. The foregoing factors could have a material adverse effecton our business, prospects, financial condition and results of operations. These companies, as well as academic institutions, governmental agencies andprivate research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Competition within our sector is increasing, so we will encounter competition from existing firms that offer competitive solutions in diabetestreatment solutions. These competitive companies could develop products that are superior to, or have greater market acceptance, than the products beingdeveloped by us. We will have to compete against other biotechnology and pharmaceutical companies with greater market recognition and greater financial,marketing and other resources. Our competition will be determined in part by the potential indications for which our technology is developed and ultimately approved byregulatory authorities. In addition, the first product to reach the market in a therapeutic or preventive area is often at a significant competitive advantagerelative to later entrants to the market. Accordingly, the relative speed with which we, or our potential corporate partners, can develop products, complete theclinical trials and approval processes and supply commercial quantities of the products to the market are expected to be important competitive factors. Ourcompetitive position will also depend on our ability to attract and retain qualified scientific and other personnel, develop effective proprietary products,develop and implement production and marketing plans, obtain and maintain patent protection and secure adequate capital resources. We expect ourtechnology, if approved for sale, to compete primarily on the basis of product efficacy, safety, patient convenience, reliability, value and patent position. Competition for our Oral Insulin Capsule We anticipate the oral insulin capsule to be a competitive diabetes drug because of its anticipated efficacy and safety profile. The following aretreatment options for type 1 and type 2 diabetic patients: · Insulin injections; 11 · Insulin pumps; · Insulin inhalers; or · a combination of diet, exercise and oral medication which improve the body's response to insulin or cause the body to produce moreinsulin. Several entities who are developing oral insulin capsules and other alternative oral insulin as well as the development stage are thought to be:Buccal delivery, Biodel (US, Phase 3) – Sublingual delivery and MannKind (US) -Inhaled delivery Scientific Advisory Board We maintain a scientific advisory board consisting of internationally recognized scientists who advise us on scientific and technical aspects of ourbusiness. The scientific advisory board meets periodically to review specific projects and to assess the value of new technologies and developments to us. Inaddition, individual members of the scientific advisory board meet with us periodically to provide advice in their particular areas of expertise. The scientificadvisory board consists of the following members, information with respect to whom is set forth below: Professor Avram Hershko, Dr. Nir Barzilai, ProfessorEle Ferrannini, Dr. Derek LeRoith, Dr. John Amatruda and our director Dr. Michael Berelowitz acting as Chairman. See "Item 10 – Directors, ExecutiveOfficers and Corporate Governance" for certain information about Dr. Berelowitz. We have entered into an agreement with Dr. Berelowitz pursuant to which we will pay him certain fees as compensation for serving as Chairman. See"Item 11 – Executive Compensation – Director Compensation." Professor Avram Hershko, MD PhD joined the Oramed Scientific Advisory Board in July 2008. He earned his MD degree (1965) and PhD degree(1969) from the Hebrew University- Hadassah Medical School of Jerusalem, Prof. Hershko served as a physician in the Israel Defense Forces from 1965 to1967. After a post-doctoral fellowship with Gordon Tomkins at the University of San Francisco (1969-72), he joined the faculty of the Haifa Technionbecoming professor in 1980. He is now Distinguished Professor in the Unit of Biochemistry in the B. Rappaport Faculty of Medicine of the Technion.Professor Hershko’s main research interests concern the mechanisms by which cellular proteins are degraded, a formerly neglected field of study. Hershko andhis colleagues showed that cellular proteins are degraded by a highly selective proteolytic system. This system tags proteins for destruction by linkage aprotein called ubiquitin, which had previously been identified in many tissues, but whose function was previously unknown. Subsequent work in Hershko'sand many other laboratories has shown that the ubiquitin system has a vital role in controlling a wide range of cellular processes, such as the regulation ofcell division, signal transduction and DNA repair. Professor Hershko was awarded the Nobel Prize in Chemistry (2004) jointly with his former PhD studentAaron Ciechanover and their colleague Irwin Rose. His many honors include the Israel Prize for Biochemistry (1994), the Gardner Award (1999), the LaskerPrize for Basic Medical Research (2000), the Wolf Prize for Medicine (2001) and the Louisa Gross Horwitz Award (2001). Hershko is a member of the IsraelAcademy of Sciences (2000) and a Foreign Associate of the US Academy of Sciences (2003). Derek LeRoith MD, PhD, joined the Oramed Scientific Advisory Board in January 2007. He is currently the Chief of the Division of Endocrinology,Diabetes and Bone Diseases at Mt. Sinai School of Medicine, (New York) Dr. LeRoith has worked at the National Institues of Health ("NIH") since 1979 in thefield of Endocrinology and Diabetes and rose to be Diabetes Branch at the MDNIH in Bethesda, Maryland, a position he held until 2005. His main interestshave focused on the role of insulin and the insulin-like growth factors in normal physiology and disease states. In these areas he has published over 500 peer-reviewed articles and reviews in high profile journals. He is also the senior editor of a textbook on diabetes, now in its third edition and has edited books onthe insulin-like growth factors (IGFs). Dr. LeRoith has made major contributions in our understanding of the basic pathophysiology of type 2 diabetes andalso the role of the IGFs in various disorders, especially in cancer, and is considered a worldwide expert on these topics. In recognition of his contributions hehas received many lecturing positions worldwide and has been the plenary speaker at numerous national and international symposia. He is the editor of anumber of diabetes- and growth factor-related journals, has been on the advisory boards of a number of companies and co-chairs two national committeesinvolved in the education of endocrinologist and primary care physicians. 12 Professor Ele Ferrannini joined the Oramed Scientific Advisory Board in February 2007. He is a past President to the, European Association for theStudy of Diabetes ("EASD"), which supports scientists, physicians, laboratory workers, nurses and students from all over the world who are interested indiabetes and related subjects in Europe, and performs functions similar to that of the American Diabetes Association ("ADA") in the United States. ProfessorFerrannini has worked with various institutions including the Department of Internal Medicine, University of Pisa School of Medicine, and CNR (NationalResearch Council) Institute of Clinical Physiology, Pisa, Italy; Diabetes Division, Department of Medicine, University of Texas Health Science Center at SanAntonio, Texas, USA. He has also had extensive training focused on microbiology, immunology, endocrinology, and specializing in diabetes studies.Professor Ferrannini has received a Certificate of the Educational Council for Foreign Medical Graduates from the University of Bologna, and with cum laudehonors completed a subspecialty in Diabetes and Metabolic Diseases at the University of Torino. He has published over 350 original papers and 50 bookchapters and he is among the "highly cited researcher", according to the Institute for Scientific Information ("ISI"). ISI provides bibliographic databaseservices and publishes list of highly cited researchers. Dr. Nir Barzilai joined the Oramed Scientific Advisory Board in January 2007. He is the Director of the Institute for Aging Research at the AlbertEinstein College of Medicine, New York. He is currently an Associate Professor in the Department of Medicine, Molecular Genetics and the DiabetesResearch Center and is a member of the Divisions of Endocrinology and Geriatrics. He is also the Director of the Montefiore Hospital Diabetes Clinic, NewYork. He has spent over 20 years assisting patients internationally and training in various fields including Medicine, Geriatrics, Endocrinology andMolecular Genetics. Dr. Barzilai has had a strong career in diabetes studies between Israel, London and the United States. He has worked for such esteemedinstitutions as Hadassah Research Hospital, NIH, and many esteemed United States based university hospitals, including Cornell and Yale. Dr. John Amatruda joined the Oramed Scientific Advisory Board in February 2010. He graduated from Yale University, received his MD degreefrom the Medical College of Wisconsin and did his internship and residency in Internal Medicine and Fellowship in Endocrinology and Metabolism at TheJohns Hopkins Hospital. He is board certified in Internal Medicine and Endocrinology and Metabolism and continues to see patients. Dr. Amatruda was aProfessor of Medicine at The University of Rochester School of Medicine where he was head of the Clinical Research Center, fully funded as principleinvestigator on two NIH grants, and acting Head of the Endocrine Metabolism Unit. From 1992 to 2002, he started and ran a drug discovery group at BayerCorp where he served as Vice President and Therapeutic Area Research Head, as well as a Professor of Medicine Adjunct at Yale University School ofMedicine. He assisted in the approval of Acarbose, an anti-diabetic drug used to treat type 2 diabetes mellitus and, in some countries, prediabetes distributedby Bayer AG, and his group put several compounds into clinical development including the first glucagon receptor antagonist. From 2002 to 2009, Dr.Amatruda held various positions at Merck, including Vice President and Therapeutic Area Head for Metabolism and Atherosclerosis and acting TherapeuticArea head for Cardiovascular. These groups filed NDAs for Vytorin, Januvia and Janumet. Most recently Dr. Amatruda was Senior Vice President andFranchise Head for Diabetes and Obesity and a member of the Research Management Committee at Merck. Dr. Amatruda is an author of over 150 papers,abstracts, reviews and book chapters, primarily in the areas of insulin action in vitro systems and in clinical diabetes and obesity. 13 Employees We have been successful in retaining the experienced personnel involved in our research and development program. In addition, we believe we havesuccessfully recruited the clinical/regulatory, quality assurance and other personnel needed to advance through clinical studies or have engaged the servicesof experts in the field for these requirements. As of August 31, 2011, we have contracted with eight individuals for employment or consulting arrangements.Of our staff, three are senior management, three are engaged in research and development work, and the remaining are involved in administration work. Corporate History Oramed was incorporated on April 12, 2002, in the State of Nevada under the name Iguana Ventures Ltd. Following the incorporation, we were anexploration stage company engaged in the acquisition and exploration of mineral properties. We were unsuccessful in implementing our business plan as amineral exploration company. Accordingly, we decided to change the focus of our business by completing a share exchange with the shareholders ofIntegrated Security Technologies, Inc., a New Jersey private corporation (“ISTI”). On June 4, 2004, we changed our name to Integrated Security Technologiesby filing a Certificate of Amendment with the Nevada Secretary of State. Effective June 14, 2004 we effected a 3.3:1 forward stock split, increasing theamount of authorized capital to 200,000,000 shares of common stock with a par value of $.001 per share. However, due to disappointing results, weterminated the share exchange agreement with the shareholders of ISTI. On February 17, 2006, we executed an agreement with Hadasit to acquire provisional patent application No. 60/718716 and related intellectualproperty. The provisional patent application No. 60/718716 relates to a method of preparing insulin so that it may be taken orally to be used in the treatmentfor the treatment of individuals with diabetes. On April 10, 2006, we changed our name from Integrated Security Technologies, Inc. to OramedPharmaceuticals Inc. On August 31, 2006, based on provisional patent application No. 60/718716, we filed a patent application under the PatentCooperation Treaty at the Israel Patent Office for “Methods and Compositions for Oral Administration of Proteins.” On March 11, 2011, Oramed was reincorporated from the State of Nevada to the State of Delaware. 14 ITEM 1A – RISK FACTORS An investment in our securities involves a high degree of risk. You should consider carefully the following information about these risks, togetherwith the other information contained in this Annual Report on Form 10-K before making an investment decision. Our business, prospects, financialcondition, and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities coulddecline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in “Risk Factors” areforward looking statements. Risks Related to Our Business There is substantial doubt as to our ability to continue as a going concern. Our financial statements were prepared on the assumption that we will continue as a going concern. Our cash reserves will not be sufficient to permitus to continue at our anticipated level of operations for our fiscal year ending August 31, 2012. During 2011 and 2012, we plan to increase research anddevelopment, product development, and administrative expenses relating to our business, including expenses related to research and development related toour oral delivery platform. We intend to use our cash reserves, as well as other funds in the event that they shall become available on commerciallyreasonable terms, to finance these activities and other activities described herein, although we can provide no assurance that these additional funds will beavailable in the amounts or at the times we may require. If sufficient capital is not available, we would likely be required to scale back or terminate ourresearch and development efforts. See “Risk Factors -- We will need substantial additional capital in order to satisfy our business objectives.” We will need substantial additional capital in order to satisfy our business objectives. To date, we have financed our operations principally through offerings of securities exempt from the registration requirements of the Securities Act.We believe that our available resources and cash flow will be sufficient to meet our anticipated working capital needs for a minimum of six months from thedate of this Annual Report on Form 10-K. We will require substantial additional financing at various intervals in order to continue our research anddevelopment programs, including significant requirements for operating expenses including intellectual property protection and enforcement, for pursuit ofregulatory approvals, and for commercialization of our products. We can provide no assurance that additional funding will be available on a timely basis, onterms acceptable to us, or at all. In the event that we are unable to obtain such financing, we will not be able to fully develop and commercialize ourtechnology. Our future capital requirements will depend upon many factors, including: · continued scientific progress in our research and development programs; · costs and timing of conducting clinical trials and seeking regulatory approvals and patent prosecutions; · competing technological and market developments; · our ability to establish additional collaborative relationships; and · effects of commercialization activities and facility expansions if and as required. If we cannot secure adequate financing when needed, we may be required to delay, scale back or eliminate one or more of our research anddevelopment programs or to enter into license or other arrangements with third parties to commercialize products or technologies that we would otherwiseseek to develop ourselves and commercialize ourselves. In such event, our business, prospects, financial condition, and results of operations may beadversely affected as we may be required to scale-back, eliminate, or delay development efforts or product introductions or enter into royalty, sales or otheragreements with third parties in order to commercialize our products. 15 We are a development stage company with a history of losses and can provide no assurance as to our future operating results. We are a development stage company with no revenues from our research and development activities. Consequently, we have incurred net lossesand negative cash flows since inception. We currently have no product revenues, and may not succeed in developing or commercializing any products whichcould generate product or licensing revenues. We do not expect to have any products on the market for several years. In addition, development of our productcandidates requires a process of pre-clinical and clinical testing, during which our products could fail. We may not be able to enter into agreements with oneor more companies experienced in the manufacturing and marketing of therapeutic drugs and, to the extent that we are unable to do so, we will not be able tomarket our product candidates. Eventual profitability will depend on our success in developing, manufacturing, and marketing our product candidates. As ofAugust 31, 2011 and August 31, 2010, we had working capital of $3,842,790 and $938,225, respectively, and stockholders’ equity of $3,723,916 and$830,272, respectively. We have generated no revenues to date. For the period from our inception on April 12, 2002 through August 31, 2011, the year endedAugust 31, 2011 and the year ended August 31, 2010, we incurred net losses of $14,547,299, $1,561,245 and $2,977,376 million, respectively. We maynever achieve profitability and expect to incur net losses in the foreseeable future. See “Management's Discussion and Analysis of Financial Condition andResults of Operations.” We rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable forinfringing the intellectual property rights of others. Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies. We currently hold severalpending patent applications in the United States for our technologies covering oral administration of insulin and other proteins and oral administration ofexenatides and proteins, and corresponding patent applications filed in Israel, South Africa and India. Further, we intend to rely on a combination of tradesecrets and non-disclosure, and other contractual agreements and technical measures to protect our rights in our technology. We intend to depend uponconfidentiality agreements with our officers, directors, employees, consultants, and subcontractors, as well as collaborative partners, to maintain theproprietary nature of our technology. These measures may not afford us sufficient or complete protection, and others may independently develop technologysimilar to ours, otherwise avoid our confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects,financial condition, and results of operations. We believe that our technology is not subject to any infringement actions based upon the patents of any thirdparties; however, our technology may in the future be found to infringe upon the rights of others. Others may assert infringement claims against us, and if weshould be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, our ability to continue to use our technologycould be materially restricted or prohibited. If this event occurs, we may be required to obtain licenses from the holders of this intellectual property, enter intoroyalty agreements, or redesign our products so as not to utilize this intellectual property, each of which may prove to be uneconomical or otherwiseimpossible. Licenses or royalty agreements required in order for us to use this technology may not be available on terms acceptable to us, or at all. Theseclaims could result in litigation, which could materially adversely affect our business, prospects, financial condition, and results of operations. 16 The patent position of biopharmaceutical and biotechnology firms is generally uncertain and involves complex legal and factual questions. We donot know whether any of our current or future patent applications will result in the issuance of any patents. Even issued patents may be challenged,invalidated or circumvented. Patents may not provide a competitive advantage or afford protection against competitors with similar technology. Competitorsor potential competitors may have filed applications for, or may have received patents and may obtain additional and proprietary rights to compounds orprocesses used by or competitive with ours. In addition, laws of certain foreign countries do not protect intellectual property rights to the same extent as dothe laws of the United States. Patent litigation is becoming widespread in the biopharmaceutical and biotechnology industry and we cannot predict how this will affect our effortsto form strategic alliances, conduct clinical testing or manufacture and market any products under development. If challenged, our patents may not be heldvalid. We could also become involved in interference proceedings in connection with one or more of our patents or patent applications to determine priorityof invention. If we become involved in any litigation, interference or other administrative proceedings, we will likely incur substantial expenses and theefforts of our technical and management personnel will be significantly diverted. In addition, an adverse determination could subject us to significantliabilities or require us to seek licenses that may not be available on favorable terms, if at all. We may be restricted or prevented from manufacturing andselling our products in the event of an adverse determination in a judicial or administrative proceeding or if we fail to obtain necessary licenses. Our commercial success will also depend significantly on our ability to operate without infringing the patents and other proprietary rights of thirdparties. Patent applications are, in many cases, maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patentliterature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications are filed. In the event ofinfringement or violation of another party's patent, we may be prevented from pursuing product development or commercialization. See “Business—Patentsand Licenses.” At present, our success depends primarily on the successful commercialization of our oral insulin capsule. The successful commercialization of oral insulin capsule is crucial for our success. At present, our principal product is the oral insulin capsule. Ouroral insulin capsule is in a very early stage of clinical development and faces a variety of risks and uncertainties. Principally, these risks include thefollowing: · future clinical trial results may show that the oral insulin capsule is not well tolerated by recipients at its effective doses or is notefficacious as compared to placebo; · future clinical trial results may be inconsistent with previous preliminary testing results and data from our earlier studies may beinconsistent with clinical data; · even if our oral insulin capsule is shown to be safe and effective for its intended purposes, we may face significant or unforeseendifficulties in obtaining or manufacturing sufficient quantities or at reasonable prices; · our ability to complete the development and commercialization of the oral insulin capsule for our intended use is significantly dependentupon our ability to obtain and maintain experienced and committed partners to assist us with obtaining clinical and regulatory approvals for, and themanufacturing, marketing and distribution of, the oral insulin capsule on a worldwide basis; 17 · even if our oral insulin capsule is successfully developed, commercially produced and receive all necessary regulatory approvals, there isno guarantee that there will be market acceptance of the products; and · our competitors may develop therapeutics or other treatments which are superior or less costly than our own with the result that ourproducts, even if they are successfully developed, manufactured and approved, may not generate significant revenues. If we are unsuccessful in dealing with any of these risks, or if we are unable to successfully commercialize our oral insulin capsule for someother reason, it would likely seriously harm our business. We have limited experience in conducting clinical trials. Clinical trials must meet FDA and foreign regulatory requirements. We have limited experience in designing, conducting and managing thepreclinical studies and clinical trials necessary to obtain regulatory approval for our product candidates in any country. We have entered into agreementswith Hadasit Medical Center, ETI Karle Clinical Pvt, Ltd., and OnQ Consulting to assist us in designing, conducting and managing our various clinical trialsin Israel, South Africa, and India, respectively, as more fully described in “Description of Business – Partnerships and Collaborative Agreements.” Anyfailure of such consultants to fulfill their obligations could result in significant additional costs as well as delays in designing, consulting and completingclinical trials on our products. Notwithstanding the assistance of such consultants, we may encounter problems in clinical trials that may cause us or the FDA or foreign regulatoryagencies to delay, suspend or terminate our clinical trials at any phase. These problems could include the possibility that we may not be able to conductclinical trials at our preferred sites, enroll a sufficient number of patients for our clinical trials at one or more sites or begin or successfully complete clinicaltrials in a timely fashion, if at all. Furthermore, we, the FDA or foreign regulatory agencies may suspend clinical trials at any time if we or they believe thesubjects participating in the trials are being exposed to unacceptable health risks or if we or they find deficiencies in the clinical trial process or conduct ofthe investigation. If clinical trials of any of the product candidates fail, we will not be able to market the product candidate which is the subject of the failedclinical trials. The FDA and foreign regulatory agencies could also require additional clinical trials, which would result in increased costs and significantdevelopment delays. Our failure to adequately demonstrate the safety and effectiveness of a pharmaceutical product candidate under development coulddelay or prevent regulatory approval of the product candidate and could have a material adverse effect on our business, prospects, financial condition, andresults of operations. We can provide no assurance that our products will obtain regulatory approval or that the results of clinical studies will be favorable. The testing, marketing and manufacturing of any of our products will require the approval of the FDA or regulatory agencies of other countries. Wehave completed certain non-FDA clinical trials and pre-clinical trials for our products but have yet to conduct any FDA approved trials. We have retainedAdvanced Regulatory Services Ltd. to assist us in the preparation of an IND application with the FDA to conduct an FDA approved Phase 2 study on our oralinsulin capsule product but no application has yet been filed. 18 We cannot predict with any certainty the amount of time necessary to obtain regulatory approvals, including from the FDA or other foreignregulatory authorities, and whether any such approvals will ultimately be granted. In any event, review and approval by the regulatory bodies is anticipatedto take a number of years. Preclinical and clinical trials may reveal that one or more of our products are ineffective or unsafe, in which event furtherdevelopment of such products could be seriously delayed or terminated. Moreover, obtaining approval for certain products may require the testing on humansubjects of substances whose effects on humans are not fully understood or documented. Delays in obtaining necessary regulatory approvals of any proposedproduct and failure to receive such approvals would have an adverse effect on the product’s potential commercial success and on our business, prospects,financial condition, and results of operations. In addition, it is possible that a product may be found to be ineffective or unsafe due to conditions or factswhich arise after development has been completed and regulatory approvals have been obtained. In this event we may be required to withdraw such productfrom the market. See “Business – Governmental Regulation.” We are dependent upon third party suppliers of our raw materials. We are dependent on outside vendors for our entire supply of the oral insulin capsule. While we believe that there are numerous sources of supplyavailable, if the third party suppliers were to cease production or otherwise fail to supply us with quality raw materials in sufficient quantities on a timelybasis and we were unable to contract on acceptable terms for these services with alternative suppliers, our ability to produce our products and to conducttesting and clinical trials would be materially adversely affected. We are highly dependent upon our ability to enter into agreements with collaborative partners to develop, commercialize, and market ourproducts. Our long-term strategy is to ultimately seek a strategic commercial partner, or partners, such as large pharmaceutical companies, with extensiveexperience in the development, commercialization, and marketing of insulin applications and/or other orally digestible drugs. We anticipate such partner orpartners would be responsible for, or substantially support, late stage clinical trials (Phase III) and sales and marketing of our oral insulin capsule and otherproducts. Such planned strategic partnership, or partnerships, may provide a marketing and sales infrastructure for our products as well as financial andoperational support for global clinical trials, post marketing studies, label expansions and other regulatory requirements concerning future clinicaldevelopment in the United States and elsewhere. While our strategy is to partner with an appropriate party, no assurance can be given that any third party would be interested in partnering withus. We currently lack the resources to manufacture any of our product candidates on a large scale and we have no sales, marketing or distributioncapabilities. In the event we are not able to enter into a collaborative agreement with a partner or partners, on commercially reasonable terms, or at all, wemay be unable to commercialize our products, which would have a material adverse effect upon our business, prospects, financial condition, and results ofoperations. The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree ofcompetition. We may be unable to compete with more substantial enterprises. The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As aresult, our products could become obsolete before we recoup any portion of our related research and development and commercialization expenses. Theseindustries are highly competitive, and this competition comes both from biotechnology firms and from major pharmaceutical and chemicalcompanies. Many of these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases,substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience competition in thedevelopment of our products from universities and other research institutions and compete with others in acquiring technology from such universities andinstitutions. In addition, certain of our products may be subject to competition from products developed using other technologies. See “Business –Competition”. 19 We have limited senior management resources and may be required to obtain more resources to manage our growth. We expect the expansion of our business to place a significant strain on our limited managerial, operational, and financial resources. We will berequired to expand our operational and financial systems significantly and to expand, train, and manage our work force in order to manage the expansion ofour operations. Our failure to fully integrate our new employees into our operations could have a material adverse effect on our business, prospects, financialcondition, and results of operations. Our ability to attract and retain highly skilled personnel is critical to our operations and expansion. We face competitionfor these types of personnel from other technology companies and more established organizations, many of which have significantly larger operations andgreater financial, technical, human, and other resources than we have. We may not be successful in attracting and retaining qualified personnel on a timelybasis, on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, our business, prospects, financial condition, andresults of operations will be materially adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”“Business–Strategy” and “Business—Employees.” We depend upon our senior management and skilled personnel and their loss or unavailability could put us at a competitive disadvantage. We currently depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants and other keypersonnel, including Dr. Miriam Kidron, our Chief Medical and Technology Officer. The loss or unavailability of the services of any of these individuals forany significant period of time could have a material adverse effect on our business, prospects, financial condition, and results of operations. We do notmaintain “key man” life insurance policies for any of our senior executives. In addition, recruiting and retaining qualified scientific personnel to performfuture research and development work will be critical to our success. There is currently a shortage of employees with expertise in developing, manufacturingand commercialization of products and related clinical and regulatory affairs, and this shortage is likely to continue. Competition for skilled personnel isintense and turnover rates are high. Our ability to attract and retain qualified personnel may be limited. Our inability to attract and retain qualified skilledpersonnel would have a material adverse effect on our business, prospects, financial condition, and results of operations. Fulfilling our obligations incident to being a public company will be expensive and time consuming. As a public company, the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, requires us to maintain corporate governancepractices and adhere to a variety of reporting requirements and complex accounting rules. Compliance with these public company obligations increases ourlegal and financial compliance costs and place significant additional demands on our finance and accounting staff and on our financial, accounting andinformation systems. 20 We became a publicly traded company through the acquisition of a public shell company, and we could be liable for unanticipated claimsor liabilities as a result thereof. We were originally incorporated on April 12, 2002 as an exploration stage company engaged in the acquisition and exploration of mineralproperties. We were unsuccessful in implementing our business plan as a mineral exploration company and became a public shell company. On May 27,2004, we executed a share exchange with the shareholders of Integrated Security Technologies, Inc., a New Jersey private corporation (“ISTI”). However, dueto disappointing results, on May 31, 2005, effective as of May 27, 2004 we terminated the share exchange agreement with the shareholders of ISTI, and weagain became a public shell company. We remained a public shell company until March 8, 2006, when we became a pharmaceutical company engaged inthe development of innovative pharmacological solutions. We face substantial risks associated with being a former public shell company, including absence of accurate or adequate public informationconcerning the public shell company; undisclosed liabilities; improper accounting; claims or litigation from former officers, directors, employees orstockholders; contractual obligations; and regulatory requirements. Although management performed due diligence on us, there can be no assurance thatsuch risks do not occur. The occurrence of any such risk could materially adversely affect our financial condition. Healthcare policy changes, including pending legislation recently adopted and further proposals still pending to reform the U.S.healthcare system, may harm our future business. Healthcare costs have risen significantly over the past decade. There have been and continue to be proposals by legislators, regulators and third-party payors to keep these costs down. Certain proposals, if passed, would impose limitations on the prices we will be able to charge for the products that weare developing, or the amounts of reimbursement available for these products from governmental agencies or third-party payors. These limitations could inturn reduce the amount of revenues that we will be able to generate in the future from sales of our products and licenses of our technology. In March 2010, the United States Congress enacted and President Obama signed into law healthcare reform legislation that may significantly impactthe pharmaceutical industry. In addition to requiring most individuals to have health insurance and establishing new regulations on health plans, thislegislation will require discounts under the Medicare drug benefit program and increased rebates on drugs covered by Medicaid. In addition, the legislationimposes an annual fee, which will increase annually, on sales by branded pharmaceutical manufacturers starting in 2011. The financial impact of thesediscounts, increased rebates and fees and the other provisions of the legislation on our business is unclear and there can be no assurance that our business willnot be materially adversely affected. In addition, these and other ongoing initiatives in the United States have increased and will continue to increasepressure on drug pricing. The announcement or adoption of any such initiative could have an adverse effect on potential revenues from any product that wemay successfully develop. Various healthcare reform proposals have also emerged at the state level. We cannot predict what healthcare initiatives, if any, will be implementedat the federal or state level, or the effect any future legislation or regulation will have on us. However, an expansion in government’s role in the U.S.healthcare industry may lower the future revenues for the products we are developing and adversely affect our future business, possibly materially. Risks Related to our Common Stock As the market price of our common stock may fluctuate significantly, this may make it difficult for you to sell your shares of commonstock when you want or at prices you find attractive. The price of our common stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB") and constantly changes. In recent years, the stockmarket in general has experienced extreme price and volume fluctuations. We expect that the market price of our common stock will continue to fluctuate.These fluctuations may result from a variety of factors, many of which are beyond our control. These factors include: · Clinical trial results and the timing of the release of such results, 21 · The amount of cash resources and ability to obtain additional funding, · Announcements of research activities, business developments, technological innovations or new products by companies or theircompetitors, · Entering into or terminating strategic relationships, · Changes in government regulation, · Departure of key personnel, · Disputes concerning patents or proprietary rights, · Changes in expense level, · Future sales of our equity or equity-related securities, · Public concern regarding the safety, efficacy or other aspects of the products or methodologies being developed, · Activities of various interest groups or organizations, · Media coverage, and · Status of the investment markets. Future sales of common stock or the issuance of securities senior to our common stock or convertible into, or exchangeable or exercisable for,our common stock could materially adversely affect the trading price of our common stock, and our ability to raise funds in new equity offerings. Future sales of substantial amounts of our common stock or other equity-related securities in the public market or privately, or the perception thatsuch sales could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital through futureofferings of equity or other equity-related securities. We anticipate that we will need to raise capital though offerings of equity and equity relatedsecurities. We can make no prediction as to the effect, if any, that future sales of shares of our common stock or equity-related securities, or the availability ofshares of common stock for future sale, will have on the trading price of our common stock. Our common stock is deemed to be a “penny stock,” which may make it more difficult for investors to sell their shares due to suitabilityrequirements. Low-priced stocks are sometimes the subject of fraud and abuse. The Securities and Exchange Commission, or the SEC, has adopted regulations that generally define “penny stock” to be an equity security that hasa market price of less than $5.00 per share, subject to specific exemptions, such as if the issuer of the security has net tangible assets in excess of$2,000,000. The market price of our common stock is currently less than $5.00 per share, and our net tangible assets as of August 31, 2011 were less than$2,000,000. Therefore, our common stock is currently a “penny stock” according to SEC rules. Designation as a "penny stock" requires any broker or dealerselling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser, furnish the customer adocument describing the risks of investing in penny stocks and send monthly account statements showing the market value of each penny stock held in thecustomer’s account. These rules may restrict the ability of brokers or dealers to sell penny stocks. 22 You should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Thesecould affect low-priced stocks, such as ours, even if they do not qualify as "penny stocks" under the SEC rules. Such patterns include: · Control of the market for the security by one or a few broker-dealers; · “Boiler room” practices involving high-pressure sales tactics; · Manipulation of prices through prearranged matching of purchases and sales; · The release of misleading information; · Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and · Dumping of securities by broker-dealers after prices have been manipulated to a desired level, which hurts the price of the stock and causesinvestors to suffer loss. We are aware of the abuses that have occurred in the market for low-priced stocks. Although we do not expect to be in a position to dictate thebehavior of the market or of broker-dealers who participate in the market, we will strive within the confines of practical limitations to prevent such abuseswith respect to our common stock. Future sales of our common stock by our existing stockholders could adversely affect our stock price. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, or theperception that these sales could occur. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price thatwe deem appropriate. As of November 28, 2011, we had outstanding 70,104,583 shares of common stock. Of these shares, 45,560,053 shares are freelytradable. Giving effect to the exercise in full of all of our outstanding warrants and options, we would have outstanding 85,161,627 shares of common stock. Our issuance of warrants and options to investors, employees and consultants may have a negative effect on the trading prices of our commonstock as well as a dilutive effect. We have issued and may continue to issue warrants, options and convertible notes at, above or below the current market price. As of August 31,2011, we had outstanding warrants and options exercisable for 17,157,044 shares of common stock (15,584,897 as of August 31, 2010). In addition to thedilutive effect of a large number of shares and a low exercise price for the warrants and options, there is a potential that a large number of underlying sharesmay be sold in the open market at any given time, which could place downward pressure on the trading of our common stock. 23 Because we will not pay cash dividends, investors may have to sell shares in order to realize their investment. We have not paid any cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future. We intend to retainfuture earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements which we may enter into with institutionallenders or otherwise may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directorsand will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that our board of directors decides isrelevant. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”. Our shares of common stock are not listed for trading on a national securities exchange. Our common stock currently trades on the OTCBB and is not listed for trading on any national securities exchange. Investments in securities tradingon the OTCBB are generally less liquid than investments in securities trading on a national securities exchange. The failure of our shares to be approved fortrading on a national securities exchange may have the effect of limiting the trading activity of our common stock and reducing the liquidity of aninvestment in our common stock. Risks Related to Conducting Business in Israel We are affected by the political, economic, and military risks of locating our principal operations in Israel. Our operations are located in the State of Israel, and we are directly affected by political, economic, and security conditions in that country. Sincethe establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility,varying in degree and intensity, has led to security and economic problems for Israel. Since October 2000, there has been a high level of violence betweenIsrael and the Palestinians. In addition, acts of terrorism, armed conflicts or political instability in the region could negatively affect local business conditionsand harm our results of operations. We cannot predict the effect on the region of any diplomatic initiatives or political developments involving Israel or thePalestinians or other countries in the Middle East. Recent political events, including political uprisings, social unrest and regime change, in various countriesin the Middle East and North Africa have weakened the stability of those countries, which could result in extremists coming to power. In addition, Iran hasthreatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groupsin the region, such as Hamas in Gaza and Hezbollah in Lebanon. This situation may potentially escalate in the future to violent events which may affect Israeland us. Our business, prospects, financial condition, and results of operations could be materially adversely affected if major hostilities involving Israelshould occur or if trade between Israel and its current trading partners is interrupted or curtailed. All adult male permanent residents of Israel, unless exempt, may be required to perform military reserve duty annually. Additionally, all suchresidents are subject to being called to active duty at any time under emergency circumstances. Some of our officers, directors, and employees currently areobligated to perform annual military reserve duty. We can provide no assurance that such requirements will not have a material adverse effect on ourbusiness, prospects, financial condition, and results of operations in the future, particularly if emergency circumstances occur. 24 Because almost all of our officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against ourmanagement for misconduct. Almost all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of theirassets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained againstsuch officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any U.S. state.Additionally, it may be difficult to enforce civil liabilities under U.S. federal securities law in original actions instituted in Israel. Israeli courts may refuse tohear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israelicourt agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content ofapplicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israelilaw. 25 ITEM 1B. – UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2 – PROPERTIES Our principal executive offices are comprised of approximately 117 square meters of office space located in Givat-Ram, Jerusalem, Israel. The leasecommenced on October 1, 2007 and is for a period of 51 months. The aggregate annual base rental fee for this space is $7,548. We believe that our existingfacilities are suitable and adequate to meet our current business requirements. In the event that we should require additional or alternative facilities, webelieve that such facilities can be obtained on short notice at competitive rates. ITEM 3 - LEGAL PROCEEDINGS From time to time we may become subject to litigation incidental to our business. We are not currently a party to any material legal proceedings. ITEM 4 – (REMOVED AND RESERVED) 26 PART II ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Market Price for our Common Stock Our common stock is quoted on the OTCBB under the symbol “ORMP.OB”. The quarterly high and low reported bid prices for our common stock asquoted on the OTCBB for the periods indicated are as follows: High Low Year Ended August 31, 2010 Three Months Ended November 30, 2009 $0.64 $0.43 Three Months Ended February 28, 2010 $0.48 $0.37 Three Months Ended May 31, 2010 $0.55 $0.41 Three Months Ended August 31, 2010 $0.51 $0.36 Year Ended August 31, 2011 Three Months Ended November 30, 2010 $0.42 $0.28 Three Months Ended February 28, 2011 $0.37 $0.27 Three Months Ended May 31, 2011 $0.35 $0.23 Three Months Ended August 31, 2011 $0.34 $0.20 The foregoing quotations were provided by Yahoo! Finance and the quotations reflect inter-dealer prices, without retail mark-up, mark-down orcommission and may not represent actual transactions. The last reported bid price per share of common stock as quoted on the OTCBB was $0.34 onNovember 25, 2011. Holders As of November 28, 2011, there were 70,104,583 shares of our common stock issued and outstanding that are held of record by 71 registeredstockholders. We believe that a number of stockholders hold their shares of our common stock in brokerage accounts and registered in the name of stockdepositories. Dividend Policy We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in theforeseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determinationto pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capitalrequirements and such other factors as our board deems relevant. Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not purchase any of our shares of common stock or other securities during the fiscal year ended August 31, 2011. 27 ITEM 6 – SELECTED FINANCIAL DATA As a smaller reporting company, we are not required to provide the information required by this Item. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our audited Financial Statements and Notes thereto for the years endedAugust 31, 2011 and 2010. In addition to our audited Financial Statements, the following discussion contains forward-looking statements that reflect ourplans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause orcontribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in "Item 1A - Risk Factors.” Overview of Operations We are a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions, including an orally ingestibleinsulin capsule or tablet to be used for the treatment of individuals with diabetes, and the use of orally ingestible capsules, tablets or pills for delivery of otherpolypeptides. Short Term Business Strategy We plan to conduct further research and development on the technology covered by the patent application "Methods and Composition for OralAdministration of Proteins", which we acquired from Hadasit, as well as the other patents we have filed since. Through our research and development efforts,we are seeking to develop an oral dosage form that will withstand the harsh chemical environment of the stomach or intestines and will be effective indelivering active insulin for the treatment of diabetes. The enzymes and vehicles that are added to the insulin in the formulation process must not modify theinsulin chemically or biologically, and the dosage form must be safe to ingest. We plan to continue to conduct clinical trials to show the effectiveness of ourtechnology. We intend to conduct the clinical trials necessary to file an IND application with the FDA. Additional clinical trials are planned in othercountries such as Israel, India and South Africa, in order to substantiate our results as well as for purposes of making future filings for drug approval in thesecountries. We also plan to conduct further research and development by deploying our proprietary drug delivery technology for the delivery of otherpolypeptides in addition to insulin, and to develop other innovative pharmaceutical products. Long Term Business Strategy If our oral insulin capsule or other drug delivery solutions show significant promise in clinical trials, we plan to ultimately seek a strategiccommercial partner, or partners, with extensive experience in the development, commercialization, and marketing of insulin applications and/or other orallydigestible drugs. We anticipate such partner or partners would be responsible for, or substantially support, late stage clinical trials (Phase III) to increase thelikelihood of obtaining regulatory approvals and registrations in the appropriate markets in a timely manner. We further anticipate that such partner, orpartners, would also be responsible for sales and marketing of our oral insulin capsule in these markets. Such planned strategic partnership, or partnerships,may provide a marketing and sales infrastructure for our products as well as financial and operational support for global clinical trials, post marketing studies,label expansions and other regulatory requirements concerning future clinical development in the United States and elsewhere. Any future strategic partner,or partners, may also provide capital and expertise that would enable the partnership to develop new oral dosage form for other polypeptides. While ourstrategy is to partner with an appropriate party, no assurance can be given that any third party would be interested in partnering with us. Under certaincircumstances, we may determine to develop one or more of our oral dosage form on our own, either world-wide or in select territories. 28 Other Planned Strategic Activities In addition to developing our own oral dosage form drug portfolio, we are, on an on-going basis, considering in-licensing and other means ofobtaining additional technologies to complement and/or expand our current product portfolio. Our goal is to create a well-balanced product portfolio thatwill enhance and complement our existing drug portfolio. Results of Operations Going concern assumption The accompanying financial statements have been prepared assuming that we will continue as a going concern. We have net losses for the periodfrom inception (April 12, 2002) through August 31, 2011 of $14,547,299 as well as negative cash flow from operating activities. Based upon our existingspending commitments, estimated at $4.7 million for the twelve months following August 31, 2011, and our cash availability, we do not have sufficient cashresources to meet our liquidity requirements through August 31, 2012. Accordingly, these factors raise substantial doubt about our ability to continue as agoing concern. Management is in the process of evaluating various financing alternatives as we will need to finance future research and developmentactivities and general and administrative expenses through fund raising in the public or private equity markets. Although there is no assurance that we will besuccessful with those initiatives, management believes that it will be able to secure the necessary financing as a result of ongoing financing discussions withthird party investors and existing shareholders. The financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. Ourcontinuation as a going concern is dependent on our ability to obtain additional financing as may be required and ultimately to attain profitability. Critical accounting policies Our significant accounting policies are more fully described in the notes to our consolidated financial statements. We believe that the accountingpolicies below are critical for one to fully understand and evaluate our financial condition and results of operations. The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepared inaccordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well asthe reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates onhistorical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimatesunder different assumptions or conditions. 29 Marketable securities: Consist mainly of equity securities classified as available-for-sale and are recorded at fair value. The fair value of therestricted securities is measured based on the quoted prices of the otherwise identical unrestricted securities, adjusted for the effect of the restriction byapplying a proper discount. The discount was determined with reference to other similar restricted instruments. Similar securities, with no restriction ontradability, are quoted on an active market. Changes in fair value, net of taxes, are reflected in other comprehensive income (loss). Factors considered in determining whether a loss is temporary include the extent to which fair value has been less than the cost basis, the financialcondition and near-term prospects of the investee based on our intent and ability to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value. The loss is recorded as a charge to earnings Valuation of options and warrants: We granted options to purchase shares of our common stock to employees and consultants and issued warrantsin connection with some of our financings. We account for share-based payments in accordance with the guidance that requires awards classified as equity awards be accounted for using thegrant-date fair value method. The fair value of share-based payment transactions is recognized as an expense over the requisite service period, net ofestimated forfeitures. We estimated forfeitures based on historical experience and anticipated future conditions. We elected to recognize compensation cost for an award with only service conditions that has a graded vesting schedule using the acceleratedmethod based on the multiple-option award approach. When stock options are granted as consideration for services provided by consultants and other non-employees, the transaction is accounted forbased on the fair value of the consideration received or the fair value of the stock options issued, whichever is more reliably measurable, pursuant to theguidance. The fair value of the options granted is measured on a final basis at the end of the related service period and is recognized over the related serviceperiod using the straight-line method. Taxes on income: Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differencesbetween the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax ratesexpected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is provided if, based upon the weight ofavailable evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We have provided a full valuation allowance withrespect to its deferred tax assets. Regarding our subsidiary, Oramed Ltd., the guidance prohibits the recognition of deferred tax liabilities or assets that arise from differences betweenthe financial reporting and tax bases of assets and liabilities that are measured from the local currency into dollars using historical exchange rates, and thatresult from changes in exchange rates or indexing for tax purposes. Consequently, the abovementioned differences were not reflected in the computation ofdeferred tax assets and liabilities. 30 Comparison of Fiscal Year 2011 to Fiscal Year 2010 The following table summarizes certain statements of operations data for us for the twelve months periods ended August 31, 2011 and 2010: Year ended Operating Data: August 31,2011 August 31,2010 Research and development expenses, net $1,159,309 $1,463,886 General and administrative expenses 1,275,960 1,508,667 Gain on sale of investment (1,033,004) - Impairment of available for sale securities 197,412 - Financial income, net (14,452) (10,148)Loss before taxes on income (1,585,225) (2,962,405)Taxes on income (23,980) 14,971 Net loss for the period 1,561,245 $(2,977,376) Loss per common share – basic and diluted $(0.02) $(0.05)Weighted average common shares outstanding 64,999,026 57,389,991 Research and development expenses Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost ofsalaries, payroll taxes, employee benefits, costs of registered patents materials, supplies, the cost of services provided by outside contractors, includingservices related to our clinical trials, clinical trial expenses, the full cost of manufacturing drug for use in research, preclinical development. All costsassociated 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. Weoutsource a substantial portion of our clinical trial activities, utilizing external entities such as contract research organizations, independent clinicalinvestigators, and other third-party service providers to assist us with the execution of our clinical studies. For each clinical trial that we conduct, certainclinical trial costs are expensed immediately, while others are expensed over time based on the expected total number of patients in the trial, the rate at whichpatients enter the trial, and the period over which clinical investigators or contract research organizations are expected to provide services. Clinical activities which relate principally to clinical sites and other administrative functions to manage our clinical trials are performed primarilyby contract research organizations ("CROs"). CROs typically perform most of the start-up activities for our trials, including document preparation, siteidentification, screening and preparation, pre-study visits, training, and program management. Clinical trial and pre-clinical trial expenses include regulatory and scientific consultants’ compensation and fees, research expenses, purchase ofmaterials, cost of manufacturing of the oral insulin capsules, payments for patient recruitment and treatment, costs related to the maintenance of our registeredpatents, costs related to the filings of patent applications, as well as salaries and related expenses of research and development staff. In August 2009, Oramed Ltd., our wholly owned Israeli subsidiary, was awarded a government grant amounting to a total net amount of New IsraeliShekels ("NIS") 3.1 million (approximately $813,000), from the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of Israel (the"OCS"). This grant was used for research and development expenses for the period of February 2009 to June 2010. The funds were used by us to supportfurther research and development and clinical study of our oral insulin capsule and Oral GLP-1-analog. In December 2010, Oramed Ltd., was awarded anothergrant amounting to a total net amount of NIS 2.9 million (approximately $807,000) from the OCS, which was designated for research and developmentexpenses for the period of July 2010 to June 2011. We used the funds to support further research and development and clinical study of our oral insulincapsule and Oral GLP-1-analog. The two grants are subject to repayment according to the terms determined by the OCS and applicable law. See "--Government Grants" below. 31 During the year ended August 31, 2011, research and development expenses totaled $1,159,309, compared to $1,463,886 for the year ended August31, 2010. The decrease is mainly attributable to the fact that no major clinical trials were conducted this year. The research and development costs includestock based compensation costs, which during the year ended August 31, 2011 totaled $265,327, as compared to $341,203 during the year ended August 31,2010. Government Grants The Government of Israel encourages research and development projects through the OCS, pursuant to the Law for the Encouragement of IndustrialResearch and Development, 1984, as amended, commonly referred to as the “R&D Law”. Under the R&D Law, a research and development plan that meetsspecified criteria is eligible for a grant of up to 50% of certain approved research and development expenditures. Each plan must be approved by the OCS. In the years ended August 31, 2011 and 2010, we recognized research and development grants in an amount of $354,906 and $350,198,respectively. As of August 31, 2011, we had no contingent liabilities to the OCS. Under the terms of the grants we received from the OCS, we are obligated to pay royalties of 3% to 3.5% on all revenues derived from the sale of theproducts developed pursuant to the funded plans, including revenues from licensed ancillary services. Pursuant to a proposed amendment to the R&D Law,our royalty rate may be 3% to 6% per annum. Royalties are payable up to 100% of the amount of such grants, or up to 300% as detailed below, linked to theU.S. Dollar, plus annual interest at LIBOR. The R&D Law generally requires that a product developed under a program be manufactured in Israel. However, upon notification to the OCS (andprovided that the OCS does not object within 30 days), up to 10% of a company’s approved Israeli manufacturing volume, measured on an aggregate basis,may be transferred outside of Israel. In addition, upon the approval of the Chief Scientist, a greater portion of the manufacturing volume may be performedoutside of Israel, provided that the grant recipient pays royalties at an increased rate, which may be substantial, and the aggregate repayment amount isincreased up to 300% of the grant, depending on the portion of the total manufacturing volume that is performed outside of Israel. The R&D Law furtherpermits the OCS, among other things, to approve the transfer of manufacturing rights outside of Israel in exchange for an import of different manufacturinginto Israel as a substitute, in lieu of the increased royalties. The R&D Law also allows for the approval of grants in cases in which the applicant declares thatpart of the manufacturing will be performed outside of Israel or by non-Israeli residents and the research committee is convinced that doing so is essential forthe execution of the program. This declaration will be a significant factor in the determination of the OCS as to whether to approve a program and theamount and other terms of benefits to be granted. For example, an increased royalty rate and repayment amount might be required in such cases. 32 The R&D Law also provides that know-how developed under an approved research and development program may not be transferred to third partiesin 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 ordevelopment. The R&D Law further provides that the know-how developed under an approved research and development program may not be transferred toany third parties outside Israel, except in certain special circumstances and subject to the OCS’ prior approval. The OCS may approve the transfer of OCS-funded know-how outside Israel, generally in the following cases: (a) the grant recipient pays to the OCS a portion of the sale price paid in consideration forsuch OCS-funded know-how or the price paid in consideration for the sale of the grant recipient itself, as the case may be (according to certain formulas), or(b) the grant recipient receives know-how from a third party in exchange for its OCS-funded know-how, or (c) such transfer of OCS-funded know-how arises inconnection with certain types of cooperation in research and development activities. The R&D Law imposes reporting requirements with respect to certain changes in the ownership of a grant recipient. The law requires the grantrecipient and its controlling shareholders and foreign interested parties to notify the OCS of any change in control of the recipient or a change in the holdingsof the means of control of the recipient that results in a non-Israeli becoming an interested party in the recipient, and requires the new interested party toundertake to the OCS to comply with the R&D Law. In addition, the rules of the OCS may require additional information or representations in respect ofcertain such events. For this purpose, “control” is defined as the ability to direct the activities of a company other than any ability arising solely from servingas 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 acompany. “Means of control” refers to voting rights or the right to appoint directors or the chief executive officer. An “interested party” of a companyincludes 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 toappoint its chief executive officer or at least one director, and a company with respect to which any of the foregoing interested parties owns 25% or more ofthe outstanding share capital or voting rights or has the right to appoint 25% or more of the directors. Accordingly, any non-Israeli who acquires 5% or moreof our ordinary shares will be required to notify the OCS that it has become an interested party and to sign an undertaking to comply with the R&D Law. General and administrative expenses General and administrative expenses include the salaries and related expenses of our management, consulting costs, legal and professional fees,traveling, business development costs, insurance expenses and other general costs. For the year ended August 31, 2011, general and administrative expenses totaled $1,275,960 compared to $1,508,667 for the year ended August 31,2010. Costs incurred related to general and administrative activities during the year ended August 31, 2011, was mainly caused by a decrease incompensation costs in respect of options granted during the year, which partially offset by increase in payroll and consulting fees. During the year endedAugust 31, 2011, as part of our general and administrative expenses, we incurred $263,999 related to stock options granted to employees and consultants, ascompared to $466,623 during the year ended August 31, 2010. Financial income/expense, net During the year ended August 31, 2011, we generated a larger interest income on available cash and cash equivalents balance than in the previousfiscal year, this income was offset by bank charges. The increase in the interest income for the year ending August 31, 2011 as compared with the year ended August 31, 2010 is also attributable to theadditional funds raised by share issueances. 33 Liquidity and Capital Resources From inception through August 31, 2011, we incurred losses in an aggregate amount of $14,547,299. We have financed our operations through theprivate placements of equity and debt financing, raising a total of $11,655,693, net of transaction costs. We will seek to obtain additional financing throughsimilar sources. As of August 31, 2011, we had $1,513,365 of available cash as well as $1,801,400 in short term interest bearing investments. We anticipatethat we will require approximately $4.7 million to finance our activities during the twelve months following August 31, 2011. Management is in the process of evaluating various financing alternatives as we will need to finance future research and development activities andgeneral and administrative expenses through fund raising in the public or private equity markets. Although there is no assurance that we will be successfulwith those initiatives, management believes that it will be able to secure the necessary financing as a result of ongoing financing discussions with third partyinvestors and existing shareholders as well as through additional funding from the OCS. During fiscal years 2010 and 2011 we issued a total of 927,387 shares of common stock to various third party vendors for services rendered. The aggregatevalue of those shares was approximately $290,529. We also consummated a private placement by selling 937,500 "units" at a purchase price of $0.32 per unitfor a total consideration of $300,000. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stockat an exercise price of $0.50 per share. Our recent financing activities include the following: · In September 2010 and January 2011, we issued a total of 353,714 shares of our common stock, valued at $119,800, in the aggregate, toSwiss Caps AG as remuneration for services rendered. · In March 2011, we completed a private placement with a number of “accredited investors” as defined in Rule 501(a) of Regulation D,pursuant to which we agreed to sell to the investors an aggregate of 10,487,500 "units" at a purchase price of $0.32 per unit for total consideration of$3,356,000. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stock at an exercise price of$0.50 per share. We also issued 196,750 shares of common stock and warrants to purchase 70,863 shares of common stock as finders' fees in connection withthe private placement. These amounts include the $250,000 investment by D.N.A made in connection with our technology transaction on March 31, 2011. · On March 31, 2011, we consummated a transaction with D.N.A for the sale of 781,250 shares of common stock and warrants to purchase upto 273,438 shares of common stock, for a total purchase price of $250,000 in cash. The shares and warrants were sold in "units" at a price per unit of $0.32,each unit consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock. The warrants have an exercise price of $0.50per share, subject to adjustment, and a term of five years commencing upon the closing of the transaction. D.N.A's $250,000 investment in Oramed isincluded in the private placement described in the immediately preceding paragraph. · In April 2011, we completed a private placement with a number of “accredited investors” as defined in Rule 501(a) of Regulation D,pursuant to which we agreed to sell to the investors an aggregate of 1,124,375 "units" at a purchase price of $0.32 per unit for total consideration of$359,800. Each unit consisted of one share of common stock and a five-year warrant to purchase 0.35 of a share of common stock at an exercise price of$0.50 per share. 34 · In May 2011, we issued 176,923 shares of our common stock, valued at $47,769, in the aggregate, to Swiss Caps AG as remuneration forservices rendered in the past. · In May 2011, we issued 200,000 shares of our common stock, valued at $60,000, in the aggregate, to New Castle Consulting, LLC asremuneration for services to be rendered. Employee and Consultant Stock Options and Warrants Employee and consultant stock options grant and warrant issuance activities for the fiscal year 2011 include the following: · On February 15, 2011, we granted options under the Company's 2008 Stock Incentive Plan to purchase up to 250,000 shares of ourcommon stock at an exercise price of $0.50 to a consultant. The options vest in five annual installments commencing on February 16, 2012 and expire onFebruary 16, 2021. The initial fair value of the option on the date of grant, was $71,495, calculated using the Black Scholes option-pricing model, and wasbased on the following assumptions: dividend yield of 0% for all years; expected volatility of 113.80%; risk-free interest rates of 3.42%; and the remainingcontractual life of 10 years. The fair value of the options granted is measured on a final basis at the end of the related service period and is recognized overthe related service period using the straight-line method. · On April 27, 2011, 43,000 options were granted to experiMind Ltd as remuneration for services rendered at an exercise price of $0.50 pershare (higher than the traded market price on the date of grant). The options vested immediately on the date of grant and will expire on April 26, 2016. Thefair value of these options on the date of grant, was $10,000, calculated using the Black Scholes option-pricing model, and was based on the followingassumptions: dividend yield of 0% for all years; expected volatility of 113.50%; risk-free interest rates of 2.06%; and the remaining contractual life of 5years. · On July 25, 2011, we issued warrants to purchase 32,000 shares of our common stock at an exercise price of $0.50 per share to The TroutGroup, LLC as remuneration for services to be rendered during the 12 month period commencing on May 13, 2011. The warrants vest in twelve equal annualinstallments commencing on October 13, 2011 and will expire on July 25, 2016. The fair value of these warrants on the date of grant, was $7,136, calculatedusing the Black Scholes option-pricing model, and was based on the following assumptions: dividend yield of 0% for all years; expected volatility of112.46%; risk-free interest rates of 1.55%; and the remaining contractual life of 5 years. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Planned Expenditures The estimated expenses referenced herein are in accordance with our business plan. Since our technology is still in the development stage, it can beexpected that there will be changes in some budgetary items. Our planned expenditures for the twelve months beginning September 1, 2011 are as follows: Category Amount Research & Development, net of OCS funds $3,745,027 General & Administrative expenses 913,500 Financial income, net (1,200)Taxes on Income - Total $4,657,327 As previously indicated we are planning to conduct further clinical studies as well as file an IND application with the FDA for our orally ingestedinsulin. Our ability to proceed with these activities is dependent on several major factors including the ability to attract sufficient financing on termsacceptable to us. 35 ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 15. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A – CONTROLS AND PROCEDURES Disclosure Controls and Procedures Our management, including our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls andprocedures as of August 31, 2011. Based on such review, our chief executive officer and chief financial officer have determined that in light of theirconclusion with respect to the effectiveness of our internal control over our financial reporting as of such date, that the Company did not have in placeeffective controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the SecuritiesExchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers,or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized andreported, within the time periods specified in the Commission’s rules and forms. Management’s Annual Report on Internal Control over Financial Reporting Our management, under the supervision of our chief executive officer and chief financial officer, is responsible for establishing and maintainingadequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, asamended. The Company’s internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internalcontrol over financial reporting includes policies and procedures that: · pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions; · provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordancewith generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of ourmanagement and directors; and 36 · provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets thatcould have a material effect on our financial statements. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weevaluated the effectiveness of our internal control over financial reporting as of August 31, 2011 based on the framework for Internal Control-IntegratedFramework set forth by The Committee of Sponsoring Organizations of the Treadway Commission. Due to the inherent limitations of our company, derivedfrom our small size and the limited number of employees, the management evaluation concluded that there is a material weakness with respect to segregationof duties that may not provide reasonable assurance regarding the reliability of internal control over financial reporting and may not prevent or detectmisstatements. Specifically, our CFO serves as our only qualified internal accounting and financial reporting personnel and as such performs all accountingand financial reporting functions without the benefit of independent checks, confirmations or backup other than bookkeeping functions performed by anoutside accounting firm. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on this evaluation, our management concluded that the Company's internal controls over financial reporting were not effective as of August31, 2011 at a reasonable assurance level. During the year ended August 31, 2010, management started an extensive program of documenting all processes related to the financial reporting, inorder to strengthen our internal controls over financial reporting in order to reasonably ensure the reliability of financial reporting and the preparation offinancial statements. This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Commission that permit us toprovide only management’s report in this Annual Report. 37 Changes in Internal Control over Financial Reporting There were no changes in our internal controls over financial reporting identified with the evaluation thereof that occurred during the quarter endedAugust 31, 2011 that have materially affected, or are reasonable likely to materially affect our internal control over financial reporting. ITEM 9B – OTHER INFORMATION None. 38 PART III ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Set forth below is certain information with respect to the individuals who are our directors, executive officers and significant employees. Name Age Position Nadav Kidron 37 President, Chief Executive Officer and Director Miriam Kidron 70 Chief Medical and Technology Officer and Director Leonard Sank 46 Director Harold Jacob 57 Director Michael Berelowitz 67 Director and Chairman of the Scientific Advisory Board Yifat Zommer 37 Chief Financial Officer, Treasurer and Secretary Dr. Miriam Kidron is Mr. Nadav Kidron’s mother. There are no other directors or officers of our company who are related by blood or marriage. Business Experience The following is a brief account of the education and business experience during at least the past five years of each director, executive officer andsignificant employee, indicating the principal occupation during that period, and the name and principal business of the organization in which suchoccupation and employment were carried out. Mr. Nadav Kidron was appointed President, Chief Executive Officer and director in March 2006. He is also a director of Entera Bio Ltd. (of whichthe Company owns 3% of the outstanding shares.) In 2009, he was a fellow at the Merage Foundation for U.S.-Israel Trade Programs for executives in the lifesciences field. From 2003 to 2006, he was the managing director of the Institute of Advanced Jewish Studies at Bar Ilan University. From 2001 to 2003, hewas a legal intern at Wine, Mishaiker & Erenstof Law Offices in Jerusalem, Israel. Mr. Kidron holds an LLB and an International MBA from Bar IlanUniversity and is a member of the Israel bar. Dr. Miriam Kidron was appointed Chief Medical and Technology Officer and director in March 2006. Dr. Kidron is a pharmacologist and abiochemist with a PhD in biochemistry. From 1990 to 2007, Dr. Kidron has been a senior researcher in the Diabetes Unit at Hadassah University Hospital inJerusalem, Israel. During 2003 and 2004, Dr. Kidron served as a consultant to Emisphere Technologies Inc., a company that specializes in developing broad-based proprietary drug delivery platforms. Dr. Kidron was formerly a visiting professor at the Medical School at the University of Toronto (Canada), and is amember of the American, European and Israeli Diabetes Associations. Dr. Kidron is a recipient of the Bern Schlanger Award. Mr. Leonard Sank was appointed a director in October 2007. Mr. Sank is a South African entrepreneur and businessman who is devoted toentrepreneurial endeavors and initiatives. He has over 20 years of experience playing important leadership roles in developing businesses. He was a directorin Eastvaal Motor Group, a diversified retail motor business. He was a also director in Vecto Finance, a credit lending business. He has also served as adirector of Macsteel Service Centres SA Pty Ltd., South Africa’s largest private company. He also serves on the board of local non-profit charityorganizations in Cape Town, where he resides. 39 Dr. Harold Jacob was appointed a director in July 2008. Since 1998, Dr. Jacob has served as the president of Medical Instrument, a company whichprovides a range of support and consulting services to start-up and early stage companies as well as patenting its own proprietary medical devices. Dr. Jacobhas advised a spectrum of companies in the past and he served as a consultant and then as the Director of Medical Affairs at Given Imaging Ltd., during theyears 1997 to 2003, a company that developed the first swallowable wireless pill camera for inspection of the intestine. He has licensed patents to a numberof companies including Kimberly Clark Ballard. Since 2003, Dr. Jacob has served as the CEO of NanoVibronix, a medical device company using surfaceacoustics to prevent catheter acquired infection as well as other applications. He practiced clinical gastroenterology in New York and served as Chief ofGastroenterology at St. Johns Episcopal Hospital and South Nassau Communities Hospital in the years 1986-1995, and was a Clinical Assistant Professor ofMedicine at SUNY during the years 1983-1990. Dr. Jacob founded and served as Editor in Chief of Endoscopy Review and has authored numerouspublications in the field of gastroenterology. Dr. Michael Berelowitz was appointed a director in June 2010 and Chairman of our Scientific Advisory Board in June 2011. From 2009 to 2010, Dr.Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in the Specialty Care Business Unit at Pfizer, Inc. From1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes Clinical Research team and then assumingpositions of increasing responsibility until being appointed to his present role. Prior to that, Dr. Berelowitz spent a number of years in academia. Among hispublic activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical Initiatives Committee of theEndocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorial boards,including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and co-authored more than 100 peer-reviewed journal articles and book chapters in the areas of pituitary growth hormoneregulation, diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology andMetabolism at SUNY – StonyBrook and Mt. Sinai School of Medicine in New York. Ms. Yifat Zommer was appointed Chief Financial Officer, Treasurer and Secretary in April 2009. From April 2007 to October 2008, Ms. Zommerserved as Chief Financial Officer of Witech Communications Ltd., a subsidiary of IIS Intelligence Information Systems Ltd, a company operating in the fieldof video transmission using wireless communications. From April 2006 to April 2007, Ms. Zommer acted as Chief Financial Officer for CTWARE Ltd, atelecommunication company. Prior to that she was an audit manager in PricewaterhouseCoopers (PwC), where she served for five years. Ms. Zommer holds aBachelor of Accounting and Economics degree from the Hebrew University and Business Administration (MBA) from Tel-Aviv University. Ms. Zommer is acertified public accountant in Israel. Board of Directors There are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting ofstockholders and serves until the next such meeting and until his or her successor is duly elected. The board of directors may also appoint additionaldirectors up to a maximum of fifteen directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders. The board ofdirectors has determined that Leonard Sank, Harold Jacob and Michael Berelowitz are independent as defined under the rules promulgated by the NASDAQStock Market. 40 We have determined that each of the directors is qualified to serve as a director of the Company based on a review of the experience, qualifications,attributes and skills of each director. In reaching this determination, we have considered a variety of criteria, including, among other things: character andintegrity; ability to review critically, evaluate, question and discuss information provided, to exercise effective business judgment and to interact effectivelywith the other directors; and willingness and ability to commit the time necessary to perform the duties of a director. Each director’s ability to perform his orher duties effectively is evidenced by such director’s experience or achievements in the following areas: management or board experience in the healthcare,biopharmaceutical and biotechnology industries or companies in other fields; educational background and professional training; and experience as a directorof the Company. Board Meeting Attendance During the year ended August 31, 2011, our board held five meetings and took actions by written consent on 13 occasions. No incumbent directorof the meeting attended fewer than 75% of the aggregate of: (i) the total number of meetings of the board (during the period for which such director served asa director); and (ii) the total number of meetings held by all committees of the board on which such director served (during the period for which such directorserved on such committees). Board members are encouraged to attend our annual meetings of stockholders. In the annual meeting of stockholders held onFebruary 24, 2011 three Board members were present. Committees As of August 31, 2011, the Board has not established any committees. The Board intends to establish an audit and compensation committee duringthe year ending August 31, 2012. The Board has not established a nominating or audit committee because it believes that the Board, of which three of its fivemembers are independent directors, with broad business experience, has the sufficient knowledge to fulfill that function. The Company has not identified a financial expert. The management of the Company believes that the three independent directors, which havebroad business experience, have the sufficient skills for that purpose. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished to us during fiscal year 2011, we believe that during fiscal year2011, our executive officers, directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section16(a) filing requirements. 41 Code of Ethics We have adopted a Code of Ethics for our officers, directors and employees. A copy of the Code of Ethics is located at our website atwww.oramed.com. ITEM 11 - EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth the compensation earned during the years ended August 31 2010 and 2011 by our President and Chief Executive Officer, ourChief Medical and Technology Officer, our Chief Financial Officer and former Chief Financial Officer (the “Named Executive Officers”): Name and PrincipalPosition Year(1) Salary($)(8) Option Awards($)(2) All OtherCompensation($)(3) (8) Total($) Nadav KidronPresident and CEO and director (4)2011 171,167 163,304 28,213 362,683 2010 159,919 236,344 10,783 407,046 Miriam KidronChief Medical and Technology Officer and director (5)(6)2011 172,172 163,304 13,581 349,057 2010 160,092 236,344 7,727 404,163 Yifat ZommerCFO, Treasurer and Secretary (7)2011 85,700 46,162 32,034 163,896 2010 76,896 81,803 26,979 185,678 _______________1The information is provided for each fiscal year, which begins on September 1 and ends on August 31.2The amounts reflect the compensation expense in accordance with FASB ASC 718 (FAS 123(R)) of these option awards. The assumptionsused to determine the fair value of the option awards for fiscal years ended August 31, 2011 and 2010 are set forth in the notes to our auditedconsolidated financial statements included in this Annual Report on Form 10-K. Our Named Executive Officers will not realize the value ofthese awards in cash unless and until these awards are exercised and the underlying shares subsequently sold.3See "All Other Compensation Table" below.4Mr. Kidron was appointed as our President, CEO and Director on March 8, 2006 and receives compensation from our subsidiary throughKNRY, an Israeli entity owned by Mr. Kidron. See “Employment and Consulting Agreements.”5Dr. Kidron was appointed as our Chief Medical and Technology Officer and Director on March 8, 2006 and receives compensation from oursubsidiary through KNRY, an Israeli entity owned by Mr. Kidron. See “Employment and Consulting Agreements.”6See “Certain Relationships and Related Transactions, and Director Independence” for a description of management fees received by Dr.Kidron from Hadasit.7Ms. Zommer was appointed as our CFO and Secretary on April 19, 2009.8Amounts paid for Salary and All Other Compensation were originally denominated in NIS and were translated into US Dollars usinghistorical exchange rates. 42 All Other Compensation Table The “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following: Name Year Automobile-RelatedExpenses($) Manager’sInsurance*($) EducationFund*($) Total($) Nadav Kidron2011 21,044 -- -- 28,213 Miriam Kidron2011 13,581 -- -- 13,581 Yifat Zommer2011 21,017 7,169 3,849 32,034 *Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is acombination of severance savings (in accordance with Israeli law), defined contribution tax-qualified pension savings and disabilityinsurance premiums. An education fund is a savings fund of pre-tax contributions to be used after a specified period of time foreducational or other permitted purposes. Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning stock options and stock awards held by the Named Executive Officers as of August 31, 2011. Option AwardsName Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable OptionExercisePrice($) OptionExpirationDateNadav Kidron 850,000(1) - 0.45 08/01/12 720,000(2) 0.54 05/06/18 864,000(5) 432,000(5) 0.49 04/20/20Miriam Kidron 3,361,360(3) - 0.001 08/13/12 850,000(1) - 0.45 08/01/12 720,000(2) 0.54 05/06/18 864,000(5) 432,000(5) 0.49 04/20/20Yifat Zommer - 266,667(4) 0.47 10/19/19_____________ (1)On August 2, 2007, 850,000 options were granted to each of Nadav Kidron and Miriam Kidron under the 2006 Stock Option Plan at anexercise price of $0.45 per share; the options vested immediately and have an expiration date of August 2, 2012. (2)On May 7, 2008, 864,000 options were granted to each of Nadav Kidron and Miriam Kidron under the 2008 Stock Option Plan at an exerciseprice of $0.54 per share; 144,000 of such options vested immediately on the date of grant and the remainder will vest in twenty equalmonthly installments, commencing on June 7, 2008. The options have an expiration date of May 7, 2018. (3)On August 14, 2007, 3,361,630 stock options were granted to Miriam Kidron, at an exercise price of $0.001 per share; the options vestedimmediately and have an expiration date of August 14, 2012. These options were not issued pursuant to any outstanding award plans. (4)On June 3, 2009, 400,000 options were granted to Yifat Zommer under the 2008 Stock Option Plan at an exercise price of $0.47 per share.The options vest in three equal annual installments, commencing on October 19, 2010, and expire on October 19, 2019. (5)On April 21, 2010, 864,000 options were granted to each of Nadav Kidron and Miriam Kidron under the 2008 Stock Option Plan at anexercise price of $0.49 per share; 108,000 of such options vested immediately on the date of grant and the remainder will vest in twenty oneequal monthly installments, commencing on May 31, 2010. The options have an expiration date of April 20, 2020. 43 Stock Option Plans 2006 Stock Option Plan On October 15, 2006, our board of directors adopted the 2006 Stock Option Plan (the “2006 Plan”) in order to attract and retain quality personnel.Under the 2006 Plan, 3,000,000 shares have been reserved for the grant of options by the board. In addition, under the terms of the 2006 Plan, options thathave expired or been terminated for any reason prior to being exercised may be reissued. As of August 31, 2011, options with respect to 1,700,000 shareswere outstanding under the 2006 Plan, which amount reflects the aggregate grant of options with respect to 3,350,000 shares, of which 1,650,000 haveexpired through August 31, 2011. 2008 Stock Incentive Plan On May 5, 2008, our board of directors adopted the 2008 Stock Incentive Plan (the “2008 Plan”) in order to attract and retain quality personnel. The2008 Plan provides for the grant of stock options, restricted stock, restricted stock units and stock appreciation rights, collectively referred to as “awards.”Stock options granted under the Plan may be either incentive stock options under the provisions of Section 422 of the Internal Revenue Code, or non-qualified stock options. Incentive stock options may be granted only to our employees or to our parent or subsidiary. Awards other than incentive stockoptions may be granted to employees, directors and consultants. Under the 2008 Plan, 8,000,000 shares have been reserved for the grant of options, whichmay be issued at the discretion of our board of directors from time to time. As of August 31, 2011, options with respect to 7,032,200 shares have been grantedunder the 2008 Plan, 978,000 of which have been forfeited. Other On August 14, 2007 we granted Dr. Miriam Kidron options to purchase up to 3,361,360 shares at an exercise price of $0.001; the options vestedimmediately and have an expiration date of August 14, 2012. These options are not governed by any of the plans detailed above. Stock Options Grants We did not make any stock options grants to executive officers or to directors during the year ended August 31, 2011. Employment and Consulting Agreements Effective August 1, 2007, we entered into employment agreements with KNRY Ltd. (“KRNY”), pursuant to which Nadav Kidron and Dr. MiriamKidron provided employment services to our company. Based on the agreements, Nadav Kidron served as the President and Chief Executive officer andMiriam Kidron served as our Chief Medical and Technology Officer. As remuneration for such services, KNRY was paid $20,000 per month, commencing onAugust 1, 2007. 44 On July 1, 2008, Oramed Ltd., our Israeli subsidiary, entered into a consulting agreement with KNRY, whereby Nadav Kidron, through KNRY,provides services as President and Chief Executive Officer of both the Company and Oramed Ltd. (the “Nadav Kidron Consulting Agreement”). Additionally,on July 1, 2008, Oramed Ltd. entered into a consulting agreement with KNRY whereby Dr. Miriam Kidron, through KNRY, provides services as ChiefMedical and Technology Officer of both the Company and Oramed Ltd. (the “Miriam Kidron Consulting Agreement” and together with the Nadav KidronConsulting Agreement, the “Consulting Agreements”). The Consulting Agreements replace the employment agreements entered into between the Companyand KNRY, dated as of August 1, 2007, referenced above. The Consulting Agreements are both terminable by either party upon 60 days prior written notice. The Consulting Agreements provide that KNRY(i) will be paid, under each of the Consulting Agreements, in New Israeli Shekels (NIS) a gross amount of NIS 50,400 per month and (ii) will be reimbursed forreasonable expenses incurred in connection with performance of the Consulting Agreements. Pursuant to the Consulting Agreements, KNRY, Nadav Kidron and Miriam Kidron each agree that during the term of the Consulting Agreements andfor a 12 month period thereafter, none of them will compete with Oramed Ltd. nor solicit employees of Oramed Ltd. On November 2, 2008, we entered into indemnification agreements with our directors and executive officers pursuant to which we agreed toindemnify each director and executive officer for any liability he or she may incur by reason of the fact that he or she serves as our director or executiveofficer, to the maximum extent permitted by Nevada law. On March 11, 2011, we entered into new indemnification agreements with our directors and executive officers pursuant to which we agreed toindemnify each director and executive officer for any liability he or she may incur by reason of the fact that he or she serves as our director or executiveofficer, to the maximum extent permitted by Delaware law. We, through our Israeli subsidiary, Oramed Ltd., have entered into an employment agreement with Yifat Zommer as of April 19, 2009, pursuant towhich Ms. Zommer was appointed as Chief Financial Officer, Treasurer and Secretary of Oramed. On August 31, 2009, the agreement was amended, pursuantto which Ms. Zommer's gross monthly salary will be NIS 22,000 ($5,764). In accordance with the employment agreement, as amended, as of October 19,2009, Ms. Zommer’s gross monthly salary was increased to NIS 24,200 ($6,340). On April 19, 2009, Oramed and Ms. Zommer also entered into an indemnification agreement, pursuant to which Oramed agrees to indemnify Ms.Zommer for any liability she may incur by reason of the fact that she serves as Oramed’s CFO, to the maximum extent permitted by law. On January 2, 2011, we entered into a consulting agreement with a third party (the "Advisor") for a period of 24 months, pursuant to which theAdvisor will provide financial services, advice and assistance in connection with fund raisings in the public or private equity markets. In consideration forthe services provided the Advisor will be entitled to a monthly fee of $3,500 payable in cash in respect of the first 18 months of the term of such agreementand, subject to the closing of our first round of financing conducted by the Advisor, a certain finders' fee on financing transactions conducted by the Advisorand a warrant to purchase up to 2,000,000 shares of our common stock. The warrant will have a term of five years and an exercise price of $0.50 per share. Thewarrant will vest and be exercisable only upon achieving certain milestones with respect to our market capitalization and trading volume, prior to the secondanniversary of the date of issuance, as determined in the agreement. The warrants were granted on March 16, 2011; however, a final measurement date usedfor measuring the cost will not be determined until the milestones are met. In May 2011, we terminated this agreement, and the warrant did not vest. 45 On February 15, 2011, our Israeli subsidiary, Oramed Ltd., entered into a consulting agreement with a third party (the “Consultant”) for a period offive years, pursuant to which the Consultant will provide consultation on scientific and clinical matters. The Consultant is entitled to a fixed monthly fee of$8,000, royalties of 8% of the net royalties actually received by Oramed Ltd. in respect of the patent that was sold to Entera on February 22, 2011, and anoption to purchase up to 250,000 shares of our common stock at an exercise price of $0.50 per share. On May 13, 2011, we entered into a consulting agreement with a third party for a period of 12 months, pursuant to which the third party will provideinvestor relations services and will be entitled to a monthly cash fee of $4,000, which may be increased up to $10,000 upon the completion of a $5,000,000capital raise by us. In addition, the consultant is entitled to a warrant to purchase up to 32,000 shares of our common stock. The warrant will have a term offive years and an exercise price of $0.50 per share and will vest in 12 installments during the period from October 2011 to May 2016. Director Compensation Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with their attendance atmeetings of our board of directors. Effective June 1, 2010, each independent director is entitled to receive as remuneration for his or her service as a memberof the board a sum equal to $10,000 per annum, to be paid quarterly and shortly after the close of each quarter. Prior to June 1, 2010, the fee paid toindependent directors was $8,000 per annum. The board of directors may award special remuneration to any director undertaking any special services onbehalf of us other than services ordinarily required of a director. On June 22, 2011, we appointed one of our directors, Michael Berelowitz, to serve as the Chairman of our Scientific Advisory Board. In this role, Dr.Berelowitz will be actively involved in our scientific decisions, clinical strategy, and partnership negotiations. Dr. Berelwoitz will be paid a fee of $300 perhour, up to $1,500 per day, as compensation for serving in this position. Other than indicated in this Annual Report on Form 10-K, no director received and/or accrued any compensation for his or her services as a director,including committee participation and/or special assignments. 46 The following table sets forth director compensation for the year ended August 31, 2011. Name of Director Fees Earnedor Paid inCash($) OptionAwards (1)($) All OtherCompensation Total($) Nadav Kidron (2) - 163,304 - 163,304 Miriam Kidron (2) - 163,304 - 163,304 Leonard Sank 10,000 38,554 - 48,554 Harold Jacob 10,000 38,554 - 48,554 Michael Berelowitz (3) 10,000 75,710 - 85,710 _______________1The amounts reflect the compensation expense in accordance with FASB ASC 718 (FAS 123(R)) of these option awards. The assumptions used todetermine the fair value of the option awards are set forth in Note 8 of our audited consolidated financial statements included in this Annual Report onForm 10-K. Our directors will not realize the value of these awards in cash unless and until these awards are exercised and the underlying sharessubsequently sold.2Please refer to the summary compensation table for executive compensation with respect to the named individual.3Appointed as Chairman of our Scientific Advisory Board in June 2011.ITEM 12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Securities Authorized for Issuance under Equity Compensation Plans 2006 Stock Option Plan On October 15, 2006, our board of directors adopted the 2006 Stock Option Plan (the “2006 Plan”) in order to attract and retain quality personnel.Under the 2006 Plan, 3,000,000 shares have been reserved for the grant of options by the board. In addition, under the terms of the 2006 Plan, options thathave expired or been terminated for any reason prior to being exercised may be reissued. As of August 31, 2011, options with respect to 1,700,000 shareswere outstanding under the 2006 Plan, which amount reflects the aggregate grant of options with respect to 3,350,000 shares, of which 1,650,000 haveexpired through August 31, 2011. 2008 Stock Incentive Plan On May 5, 2008, our board of directors adopted the 2008 Stock Incentive Plan (the “2008 Plan”) in order to attract and retain quality personnel. The2008 Plan provides for the grant of stock options, restricted stock, restricted stock units and stock appreciation rights, collectively referred to as “awards.”Stock options granted under the Plan may be either incentive stock options under the provisions of Section 422 of the Internal Revenue Code, or non-qualified stock options. Incentive stock options may be granted only to our employees or to our parent or subsidiary. Awards other than incentive stockoptions may be granted to employees, directors and consultants. Under the 2008 Plan, 8,000,000 shares have been reserved for the grant of options, whichmay be issued at the discretion of our board of directors from time to time. As of August 31, 2011, options with respect to 7,032,200 shares have been grantedunder the 2008 Plan, 978,000 of which have been forfeited. 47 Other On August 14, 2007 we granted Dr. Miriam Kidron options to purchase up to 3,361,360 shares at an exercise price of $0.001; the options vestedimmediately and have an expiration date of August 14, 2012. These options are not governed by any of the plans detailed above. The following table sets forth information with respect to our equity compensation plans as of August 31, 2011: Plan category Number ofsecurities to beissued uponexercise ofoutstandingoptions,warrants andrights(a) Weight-averageexercise priceof outstandingoptions,warrants andrights (b) Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans(excludingsecuritiesreflected incolumn (A))(c) Equity compensation plans approved bysecurity holders -- -- -- Equity compensation plans not approvedby security holders 10,997,560 $0.25 3,395,800 Total 10,997,560 $0.25 3,395,800 The following table sets forth certain information regarding beneficial ownership of our common stock as of August 31, 2011 by (i) by each personwho is known by us to own beneficially more than 5% of the Common Stock, (ii) by each of the Named Executive Officers and (iii) by all of our directors andexecutive officers as a group. On such date, we had 70,104,583 shares of Common Stock outstanding. As used in the table and elsewhere in this Annual Report on Form 10-K, the term “beneficial ownership” with respect to a security consists of sole orshared voting power, including the power to vote or direct the vote and/or sole or shared investment power, including the power to dispose or direct thedisposition, with respect to the security through any contract, arrangement, understanding, relationship, or otherwise, and includes any right to acquire suchpower(s) during the 60 days following August 31, 2011. Inclusion of shares in the table does not, however, constitute an admission that the namedstockholder is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, each person or entity named in the table has sole voting powerand investment power (or shares that power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity. 48 Name and Address ofBeneficial Owner Number ofShares Percentageof SharesBeneficiallyOwned Nadav Kidron †‡10 Itamar Ben Avi St.Jerusalem, Israel 10,371,735(1) 14.79% Zeev Bronfeld6 Uri St.Tel-Aviv, Israel 6,158,517(2) 8.78% Miriam Kidron †‡2 Elza St.Jerusalem, Israel *(3) * Hadasit Medical Research Services & Development Ltd.P.O. Box 12000Jerusalem, Israel 4,141,532 5.91% Leonard Sank †3 Blair Rd Camps BayCape Town, South Africa 166,667(4) * Harold Jacob †Haadmur Mebuyon 26Jerusalem, Israel 10,000(5) * Michael Berelowitz †415 East 37th StreetNew York, NY, USA * * Yifat Zommer ‡P.O. Box 39098,Jerusalem, Israel *(6) * Attara Fund, Ltd767 Fifth Ave. New York, NY, USA 6,250,000(7) 8.92% All current executive officers and directors, as a group (six persons) 13,676,885(8) 19.51%_______________*Less than 1% 49 †Indicates Director‡Indicates Officer(1)Includes 2,290,000 shares of common stock issuable upon the exercise of outstanding stock options.(2)Includes 781,250 shares of common stock and five-year warrants to purchase 273,438 shares of common stock at an exercise price of $0.50 pershare, held by D.N.A Mr. Bronfeld is a director of D.N.A and party to a voting agreement with Mr. Meni Mor relating to their respective shares ofD.N.A, representing, in the aggregate, approximately 46.8% of D.N.A's outstanding share capital. As a result, Mr. Bronfeld may be deemed abeneficial owner of, and to share the power to vote and dispose of our securities held by D.N.A. Mr. Bronfeld has disclaimed beneficial ownershipof any of our securities held by D.N.A. The foregoing is based on a Form 4 filed by Mr. Bronfeld on October 5, 2011.(3)Includes 5,651,360 shares of common stock issuable upon the exercise of outstanding stock options.(4)Consists of 2,357,650 shares of common stock held by Mr. Sank, 937,500 shares of common stock and a warrant to purchase 328,125 shares ofcommon stock held by Mr. Sank's wife and 1,666,667 shares of common stock held by a company wholly owned by a trust of which Mr. Sank is oneof eight trustees. Mr. Sank disclaims beneficial ownership of the securities held by his wife and such company.(5)Includes 200,000 shares of common stock issuable upon the exercise of outstanding stock options.(6)Includes 266,666 shares of common stock issuable upon the exercise of outstanding stock options.(7)Includes of 766,208 shares of common stock issuable upon the exercise of warrants beneficially owned by the referenced person.(8)Includes 9,180,151 shares of common stock issuable upon the exercise of warrants beneficially owned by the referenced person and the exercise ofoutstanding stock options. 50 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Except as otherwise indicated below, during fiscal year 2011 we were not a party to any transaction, and we are not currently a party to any proposedtransaction, or series of transactions, in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-endfor the last two completed fiscal years, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders, or any memberof the immediate family of the foregoing persons had, or will have , a direct or indirect material interest. Our policy is to enter into transactions with related parties on terms that, on the whole, are no less favorable than those available from unaffiliatedthird parties. Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believethat all of the transactions described below met this policy standard at the time they occurred. All related parties transactions are approved by our board ofdirectors. On March 8, 2006, and July 8, 2009, we entered into two agreements with Hadasit to provide consulting and clinical trial services for totalconsideration of $400,000. The clinical trials conducted by Hadasit are managed by Dr. Miriam Kidron, our Chief Medical and Technology Officer andDirector, through a research fund account at Hadasit in Dr. Kidron's name. The fees paid by us to Hadasit are deposited into such Hadasit research account.Pursuant to the general policy of Hadasit with respect to its research funds, Dr. Kidron is entitled to receive a management fee in the amount of 10% of all thefunds deposited into this research fund account, including the funds paid by us under the aforementioned agreements. Since March 2006, only the funds paidby us have been deposited in this account, of which, $10,214 has been paid to Dr. Kidron. On June 1, 2010, our subsidiary, Oramed Ltd, entered into a joint venture agreement with D.N.A for the establishment of Entera. On February 22,2011, we entered into agreements with D.N.A for the sale of 47% of Entera and a patent application, which closed on March 31, 2011. We currently own 3%of the outstanding shares of Entera. Mr. Zeev Bronfeld, who is one of D.N.A's directors and controlling shareholders, holds approximately 9% of ouroutstanding common stock (see "Securities Ownership of Certain Beneficial Owners and Management"). Mr. Nadav Kidron, our President, Chief ExecutiveOfficer and Director, is also a director of Entera. See "Item 1 – Business – Description of Business – Out-Licensed Technology" for further information. See “Employment and Consulting Agreements” above for information as to the agreements with our directors, employees and consultants. The board of directors has determined that Leonard Sank, Harold Jacob and Michael Berelowitz are independent as defined under the rulespromulgated by the NASDAQ Stock Market. 51 ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES The aggregate fees billed by Kesselman & Kesselman, certified public accountants in Israel, and member of PricewaterhouseCoopers InternationalLimited, for services rendered to us during the fiscal years ended August 31, 2011 and 2010: Summary: 2011 2010 Audit fees(1) $100,390 $65,880 Tax fees(2) $-- -- ___________(1) Amount represents fees paid for professional services for the audit of our consolidated annual financial statements and review of ourinterim consolidated financial statements included in quarterly reports and services that are normally provided by our accountants in connection withstatutory and regulatory filings or engagements.(2) Amount represents fees paid for professional services for tax compliance and tax advice.We do not have an Audit Committee. As such, our three independent directors act as our audit committee. No formal pre-approval process has beenadopted. The Board intends to establish an audit and compensation committee during the year ending August 31, 2012. The Board has not established anominating or audit committee because it believes that the Board, of which three of its five members are independent directors, is qualified to fulfill thatfunction. 52 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements The following financial statements are filed as part of this report: Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Report of Kesselman & Kesselman F - 2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Report of Malone & Bailey, PC F - 3CONSOLIDATED FINANCIAL STATEMENTS: Balance sheets F - 4Statements of operations F - 5Statements of changes in stockholders’ equity F - 6Statements of cash flows F - 7Notes to financial statements F - 8 - F -34  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders ofOramed Pharmaceuticals Inc.(A Development Stage Company)We have audited the accompanying consolidated balance sheets of Oramed Pharmaceuticals Inc. (A Development Stage Company) and its subsidiary (the“Company”) as of August 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for theyears then ended and cumulatively, for the period from September 1, 2007 to August 31, 2011 (not separately presented herein) . These financial statementsare the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We didnot audit the cumulative totals of the Company for the period from April 12, 2002 (date of incorporation) to August 31, 2007, which totals reflect a deficit of$4,478,933 accumulated during the development stage. Those cumulative totals were audited by other independent auditors, whose report, dated December10, 2007, expressed an unqualified opinion on the cumulative amounts but included an emphasis of a matter. Our opinion, insofar as it relates to amountsincluded for that period is based on the report of the other independent auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, based upon our audits and the report of the other independent auditors, the consolidated financial statements referred to above present fairly,in all material respects, the consolidated financial position of the Company as of August 31, 2011 and 2010, and the consolidated results of their operationsand their cash flows for the years then ended and cumulatively, for the period from September 1, 2007 to August 31, 2011 (not separately presented herein),in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1a to the financial statements, the Company has suffered recurring losses for the period from inception (April 12, 2002) through August31, 2011 and presently the Company does not have sufficient cash and other resources to meet its requirements in the following twelve months. These factorsraise substantial doubts as to the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note1a. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include anyadjustments that might result from the outcome of this uncertainty/s/ Kesselman & Kesselman Tel Aviv, IsraelNovember 28, 2011 F - 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of DirectorsOramed Pharmaceuticals, Inc.(a development stage company)Jerusalem, Israel We have audited the consolidated statements of expenses, changes in stockholders’ deficit, and cash flows for the period from April 12, 2002 (Inception)through August 31, 2007. These financial statements are the responsibility of Oramed’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit. We conducted our audit in accordance with standards of the Public Accounting Oversight Board (United States). Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control overfinancial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonablebasis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of its consolidated operations and itscash flows for the periods described in conformity with accounting principles generally accepted in the United States of America. MALONE & BAILEY, PCwww.malone-bailey.comHouston, Texas December 10, 2007 F - 3 ORAMED PHARMACEUTICALS, INC.(A Development Stage Company) CONSOLIDATED BALANCE SHEETSU.S. dollars August 31 2011 2010 Assets CURRENT ASSETS: Cash and cash equivalents $1,513,365 $1,199,638 Short term deposits (note 2) 1,801,400 100,000 Marketable securities (note 3) 384,565 - Restricted cash (note 1n) 16,000 16,008 Accounts receivable - other (note 4) 542,891 59,175 Prepaid expenses 1,670 1,859 Related parties (note 15) - 7,689 Grants receivable from the chief scientist 24,191 12,438 T o t a l current assets 4,284,082 1,396,807 LONG TERM DEPOSITS AND INVESTMENT(note 8b) 10,186 10,582 AMOUNTS FUNDED IN RESPECT OFEMPLOYEE RIGHTS UPON RETIREMENT(note 7) 14,293 - PROPERTY AND EQUIPMENT, NET (note 6) 17,376 43,499 T o t a l assets $4,325,937 $1,450,888 Liabilities and stockholders' equity CURRENT LIABILITIES: Accounts payable and accrued expenses (note11) $375,538 $411,330 Related parties (note 15) 18,502 - Account payable with former shareholder 47,252 47,252 T o t a l current liabilities 441,292 458,582 LONG TERM LIABILITIES: Employee rights upon retirement (note 7) 22,675 - Provision for uncertain tax position (note 14f) 138,054 162,034 160,729 162,034 COMMITMENTS (note 8) STOCKHOLDERS’ EQUITY: Common stock, $ 0.001 par value (200,000,000authorized shares; 70,104,583 and57,565,321 shares issued and outstanding asof August 31, 2011 and 2010, respectively) 70,104 57,565 Additional paid-in capital 18,201,111 13,758,761 Deficit accumulated during the development stage (14,547,299) (12,986,054)T o t a l stockholders' equity 3,723,916 830,272 T o t a l liabilities and stockholders’ equity $4,325,937 $1,450,888 The accompanying notes are an integral part of the financial statements. F - 4 ORAMED PHARMACEUTICALS, INC.(A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONSU.S. dollars Period from April 12, 2002 (inception) Year ended through August 31 August 31, 2011 2010 2011 RESEARCH AND DEVELOPMENT EXPENSES, NET (note 12) $1,159,309 $1,463,886 $7,851,849 IMPAIRMENT OF INVESTMENT - - 434,876 GENERAL AND ADMINISTRATIVE EXPENSES (note 13) 1,275,960 1,508,667 6,958,383 OPERATING LOSS 2,435,269 2,972,553 15,245,108 FINANCIAL INCOME (33,232) (24,692) (194,032)GAIN ON SALE OF INVESTMENT (1,033,004) (1,033,004)IMPAIRMENT OF AVAILABLE- FOR-SALE SECURITIES 197,412 197,412 FINANCIAL EXPENSE 18,780 14,544 181,257 LOSS BEFORE TAXES ON INCOME 1,585,225 2,962,405 14,396,741 TAXES ON INCOME (note 14) (23,980) 14,971 150,558 NET LOSS FOR THE PERIOD $1,561,245 $2,977,376 $14,547,299 BASIC AND DILUTED LOSS PER COMMON SHARE $(0.02) $(0.05) WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED IN COMPUTING BASIC AND DILUTED LOSS PER COMMON STOCK 64,999,026 57,389,991 The accompanying notes are an integral part of the financial statements. F - 5 ORAMED PHARMACEUTICALS INC.(A development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYU.S. dollars Deficit accumulated Additional during the Total Common Stock paid-in development stockholders' Shares $ capital stage equity BALANCE AS OF APRIL 12, 2002 (inception) 34,828,200 $34,828 $18,872 $53,700 CHANGES DURING THE PERIOD FROM APRIL 12,2002 THROUGH AUGUST 31, 2009 : SHARES CANCELLED (19,800,000) (19,800) 19,800 - SHARES ISSUED FOR INVESTMENT IN ISTI-NJ 1,144,410 1,144 433,732 434,876 SHARES ISSUED FOR OFFERING COSTS 1,752,941 1,753 (1,753) - SHARES AND WARRANTS ISSUED FOR CASH– NETOF ISSUANCE EXPENSES 37,359,230 37,359 7,870,422 7,907,781 SHARES ISSUED FOR SERVICES 621,929 622 367,166 571,487 CONTRIBUTIONS TO PAID IN CAPITAL 18,991 18,991 RECEIPTS ON ACCOUNT OF SHARES ANDWARRANTS 6,061 6,061 SHARES ISSUED FOR CONVERSION OFCONVERTIBLE NOTE 550,000 550 274,450 275,000 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO EMPLOYEES ANDDIRECTORS 2,864,039 2,864,039 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO CONSULTANTS 498,938 498,938 DISCOUNT ON CONVERTIBLE NOTE RELATED TOBENEFICIAL CONVERSION FEATURE 108,000 108,000 OTHER COMPREHENSIVE LOSS (16) (16)IMPUTED INTEREST 15,997 15,997 NET LOSS (10,008,662) (10,008,662)BALANCE AS OF AUGUST 31, 2009 56,456,710 56,456 12,698,414 (10,008,678) 2,746,192 SHARES ISSUED FOR SERVICES RENDERED 1,108,611 1,109 248,741 249,850 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO EMPLOYEES ANDDIRECTORS 690,882 690,882 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO CONSULTANTS 116,944 116,944 IMPUTED INTEREST 3,780 3,780 NET LOSS (2, 977, 376) (2,977,376)BALANCE AS OF AUGUST 31, 2010 57,565,321 57,565 13,758,761 (12,986,054) 830,272 SHARES ISSUED FOR SERVICES RENDERED 730,636 731 226,838 227,569 SHARES AND WARRANTS ISSUED FOR CASH* 11,808,626 11,808 3,682,404 3,694,212 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO EMPLOYEES ANDDIRECTORS 502,593 502,593 STOCK BASED COMPENSATION RELATED TOOPTIONS GRANTED TO CONSULTANTS 26,733 26,733 IMPUTED INTEREST 3,782 3,782 NET LOSS (1,561,245) (1,561,245)BALANCE AS OF August 31, 2011 70,104,583 $70,104 $18,201,111 $(14,547,299) $3,723,916 * Including 196,750 issued as finders' fee. See also note 10mThe accompanying notes are an integral part of the financial statements. F - 6 ORAMED PHARMACEUTICALS, INC.(A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS Period fromApril 12, 2002(inceptiondate)through Year ended August 31 August 31, 2011 2010 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,561,245) $(2,977,376) $(14,547,299)Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 28,303 31,862 106,107 Amortization of debt discount - 108,000 Exchange differences on long term deposits (2,002) 335 (2,668)Stock based compensation 529,326 807,826 4,700,129 Common stock issued for services 227,569 249,850 1,048,096 Gain on sale of investment (1,033,004) - (1,033,004)Impairment of investments - - 434,876 Impairment of available for sales 197,412 197,412 Imputed interest 3,782 3,780 23,559 Changes in operating assets and liabilities: Prepaid expenses and other current assets (37,591) 360,302 (118,752)Restricted cash 8 (8) (16,000)Accounts payable and accrued expenses (17,290) 89,986 394,040 Liability for employee rights upon retirement 22,675 22,675 Provision for uncertain tax position (23,980) 14,971 150,558 Total net cash used in operating activities (1,666,037) (1,418,472) (8,543,965) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,180) - (123,483)Purchase of short term investments and deposits (1,700,382) - (5,428,382)Proceeds from sale of short term investments - 900,000 3,628,000 Funds in respect of employee rights upon retirement (14,293) - (14,293)Lease deposits, net 2,407 1,244 (7,509)Total net cash provided by (used in) investing activities (1,714,448) 901,244 (1,945,667) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sales of common stocks and warrants - net of issuance expenses 3,694,212 - 11,655,693 Receipts on account of shares issuances - - 6,061 Proceeds from convertible notes - - 275,000 Proceeds from short term note payable - - 120,000 Payments of short term note payable - - (120,000)Shareholder advances - - 66,243 Net cash provided by financing activities 3,694,212 - 12,002,997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (313,727) (517,228) 1,513,365 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,199,638 1,716,866 - CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,513,365 $1,199,638 $1,513,365 Non cash investing and financing activities: Discount on convertible note related to beneficial conversion feature $108,000 Shares and warrants issued for offering costs $76,026 $77,779 Contribution to paid in capital $18,991 As disclosed in note 5, in the year ended August 31, 2011, we sold 47% of Entera's outstanding share capital for non-cash proceeds of net$1,031,977. The accompanying notes are an integral part of the financial statements. F - 7 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: a.General: Oramed Pharmaceuticals Inc. (the “Company”) was incorporated on April 12, 2002, under the laws of the State of Nevada. Fromincorporation until March 3, 2006, the Company was an exploration stage company engaged in the acquisition and exploration ofmineral properties. On February 17, 2006, the Company entered into an agreement with Hadasit Medical Services and Development Ltd(“Hadasit”) (the “First Agreement”) to acquire the provisional patent related to orally ingestible insulin pill to be used for the treatment ofindividuals with diabetes, see also note 8a. On March 11, 2011, the Company was reincorporated from the State of Nevada to the State of Delaware. The Company has been in the development stage since its formation and has not yet generated any revenues from its operations. On May 14, 2007, the Company incorporated a wholly-owned subsidiary in Israel, Oramed Ltd., which is engaged in research anddevelopment. Unless the context indicates otherwise, the term “Group” refers to Oramed Pharmaceuticals Inc. and its Israeli subsidiary,Oramed Ltd. (the “Subsidiary”), (together with the Company, "the Group"). The Group is engaged in research and development in the biotechnology field and is considered a development stage company inaccordance with the ASC Topic 915 "Development Stage Entities". The Company has suffered recurring losses for the period from inception (April 12, 2002) through August 31, 2011 amounting to $14,547,299, as well as negative cash flow from operating activities. Presently, the Company does not have sufficient cash and otherresources to meet its requirements in the twelve months following August 31, 2011. These factors raise substantial doubts as to theCompany's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assumingthat the Company will continue as a going concern and do not include any adjustments that might result from the outcome of thisuncertainty. Management is in the process of evaluating various financing alternatives through fund raising in the public or privateequity markets, as the Company will need to finance future research and development activities and general and administrative expenses.Although there is no assurance that the Company will be successful with those initiatives, management believes that it will be able tosecure the necessary financing as a result of ongoing financing discussions with third party investors, existing shareholders, as well as ongoing funding from the Office of the Chief Scientist ("OCS"), (see note 8r). These consolidated financial statements do not include any adjustments that may be necessary should the Company be unable tocontinue as a going concern. The Company's continuation as a going concern is dependent on its ability to obtain additional financingas may be required and ultimately to attain profitability. F - 8 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): b.Accounting principles The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the UnitedStates of America (“U.S. GAAP”). c.Use of estimates in the preparation of financial statements The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financialstatements date and the reported expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to stock basedcompensation collectability of receivables , valuation and impairment of marketable securities and valuation of tax exposure. d.Functional currency The currency of the primary economic environment in which the operations of the Company are conducted is the US dollar (“$” or“dollar”).Most of the group’s operating expenses are incurred in dollars. Thus, the functional currency of the Company is the dollar. Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in foreign currencies aretranslated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For foreigntransactions and other items reflected in the statements of operations, the following exchange rates are used: (1) for transactions -exchange rates at transaction dates or average rates and (2) for other items (derived from non-monetary balance sheet items such asdepreciation) - historical exchange rates. The resulting transaction gains or losses are carried to financial income or expenses, asappropriate. e.Principles of consolidation The consolidated financial statements include the accounts of the Company and its Subsidiary. All inter-company transactions andbalances have been eliminated in consolidation. On June 1, 2010, the subsidiary of the Company entered into an agreement with D.N.A Biomedical Solutions Ltd (formerly, Laser DetectSystems Ltd) ("D.N.A"), an Israeli company, for the establishment of a new company, Entera Bio Ltd. ("Entera"), ("the JV Agreement"). Asthe Group did not obtain control in Entera, these consolidated financial statements do not include Entera's financial statement (see note5). F - 9 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): f.Property and equipment Property and equipment are recorded at cost and depreciated by the straight-line method over the estimated useful lives of the assets. Annual rates of depreciation are as follows: %Computers and peripheral equipment 33Office furniture and equipment 15-33 Leasehold improvements are amortized over the term of the lease which is shorter than the estimated useful life of the improvements. g.Income taxes 1.Deferred taxes Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between thefinancial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using thetax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is provided if,based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. TheCompany has provided a full valuation allowance with respect to its deferred tax assets. Regarding the Subsidiary, the recognition is prohibited for deferred tax liabilities or assets that arise from differences between thefinancial reporting and tax bases of assets and liabilities that are measured from the local currency into dollars using historical exchangerates, and that result from changes in exchange rates or indexing for tax purposes. Consequently, the abovementioned differences werenot reflected in the computation of deferred tax assets and liabilities. Taxes that would apply in the event of disposal of investments in subsidiaries have not been taken into account in computing deferredtaxes, as it is the Company’s intention to hold these investments, not to realize them. 2. Uncertainty in income tax The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the taxposition for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position willbe sustained on audit. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realizedupon ultimate settlement. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve monthsfrom the balance sheet date. The Company's policy is to include interest and penalties related to unrecognized tax benefits within incometax expenses. F - 10 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): h.Research and developmentResearch and development expenses include costs directly attributable to the conduct of research and development programs, includingthe cost of salaries, employee benefits, costs of registered patents materials, supplies, the cost of services provided by outside contractors,including services related to the Company’s clinical trials, clinical trial expenses, the full cost of manufacturing drug for use in research,preclinical development. All costs associated with research and development are expensed as incurred. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-partycontractors. The Company out sources a substantial portion of its clinical trial activities, utilizing external entities such as contractresearch organizations, independent clinical investigators, and other third-party service providers to assist the Company with theexecution of its clinical studies. For each clinical trial that the Company conducts, clinical trial costs are expensed immediately. Grants received from the OCS are recognized when the grants become receivable, provided there is reasonable assurance that theCompany will comply with the conditions attached to the grant and there is reasonable assurance the grant will be received. The grantsare deducted from the related research and development expenses as the costs are incurred. See also note 8n. i.Cash equivalentsThe Company considers all short term, highly liquid investments, which include short-term deposits with original maturities of threemonths or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts ofcash, to be cash equivalents. j.Comprehensive loss The Company has no other comprehensive loss components other than net loss for the fiscal years of 2010 and 2011 (see note 3). k.Loss per common share Basic and diluted net loss per common share are computed by dividing the net loss for the period by the weighted average number ofshares of common stock outstanding and shares relating to receipts on account of shares in equity during the period. Outstanding stockoptions, warrants and convertible notes have been excluded from the calculation of the diluted loss per share because all such securitiesare anti-dilutive for all periods presented. The total number of common stock options and warrants excluded from the calculation ofdiluted net loss was 17,157,044 for the year ended August 31, 2011 (15,584,897 for the year ended August 31, 2010). F - 11 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): l.Impairment in value of long-lived assets The Company reviews long-lived assets, to be held and used, for impairment whenever events or changes in circumstances indicate thatthe carrying amount of the assets may not be recoverable. In the event the sum of the expected future cash flows (undiscounted andwithout interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized,and the assets are written down to their estimated fair values. m.Stock based compensation Equity awards granted to employees are accounted for using the grant-date fair value method. The fair value of share-based paymenttransactions is recognized as an expense over the requisite service period, net of estimated forfeitures. The Company estimated forfeituresbased on historical experience and anticipated future conditions. The Company elected to recognize compensation cost for an award with only service conditions that has a graded vesting schedule usingthe accelerated method based on the multiple-option award approach. When stock options are granted as consideration for servicesprovided by consultants and other non-employees, the transaction is accounted for based on the fair value of the consideration receivedor the fair value of the stock options issued, whichever is more reliably measurable. The fair value of the options granted is measured on afinal basis at the end of the related service period and is recognized over the related service period using the straight-line method. n.Fair value measurement: 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 betweenmarket participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidanceestablishes 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 fairvalue hierarchy gives the highest priority to Level 1 inputs. Level 2:Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3:Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priorityto Level 3 inputs. As of August 31, 2011 the assets or liabilities measured at fair value comprise of : -derivatives, which have a negligible fair value, measured based on observable prices (level 2). -Securities available for sales, whose measurement involves significant unobservable inputs (level 3). F - 12 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use ofunobservable inputs to the extent. In order to secure the fulfillment of the Company’s obligations under the derivatives agreements, the Company has placed a restricteddeposit with the bank in an amount of $16,000. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related tax, recorded as a separatecomponent of other comprehensive income in equity until realized. Unrealized losses that are considered to be other-than-temporary arecharged to statement of operations as an impairment charge and are included in the consolidated statement of operations under financialexpenses. Realized gains and losses on sales of the securities are included in the consolidated statement of operations as financial incomeor expenses. The fair value of the financial instrument approximate their carrying value. o.Concentration of credit risks Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, deposit and short terminvestments which are deposited in major financial institutions. In addition the company holds a promissory note backed by stockholdersguarantee. The company is in the opinion the credit risk in respect of these balances is remote. p.Newly issued and recently adopted accounting pronouncements: 1.In May 2011, the FASB issued Accounting Standards Update No. 2011-04 that amends ASC 820 - "Fair Value Measurement"regarding fair value measurements and disclosure requirements. ASC 820 provides a framework for how companies should measurefair value when used in financial reporting, and sets out required disclosures. The amendments are intended to clarify how fair valueshould be measured, converge the U.S. guidance with IFRS, and expand the disclosures that are required. The amendments areeffective during interim and annual periods beginning after December 15, 2011 and are to be applied prospectively. The accountingupdate will be applicable to the Company beginning in the second third quarter of fiscal year 2012. The Company will update its fairvalue disclosures to comply with the updated disclosure requirements. 2.In June 2011, the FASB issued an update to Accounting Standards Codification (ASC) No. 220, “Presentation of ComprehensiveIncome,” which eliminates the option to present other comprehensive income and its components in the statement of shareholders’equity. The Company can elect to present the items of net income and other comprehensive income in a single continuous statementof comprehensive income or in two separate, but consecutive, statements. Under either method the statement would need to bepresented with equal prominence as the other primary financial statements. The amended guidance, which must be appliedretroactively, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with earlieradoption permitted. F - 13 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): 3.Accounting Standard Update No. 2009-17, Consolidation (Topic 810): Improvements to Financial Reporting by EnterprisesInvolved with Variable Interest Entities ("ASU 2009-17" or "the amendment"), an amendment to the accounting and disclosurerequirements for the consolidation of variable interest entities under (“VIEs”) under Topic 810. ASU 2009-17 requires an enterpriseto perform a qualitative analysis when determining whether or not it must consolidate a VIE. Under the new guidance, a VIE’sprimary beneficiary is the entity that has both (a) the power to direct the activities that most significantly impact the VIE’s economicsuccess; and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Theamendment eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interestentity. It also requires companies to continually reassess whether they are the primary beneficiary of a VIE, whereas the previousrules only required reconsideration upon the occurrence of certain triggering events. Additionally, the amendment requires enhanceddisclosures. The Company adopted the provision of ASU 2009-17 on September 1, 2010. The adoption of the new guidance did nothave material impact on the consolidated financial statements. NOTE 2 - SHORT TERM INVESTEMNTS: Amount represents bank deposits with an original maturity of more than three months but less than one year. The bank deposits are in USDollars and bear interest of 0.7-0.86% and 0.4% per annum as of August 31, 2011 and 2010, respectively. NOTE 3 - MARKETABLE SECURITIES:Marketable securities consist of equity securities classified as available-for-sale and are recorded at fair value. The fair value of the restrictedsecurities is measured based on the quoted prices of the otherwise identical unrestricted securities, adjusted for the effect of the restriction byapplying a proper discount. The discount was determined with reference to other similar restricted instruments. Similar securities, with norestriction on tradability, are quoted on an active market. Financial items carried at fair value as of August 31, 2011 are classified as level 3. The following table summarizes the activity for thosefinancial assets: August 31 2011 2010 Carrying value at the beginning of the period $- $- Additions - see note 5 581,977 Impairment of available-for-sale securities - financial expenses (197,412) Carrying value at the end of the period $384,565 $- F - 14 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 3 - MARKETABLE SECURITIES: (continued): During the year ended August 31, 2011, the Company recorded, initially, the decline in the fair value of its available-for-sale marketablesecurities, in the amount of $197,412, to equity, as other comprehensive loss, then, in the fourth quarter, as a result of a substantial andprolonged decrease in the market value of the security reclassified such unrealized loss to earnings, to reflect the other than temporaryimpairment of these securities. NOTE 4 - ACCOUNTS RECEIVABLE: Composition of accounts receivable , grouped by major classifications, is as follows: August 31 2011 2010 Receivables from D.N.A (see note 5) $450,844 $- Tax Authorities 32,406 14,042 Other receivables 59,641 45,133 $542,891 $59,175 NOTE 5 - AGREEMENT WITH D.N.A BIOMEDICAL SOLUTIONS LTD a.In June 2010, the Subsidiary entered into an agreement with D.N.A Biomedical Solutions Ltd ("D.N.A"), for the establishment of a newcompany, Entera Bio Ltd. ("Entera"), ("the JV Agreement"). According to the JV Agreement, D.N.A invested $600,000, in two stages, in Entera, and Entera was owned in equal parts by the subsidiaryand D.N.A. In consideration for 50% of Entera's shares, the Subsidiary entered into a Patent License Agreement with Entera, according towhich, the Subsidiary out-licensed to Entera a technology for the development of oral delivery drugs for certain actions. Entera's ChiefExecutive Officer was granted options to purchase ordinary shares of Entera, reflecting 9.9% of Entera's share capital. In the event that Entera has not obtained third-party financing by June 1, 2011, or such other date mutually agreed upon by the parties,each of the Subsidiary and D.N.A would be required to make a capital contribution to Entera in the amount of $150,000. As a result of oursale of 47% of Entera's outstanding share capital in March 2011, as described below, this capital contribution was not required to bemade. Mr. Zeev Bronfeld, who is one of D.N.A 's directors and controlling shareholders, is also an affiliated shareholder of the Company. The Group has concluded Entera is a variable interest entity (a "VIE"), according to the terms of the JV Agreement. As further discussed inNote 1p (3), a new accounting standard which became effective as applicable to the Company, on September 1,2010 related toaccounting for and consolidation of VIEs. According to this standard, the Group reviewed several factors to determine whether theCompany is the primary beneficiary of Entera, including an assessment whether the Group including its related parties and defactoagents has the power to direct the activities of Entera that most significantly impact Entera's economic performance and has theobligation to absorb losses of Entera that could potentially be significant to Entera; or the right to receive benefits from Entera that couldpotentially be significant to Entera. Based on those factors, the Group determined that it was not the primary beneficiary of Entera. UntilMarch 31, 2011, the Group recognized share of losses from this entity under the equity method, offset with a corresponding amount ofincome recognition on the out-license agreement, both in the amount of $ 282,876. F - 15 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5 - AGREEMENT WITH D.N.A BIOMEDICAL SOLUTIONS LTD (continued): As of August 31, 2010, the Group held 50% of the issued and outstanding share capital of Entera (45% - on fully diluted basis). As theGroup did not obtain control in Entera, these consolidated financial statements do not include Entera's financial statement. As of August 31, 2010, The Group recognized deferred income at the amount of $200,000 (50% of $400,000) that was presented as aprovision and deducted from investment account at the same amount. As of August 31, 2010, Entera's losses from operations were at theamount of $134,049. The investment in Entera was composed at follows: August 31 2010 Share in Entera's shareholders $200,000 Currency translation adjustment (176)Less - equity losses (67,025) 132,799 Less - deferred income (132,799)Net investment -,- b.On February 22, 2011, the Subsidiary entered into a share purchase agreement with D.N.A for the sale of 47% of Entera's outstandingshare capital on an undiluted basis. The closing of that transaction took place on March 31, 2011. As consideration for the Entera shares,the Subsidiary received a promissory note issued by D.N.A in the principal amount of $450,000, with an annual interest rate of 0.45%, tobe paid within four months from closing, and 8,404,667 ordinary shares of D.N.A (the "D.N.A Shares"), having a fair value of $581,977 asof the closing date of the transaction. The D.N.A Shares are listed on the Tel Aviv Stock Exchange ("TASE") and their tradability isrestricted for a period of 6 months from the closing date of the transaction according to TASE policy with regards to private placements.As a result, such fair value of the D.N.A. Shares at the closing date reflects a discount on the quoted price. The promissory note is securedby a personal guarantee of the D.N.A majority shareholders. On August 11, 2011, the Subsidiary and D.N.A entered into an Addendum tothe Share Purchase agreement, according to which, the said promissory note term will be extended until December 31, 2011. As to thepayment of the promissory note after balance sheet date, see note 16b. F - 16 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5 - AGREEMENT WITH D.N.A BIOMEDICAL SOLUTIONS LTD (continued): D.N.A.'s securities are classified as available-for-sale, during 2011 the Company recognized an impairment of $ 197,412 In addition, on closing date, D.N.A participated in the Company's private placement, at same investment terms granted to other investorsat that period, for which it received 781,250 shares of our common stock and five-year warrants to purchase 273,438 shares of commonstock at an exercise price of $0.50 per share for $250,000. As part of the transaction, the Subsidiary entered into a patent transfer agreement (that replaced the original license agreement) accordingto which, the Subsidiary assigned to Entera all of its right, title and interest in and to the patent application that it has licensed to Enterasince August 2010. Under this agreement, the Subsidiary is entitled to receive from Entera royalties of 3% of Entera's net revenues (asdefined in the agreement) and a license back of that patent application for use in respect of diabetes and influenza. Upon the closing, Oramed, Entera and D.N.A terminated the joint venture agreement, as amended, entered into on June 1, 2010 inconnection with the formation of Entera. The Subsidiary recognized a gain on sale of investment of $1,033,004 from the transaction, as followed: Fair value of D.N.A shares $581,977 Receivables from D.N.A 450,000 Re-classification of currency translation adjustments 7,930 $1,040,413 Less – net cost of the investment realized (6,902) $1,033,004 As a result of the above transaction, the Company no longer has the ability to exert significant influence over Entera and the remaining3% interest, in the amount of $1,027, is accounted for at a cost method investment. NOTE 6 - PROPERTY AND EQUIPMENT, Net: a.Composition of property and equipment, grouped by major classifications, is as follows: August 31 2011 2010 Cost: Leasehold improvements $76,029 $76,029 Office furniture and equipment 19,941 19,941 Computers and peripheral equipment 27,513 25,333 123,483 121,303 Less - accumulated depreciation and amortization 106,107 77,804 $17,376 $43,499 b.Depreciation expenses totaled $28,303 and $31,862 in the years ended August 31, 2011 and 2010, respectively. F - 17 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 - EMPLOYEES RIGHTS UPON RETIREMENT: The Subsidiary is required to make a severance payment upon dismissal of an employee, or upon termination of employment in certaincircumstances. The severance pay liability to the employees (based upon length of service and the latest monthly salary - one month’s salary foreach year employed) is recorded on the Company’s balance sheets under “Liability for employee rights upon retirement.” The liability isrecorded as if it were payable at each balance sheet date on an undiscounted basis. The liability is funded in part from the purchase of insurance policies or by the establishment of pension funds with dedicated deposits in thefunds. The amounts used to fund these liabilities are included in the Company’s balance sheets under “Funds in respect of employee rightsupon retirement.” These policies are the Company’s assets. However, under labor agreements and subject to certain limitations, any policy maybe transferred to the ownership of the individual employee for whose benefit the funds were deposited. In the years ended August 31, 2011 and2010, the Company deposited $3,275 and $3,731, respectively, with insurance companies in connection with its severance paymentobligations. In accordance with the current employment agreements with certain employees, the Company makes regular deposits with certain insurancecompanies for accounts controlled by each applicable employee in order to secure the employee’s rights upon retirement. The Company is fullyrelieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. Theliability accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company’sbalance sheets, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks havebeen irrevocably transferred to the applicable insurance companies (the “Contribution Plans”). The amounts of severance pay expenses were $10,241 and $10,596 for the years ended August 31, 2011 and 2010, respectively, of which$6,966 and $6,336 in the years ended August 31, 2011 and 2010, respectively, were in respect of a Contribution Plan. The Company expects to contribute approximately $13,181 in the year ending August 31, 2012 to insurance companies in connection with itsseverance liabilities for its operations for that year, $6,799 of which will be contributed to one or more Contribution Plans. NOTE 8 - COMMITMENTS: a.Under the terms of the First Agreement with Hadasit (note 1a above), the Company retained Hadasit to provide consulting and clinicaltrial services. As remuneration for the services provided under the agreement, Hadasit is entitled to $200,000. The primary researcher forHadasit is Dr. Miriam Kidron, a director and officer of the Company. The funds paid to Hadasit under the agreement are deposited byHadasit into a research fund managed by Dr. Kidron. Pursuant to the general policy of Hadasit with respect to its research funds, Dr.Kidron receives from Hadasit a management fee in the rate of 10% of all the funds deposited into this research fund. The total amountpaid to Dr. Kidron out of this fund was $10,214. On January 7, 2009, the Company entered into a second agreement with Hadasit (the “Second Agreement”). In the Second Agreement,Hadasit confirms that it has conveyed, transferred and assigned all of its ownership rights in the patents acquired under the FirstAgreement to the Company, and certain other patents filed by the Company after the First Agreement as a result of the collaborationbetween the Company and Hadasit. F - 18 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - COMMITMENTS (continued):On July 8, 2009 the Company entered into a third agreement with Hadasit, Prof. Itamar Raz and Dr. Miriam Kidron ("the ThirdAgreement"), to retain consulting and clinical trial services from Hadasit. According to the Third Agreement, Hadasit will be entitled to atotal consideration of $400,000 to be paid by Oramed. $200,000 of this amount was agreed in the terms of the First Agreement, and theremaining of $200,000 will be paid in accordance with the actual progress of the study. The total amount that was paid through August31, 2011 was $400,000. See also note 16a. b.The Subsidiary has entered into operating lease agreements for vehicles used by its employees for a period of 3 years. The lease expenses for the years ended August 31, 2011 and 2010 were $37,144 and $37,583, respectively. The future lease paymentsunder the lease agreement are $35,813, $26,842 and $11,419 for the years ending August 31, 2012, 2013 and 2014, respectively. As security for its obligation under the lease agreements the Subsidiary deposited $7,473, which are classified as long term deposits. c.On September 19, 2007 the Subsidiary entered into a lease agreement for its office facilities in Israel. The lease agreement is for a periodof 51 months, and will end on December 31, 2011. The monthly lease payment is NIS 2,396 and is linked to the increase in the Israeliconsumer price index, (as of August 31, 2011 the monthly payment in the Company's functional currency is $673, the future annual leasepayments under the agreement for the year ending August 31, 2012 are $2,694). As security for its obligation under this lease agreement the Company provided a bank guarantee in an amount equal to three monthlylease payments. d.As to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note 10a. e.On April 21, 2009, the subsidiary entered into a consulting service agreement with ADRES Advanced Regulatory Services Ltd.(“ADRES”) pursuant to which ADRES will provide consulting services relating to quality assurance and regulatory processes andprocedures in order to assist the Subsidiary in submission of a U.S. IND according to FDA regulations. In consideration for the servicesprovided under the agreement, ADRES will be entitled to a total cash compensation of $211,000, of which the amount $110,000 will bepaid as a monthly fixed fee of $10,000 each month for 11 months commencing May 2009, and the remaining $51,000 will be paid basedon achievement of certain milestones. $160,000 of the total amount was paid through August 31, 2011, $50,000 of that were paid forcompleting the three first milestones, the rest will be paid on January 2012, subject to the completion of the IND. f.On February 10, 2010, the Subsidiary entered into an agreement with Vetgenerics Research G. Ziv Ltd, a clinical research organization(CRO), to conduct a toxicology trial on its oral insulin capsules. The total cost estimated for the studies is €107,100 ($154,320) of which€80,993 ($117,004) was paid through August 31, 2011 and additional $11,990 are presented as accounts payables. F - 19 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - COMMITMENTS (continued): g.On July 5, 2010, the subsidiary of the Company entered into a Manufacturing Supply Agreement (MSA) with Sanofi-AventisDeutschland GMBH ("sanofi-aventis"). According to the MSA, sanofi-aventis will supply the subsidiary with specified quantities ofrecombinant human insulin to be used for clinical trials in the USA. h.On January 2, 2011, the Company entered into a consulting agreement with a third party (the "Advisor”) for a period of 24 months,pursuant to which the Advisor will provide financial services, advice and assistance in connection with fund raisings in the public orprivate equity markets. In consideration for the services provided, the Advisor will be entitled to monthly fee of $3,500 payable in cashin respect of the first 18 months of the term of this agreement and subject to the closing of the Company's first round of financingconducted by the Advisor, a certain finders' fee on financing transactions conducted by the Advisor and a warrant to purchase up to2,000,000 shares of the Company. The warrant will have a term of five years and an exercise price of $0.50 per Share. The warrant willvest and be exercisable only upon achieving certain milestones, with respect to the Company’s market capitalization and trading volume,and prior to the second anniversary of the date of issuance, as determined in the agreement. The warrants were granted on March 16, 2011and. The agreement terminated on May 2011 and the warrants did not vest. See also note 9c as to financing achieved by the Advisor in April 2011. In May 2011 the Company terminated the agreement. i.On February 15, 2011, the Subsidiary entered into a consulting agreement with a third party (“the Consultant”) for a period of five years,pursuant to which the Consultant will provide consultation on scientific and clinical matters. The Consultant is entitled to a fixedmonthly fee of $8,000, royalties of 8% of the net royalties actually received by the Subsidiary in respect of the patent that was sold toEntera on February 22, 2011 (see note 5) and an option to purchase up to 250,000 shares of common stock, par value $0.001 per share, ofthe Company at an exercise price of $0.50 per share. The option vest in five annual installments commencing February 16, 2012 andexpire on February 16, 2021. The initial fair value of the option on the date of grant, was $71,495, using the Black Scholes option-pricing model and was based on the following assumptions: dividend yield of 0% for all years; expected volatility of 113.80%; risk-freeinterest rates of 3.42%; and the remaining contractual life of 10 years. The fair value of the options granted is measured on a final basis atthe end of the related service period and is recognized over the related service period using the straight-line method. See also note 10k. j.On May 13, 2011, the Company entered into a consulting agreement with a third party ("the Consultant”) for a period of 12 months,pursuant to which the Consultant will provide investors relations services and will be entitled to a cash monthly fee of $4,000, that maybe increased up to $10,000 upon the completion of a $5,000,000 capital raise by the Company. In addition, the Consultant received awarrant to purchase up to 32,000 shares of the Company. The warrant has a term of five years and an exercise price of $0.50 per Share andwill vest in 12 installments in the period from October 2011 to May 2016. See also note 10p. k.On June 22, 2011 the Subsidiary issued a purchase order to SAFC Pharma for producing one of its oral capsule ingredients at the amountof $600,000, none of which was paid through August 31, 2011. l.On June 21, 2011 the Company into an agreement with one of its directors, Michael Berelowitz M.D., to serve as the Chairman of itsScientific Advisory Board. Dr. Berelowitz will be paid a fee of $300 per hour, up to $1,500 per day, as compensation for serving in thisposition. m.On August 15, 2011, the Company entered into a consulting agreement with a third party ("the Consultant”) for a period of nine months,pursuant to which the Consultant will provide investors relations services and will be entitled to a cash monthly fee of $4,000, andadditional $3,000 in the first month. In addition, the Consultant will be issued 249,000 shares of the Company in three installments overthe engagement period, commencing November 2011. F - 20 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 8 - COMMITMENTS (continued): n.Grants from Bio-JerusalemThe subsidiary is committed to pay royalties to Bio-Jerusalem fund on proceeds from future sales at a rate of 4% and up to 100% of theamount of the grant received by the Company (Israeli CPI linked). On August 31, 2011, the Subsidiary has not yet realized any revenuesfrom the said project and did not incur any royalty liability. For the year ended August 31, 2011 and for the period from inception on April 12, 2002 through August 31, 2011, the research anddevelopment expenses are presented net of Bio-Jerusalem grants, in the total amount of $52,733. o.Grants from the Chief Scientist Office ("OCS")The Subsidiary is committed to pay royalties to the Government of Israel on proceeds from sales of products in the research anddevelopment of which the Government participates by way of grants. At the time the grants were received, successful development of the related projects was not assured. In case of failure of a project that waspartly financed as above, the company is not obligated to pay any such royalties.Under the terms of the company’s funding from the Israeli Government, royalties of 3%-3.5% are payable on sales of products developedfrom a project so funded, up to 100% of the amount of the grant received by the Company (dollar linked) with the addition of annualinterest at a rate based on LIBOR.On August 31, 2011, the Subsidiary has not yet realized any revenues from the said project and did not incur any royalty liability. For the years ended August 31, 2011, and 2010, and for the period from inception on April 12, 2002 through August 31, 2011, theresearch and development expenses are presented net of OCS Grants, in the total amount of $354,906 and $350,198 and$1,100,509,respectively.As to a fourth agreement, signed after balance sheet date, see note 16a.NOTE 9 - STOCK HOLDERS’ EQUITY: The Company’s shares are traded on the Over-The-Counter Bulletin Board. The following are capital stock transactions that took place during the years ended August 31, 2011 and 2010: a.BetweenNovember 2010 and February 2011 the Company entered into Securities Purchase Agreements with a few accredited investorsfor the sale of 9,706,250 units at a purchase price of $0.32 per unit for total consideration of $3,106,000. Each unit consisted of one shareof the Company's common stock and one common stock purchase warrant. Each warrant entitles the holder to purchase 0.35 a share ofcommon stock exercisable for five years at an exercise price of $0.50 per share. See also note 10l. F - 21 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - STOCK HOLDERS’ EQUITY (continued): b.On March 31, 2011, we consummated a transaction with D.N.A for the sale of 781,250 shares of common stock and warrants to purchaseup to 273,438 shares of common stock, for a total purchase price of $250,000 in cash. The shares and warrants were sold in units at aprice per unit of $0.32, each unit consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock.The warrants have an exercise price of $0.50 per share, and a term of five years commencing from the closing of the transaction. See alsonote 5. c.In April 2011, the Company entered into Securities Purchase Agreements with nine accredited investors for the sale of 1,124,375 units ata purchase price of $0.32 per unit for total consideration of $359,800. d.In May 2011, the Company issued 176,923 shares of our common stock, valued at $47,769, in the aggregate, to Swiss as settlement of ourliability for services rendered in the past. e.As to shares issued as part of stock based compensation plan see Note 10. f.As to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note 10a. NOTE 10 - STOCK BASED COMPENSATION: On October 15, 2006, the Company’s Board of Directors adopted the 2006 Stock Option Plan (the “2006 Stock Option Plan”). On May 5, 2008, the Company’s Board of Directors adopted the 2008 Stock Option Plan (the “2008 Stock Option Plan”). Under both plans 11,000,000 shares have been reserved for the grant of options, which may be issued at the discretion of the Company’s Boardof Directors from time to time. Under these plans, each option is exercisable into one share of common stock of the Company. The options may be exercised after vesting and in accordance with vesting schedules which will be determined by the board of directors foreach grant. The maximum term of the options is 10 years. The fair value of each stock option grant is estimated at the date of grant using a Black Scholes option pricing model. The volatility is based ona historical volatility, by statistical analysis of the daily share price for past periods. The expected term is the length of time until the expecteddates of exercising the options, based on estimated data regarding employees’ exercise behavior.The following are stock options and warrants transactions made during the years ended August 31, 2011 and 2010: a.On October 30, 2006 the Company entered into a Clinical Trial Manufacturing Agreement with Swiss Caps AG, pursuant to which SwissCaps AG would manufacture and deliver the oral insulin capsule developed by the Company. In consideration for the services beingprovided to the Company by Swiss Caps AG, the Company agreed to pay a certain predetermined amounts which are to be paid incommon stocks of the Company, the number of stocks to be issued is based on the invoice received from Swiss Caps AG, and the stockmarket price 10 days after the invoice is issued. During the years ended on August 31 2011 and 2010, the Company issued 530,637 and388,724 shares of its common stock, respectively, to Swiss Caps AG as remuneration for the services provided in the amount of $167,569and $198,850, respectively. F - 22 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued): b.On November 23, 2009, 100,000 options were granted to a consultant, at an exercise price of $0.76 per share (higher than the tradedmarket price on the date of grant), the options vest in three equal annual installments commencing November 23, 2010 and expire onNovember 23, 2014. The engagement with the consultant has ended during the nine months period ended May 31, 2010. The fair valueof these options on the date of grant, was $36,662, using the Black Scholes option-pricing model and was based on the followingassumptions: dividend yield of 0% for all years; expected volatility of 123.30%; risk-free interest rates of 2.20%; and the remainingcontractual life of 5 years. The Company recorded all expenses in respect of these options during the vesting period. c.On November 23, 2009, 36,000 options were granted to an employee of the Subsidiary, at an exercise price of $0.46 per share (equivalentto the traded market price on the date of grant), the options vest in three equal annual installments commencing November 23, 2010, andexpire on November 23, 2019. The fair value of these options on the date of grant was $14,565, using the Black Scholes option-pricingmodel and was based on the following assumptions: dividend yield of 0% for all years; expected volatility of 123.55%; risk-free interestrates of 2.55%; and the remaining expected term of 6 years. d.On March 16, 2010, 13,200 options were granted to a consultant, at an exercise price of $0.43 per share (equivalent to the traded marketprice on the date of grant), the options vest in six monthly installments commencing March 30, 2010 and expire on March 15, 2015. Thefair value of these options on the date of grant, was $4,747, using the Black Scholes option-pricing model and was based on thefollowing assumptions: dividend yield of 0% for all years; expected volatility of 121.61%; risk-free interest rates of 2.37%; and theremaining expected term of 5 years. e.On March 16, 2010, 100,000 options were granted to a consultant, at an exercise price of $0.43 per share (equivalent to the traded marketprice on the date of grant), the options vest in three equal monthly installments commencing March 30, 2010 and expire on March 15,2015. The fair value of these options on the date of grant, was $35,960, using the Black Scholes option-pricing model and was based onthe following assumptions: dividend yield of 0% for all years; expected volatility of 121.61%; risk-free interest rates of 2.37%; and theremaining expected term of 5 years. f.On March 16, 2010, 50,000 options were granted to a consultant, at an exercise price of $0.50 per share (higher than the traded marketprice on the date of grant), the options vest in three equal annual installments commencing March 16, 2011 and expire on March 15,2015. The fair value of these options on the date of grant, was $17,702, using the Black Scholes option-pricing model and was based onthe following assumptions: dividend yield of 0% for all years; expected volatility of 121.61%; risk-free interest rates of 2.37%; and theremaining expected term of 5 years. g.On March 25, 2010, 100,000 options were granted to a consultant, at an exercise price of $0.50 per share (higher than the traded marketprice on the date of grant), the options vest in four equal quarterly installments commencing May 17, 2010 and expire on March 24,2015. The fair value of these options on the date of grant, was $39,051, using the Black Scholes option-pricing model and was based onthe following assumptions: dividend yield of 0% for all years; expected volatility of 121.21%; risk-free interest rates of 2.65%; and theremaining expected term of 5 years. F - 23 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued): h.On April 21, 2010, an aggregate of 1,728,000 options were granted to Nadav Kidron, the Company’s President, Chief Executive Officerand director, and Miriam Kidron, the Company’s Chief Medical and Technology Officer and director, both are related parties, at anexercise price of $0.49 per share (equivalent to the traded market price on the date of grant), 216,000 of the options vested immediatelyon the date of grant and the remainder will vest in twenty one equal monthly installments. These options expire on April 20, 2020. Thefair value of these options on the date of grant was $807,392, using the Black Scholes option-pricing model and was based on thefollowing assumptions: dividend yield of 0% for all years; expected volatility of 120.69%; risk-free interest rates of 3.77%; and expectedterm of 10 years. i.On July 8, 2010, 300,000 options were granted to a director at an exercise price of $0.48 per share (equivalent to the traded market priceon the date of grant). The options vest in three equal annual installments commencing on July 8, 2011 and will expire on July 7, 2020.The fair value of these options on the date of grant, was $123,890, using the Black Scholes option-pricing model and was based on thefollowing assumptions: dividend yield of 0% for all years; expected volatility of 117.82%; risk-free interest rates of 2.14%; and theremaining expected term of 6 years. j.On August 2, 2010, the Company issued 50,000 shares of its common stock to a third party as remuneration for services to be renderedduring the six month period commencing July 14, 2010. The fair value of these shares on the date of issuance was $21,000, whichrecorded as an expense during the service period. k.On February 15, 2011, the Company granted options under the 2008 Stock Incentive Plan to purchase up to 250,000 shares of ourcommon stock at an exercise price of $0.50 to a consultant. The options vest in five annual installments commencing February 16, 2012and expire on February 16, 2021. The initial fair value of the option on the date of grant, was $71,495, using the Black Scholes option-pricing model and was based on the following assumptions: dividend yield of 0% for all years; expected volatility of 113.80%; risk-freeinterest rates of 3.42%; and the remaining contractual life of 10 years. The fair value of the options granted is measured on a final basis atthe end of the related service period and is recognized over the related service period using the straight-line method. l.In March 2011, in connection with the securities purchase agreement, as described herein above, the Company issued 196,750 shares ofthe Company's common stock and warrants to purchase 70,864 shares of common stock to three individuals, as finders' fees. The fairvalue of the shares at the date of grant was $59,778, and the fair value of the warrants at that date was $16,253, using the Black Scholesoption-pricing model and was based on the following assumptions: dividend yield of 0% for all years; expected volatility of 113.74% -113.66%; risk-free interest rates of 2.11% - 2.19%; and the remaining expected term of 5 years. The warrants have an exercise price of$0.50 per share m.In April 2011, the Company entered into Securities Purchase Agreements with nine accredited investors for the sale of 1,124,375 units ata purchase price of $0.32 per unit for total consideration of $359,800. Each unit consisted of one share of the Company's common stockand one common stock purchase warrant. Each warrant entitles the holder to purchase 0.35 a share of common stock exercisable for fiveyears at an exercise price of $0.50 per share. The Company paid $21,588 and issued on July 2011, 67,462 warrants as finders' fee. The fairvalue of the warrants at that date was $15,211, using the Black Scholes option-pricing model and was based on the followingassumptions: dividend yield of 0% for all years; expected volatility of 113.50%; risk-free interest rates of 2.09%; and the remainingexpected term of 5 years. F - 24 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued): n.On April 27, 2011, 43,000 options were granted to ExperiMind Ltd as remuneration for services rendered at an exercise price of $0.50per share (higher than the traded market price on the date of grant). The options vested immediately on the date of grant and will expireon April 26, 2016. The fair value of these options on the date of grant, was $10,000, using the Black Scholes option-pricing model andwas based on the following assumptions: dividend yield of 0% for all years; expected volatility of 113.50%; risk-free interest rates of2.06%; and the remaining expected term of 5 years. o.In May 2011, the Company issued 200,000 shares of our common stock, valued at $60,000, in the aggregate, to New Castle Consulting,LLC as remuneration for services to be rendered during the six month period commencing May 4, 2011. The agreement was terminatedon July 2011. p.On July 25, 2011, the Company issued warrants to purchase 32,000 shares of our common stock at an exercise price of $0.50 per share toThe Trout Group, LLC as remuneration for services to be rendered during the 12 month period commencing May 13, 2011. The warrantsvest in twelve equal annual installments commencing on October 13, 2011 and will expire on July 25, 2016. The fair value of thesewarrants on the date of grant, was $7,136, using the Black Scholes option-pricing model and was based on the following assumptions:dividend yield of 0% for all years; expected volatility of 112.46%; risk-free interest rates of 1.55%; and the remaining expected term of 5years. q.As to options granted to third party, see note 8j. The fair value of each option grant is estimated on the date of grant using the Black Scholes option-pricing model with the followingassumptions: For options granted in the year ended August 31 2011 2010 Expected option life (years) 4.9-9.5 4.5-10.0 Expected stock price volatility (%) 112.5-113.8 113.1-130.5 Risk free interest rate (%) 1.6-3.4 1.3-3.9 Expected dividend yield (%) 0.0 0.0 F - 25 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued):A summary of the status of the stock options granted to employees and directors as of August 31, 2011 and 2010, and changes during the yearsended on those dates, is presented below: Year ended August 31, 2011 2010 Weighted Weighted Number average Number average of exercise of exercise options price options price $ $ Options outstanding at beginning of year 10,009,360 0.32 8,445,360 0.31 Changes during the year: Granted - at market price - 2,064,000 0.49 Expired - (500,000) 0.76 Options outstanding at end of year 10,009,360 0.32 10,009,360 0.32 Options exercisable at end of year 8,925,359 7,549,360 Weighted average fair value of options granted during the year - $0.46 Costs incurred in respect of stock based compensation for employees and directors, for the years ended August 31, 2011 and 2010 were$529,326 and $690,882, respectively. F - 26 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued):The following table presents summary information concerning the options granted to employees and directors outstanding as of August 31,2011: Weighted Average Weighted Range of Remaining average exercise Number Contractual exercise Aggregate prices outstanding Life price intrinsicvalue $ Years $ $ 0.001 3,361,360 0.95 0.001 971,433 0.40 to 0.62 6,648,000 4.31 0.32 - 10,009,360 3.18 0.21 971,433 The following table presents summary information concerning the options granted to employees and directors exercisable as of August 31,2011: Weighted Average Weighted Range of Remaining average exercise Number Contractual exercise Aggregate prices exercisable Life price intrinsicvalue $ Years $ $ 0.001 3,361,360 0.95 0.001 971,433 0.40 to 0.62 5,563,999 3.82 0.49 - 8,925,359 2.74 0.30 971,433 As of August 31, 2011, there were $98,931 unrecognized compensation costs related to non-vested employees and directors ,to be recordedover the next 23 months. F - 27 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued):A summary of the status of the stock options granted to non-employees as of August 31, 2011, and changes during the years ended on this date,is presented below: Year ended August 31 2011 2010 Weighted Weighted Number average Number average of exercise of exercise options price options price $ $ Options outstanding at beginning of year 813,200 0.63 1,200,000 0.68 Changes during the year: Granted - at market price - 113,200 0.43 Granted - at an exercise price above market price 325,000 0.50 250,000 0.60 Expired (150,000) (0.71) (750,000) (0.64)Options outstanding at end of year 988,200 0.60 813,200 0.63 Options exercisable at end of year 606,200 313,200 The Company recorded stock compensation of $26,733 and $116,944 during the years ended August 31, 2011 and 2010 respectively, related toconsulting services.The following table presents summary information concerning the options granted to non-employees outstanding as of August 31, 2011: Weighted Average Weighted Range of Remaining average exercise Number Contractual exercise Aggregate prices outstanding Life price intrinsic value $ Years $ $ 0.40 to 0.62 588,200 6.22 0.49 - 0.76 to 0.90 400,000 5.83 0.76 - 988,200 6.06 0.60 - F - 28 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - STOCK BASED COMPENSATION (continued): The following table presents summary information concerning the options granted to non-employee exercisable as of August 31, 2011: Weighted Average Weighted Range of Remaining average exercise Number Contractual exercise Aggregate prices exercisable Life price intrinsic value $ Years $ $ 0.40 to 0.62 272,867 3.73 0.47 - 0.76 to 0.90 333,333 6.75 0.76 - 606,200 5.39 0.63 - As of August 31, 2011 there were $66,758 unrecognized compensation costs related to non-vested non-employees, to be recorded over the next59 months. NOTE 11 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Year ended August 31, 2011 2010 Service providers $339,052 $381,522 Payroll and related expenses 36,486 29,808 $375,538 $411, 330 NOTE 12 - RESEARCH AND DEVELOPMENT EXPENSES: Period fromApril 12, 2002 (inception) Year ended through August 31, August 31, 2011 2010 2011 Clinical trials $591,733 $905,206 $3,865,043 Payroll and consulting fees 413,191 402,145 1,535,887 Costs for registration of patents 189,342 32,992 340,799 Compensation costs in respect of optionsgranted to employees, directors andconsultants 265,327 341,203 2,823,193 Other 49,622 132,538 387,436 Less - grants from the OCS (354,906) (350,198) (1,100,509) $1,159,309 $1,463,886 $7,851,849 F - 29 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 13 - GENERAL AND ADMINISTRATIVE EXPENSES Period fromApril 12, 2002 (inception) Year ended through August 31 August 31, 2011 2010 2011 Compensation costs in respect of optionsgranted to employees, directors andconsultants $263,999 $466,623 $1,876,936 Professional services 344,277 322,447 1,678,526 Consulting fees 171,167 159,919 811,764 Travel costs 54,976 67,543 474,401 Write off of debt 275,000 Business development 151,886 151,517 531,046 Payroll and related expenses 174,229 159,485 609,107 Insurance 23,958 23,958 96,546 Other 91,536 157,175 605,057 $1,275,960 $1,508,667 $6,958,383 NOTE 14 - TAXES ON INCOME:Taxes on income included in the consolidated statements of operations represent current taxes due to taxable income of the US Company andits subsidiary. a.Corporate taxation in the U.S.The applicable corporate tax rate for the Company is 35%.As of August 31, 2011, the Company has an accumulated tax loss carryforward of approximately $3,468,280 (August 31, 2010approximately $3,979,276). Under USA tax laws, carryforward tax losses expire 20 years after the year in which it incurred, in the case ofthe Company the net loss carryforward will expire in the years 2025 through 2028. b.Corporate taxation in Israel:The Subsidiary is taxed in accordance with Israeli tax laws. The regular corporate tax rate in Israel for 2011 is 24%.On July 23, 2009, the Economic Efficiency (Legislation Amendments to the Implementation of the Economic Plan for the Years 2009and 2010) Law, 2009 (hereinafter - the 2009 Amendment) was published in the Official Gazette. Inter alia, the 2009 Amendmentprovides for a further gradual reduction of the corporate tax rate in tax years 2010 and thereinafter, as follows: 2010 -25%, 2011 - 24%,2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20% and 2016 and thereinafter - 18%. As of August 31, 2011, the Subsidiary has an accumulated tax loss carryforward of approximately $3,328,946 (August 31, 2010approximately $2,664,091). F - 30 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 14 - TAXES ON INCOME (continued):Deferred income taxes: August 31 2011 2010 In respect of: Net operating loss carryforward 1,813,108 $1,978,850 Less - Valuation allowance (1,813,108) (1,978,850)Net deferred tax assets -,- -,- Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporarydifferences and carryforwards are expected to be available to reduce taxable income. As the achievement of required future taxableincome is uncertain, the Company recorded a full valuation allowance. c.Loss before taxes on income and income taxes included in the income statements of operations: Period fromApril 12, 2002 (inception) Year ended through August 31 August 31, 2011 2010 2011 Loss before taxes on income: U.S. 415,836 $453,676 8,003,638 Outside U.S. 1,169,389 2,508,729 6,555,265 $1,585,225 $2,962,405 $14,558,903 Taxes on income: Current: U.S. (33,567) 13,107 36,003 Outside U.S. 9,587 1,864 114,555 $(23,979) $14,971 $150,558 F - 31 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 14 - TAXES ON INCOME (continued): d.Reconciliation of the statutory tax benefit to effective tax expenseFollowing is a reconciliation of the theoretical tax expense, assuming all income is taxed at the regular tax rates applicable to companiesin U.S., and the actual tax expense: Period fromApril 12, 2002 (inception) Year ended through August 31 August 31, 2011 2010 2011 Loss before income taxes as reported in the consolidated statement of operations $(1,585,225) $(2,962,405) $(14,396,741)Statutory tax benefit (554,829) (1,036,842) (5,038,860)Increase (decrease) in income taxes resulting from: Change in the balance of the valuation allowance for deferred tax losses (58,357) 576,939 2,241,126 Disallowable deductions 481,122 211,304 2,123,935 Increase in taxes resulting from different tax rates applicable to non U.S. subsidiary 132,064 248,599 686,303 Uncertain tax position (23,980) 14,971 138,054 Taxes on income for the reported year $(23,980) $14,971 $150,558 e.Uncertainty in Income Taxes ASC740 requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome ofeach tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of theeffective tax rate and consequently, affect the operating results of the Company. The Company recognizes interest and penalties relatedto its tax contingencies as income tax expense. As of August 31, 2011 and 2010, the Company recorded $34,105 and $65,151,respectively, of penalties related to tax contingencies.The following table summarizes the activity of the Company unrecognized tax benefits: Year ended August 31 2011 2010 Balance at Beginning of Year $162,034 $147,063 Increase (decrease) in tax positions for prior years (23,980) 14,971 Balance at End of Year 138,054 $162,034 F - 32 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 14 - TAXES ON INCOME (continued): The Company does not expect unrecognized tax expenses to change significantly over the next 12 months. The Company is subject to Israeli income tax examinations and to U.S. Federal income tax examinations for the tax years of 2002through 2009. As of August 31, 2010, the Company did not record any change to its unrecognized tax benefits.NOTE 15 - RELATED PARTIES - TRANSACTIONS: a.During the fiscal years of 2011 and 2010 the Company paid to directors $30,000 and $19,500, respectively, for managerial services. b.As to the agreements with Hadasit, see note 8a. c.On July 1, 2008, the subsidiary entered into a consulting agreement with KNRY Ltd. (“KNRY”), an Israeli company owned by NadavKidron, whereby Mr. Nadav Kidron, through KNRY, will provide services as President and Chief Executive Officer of both Oramed andthe subsidiary (the “Nadav Kidron Consulting Agreement”). Additionally, on July 1, 2008, the subsidiary entered into a consultingagreement with KNRY whereby Dr. Miriam Kidron, through KNRY, will provide services as Chief Medical and Technology Officer ofboth Oramed and the subsidiary (the “Miriam Kidron Consulting Agreement” and together with the Nadav Kidron ConsultingAgreement, the “Consulting Agreements”). The Consulting Agreements replaced the employment agreements entered into between theCompany and KNRY, dated as of August 1, 2007, pursuant to which Nadav Kidron and Miriam Kidron, respectively, provided services toOramed and the subsidiary. The Consulting Agreements are both terminable by either party upon 60 days prior written notice. The Consulting Agreements providethat KNRY (i) will be paid, under each of the Consulting Agreements, in New Israeli Shekels (“NIS”) a gross amount of NIS50,400 permonth (as of August 31, 2011 the monthly payment in the Company's functional currency is $14,165) and (ii) will be reimbursed forreasonable expenses incurred in connection with performance of the Consulting Agreements. d.As to options granted to related parties, see note 10i. e.According to the JV agreement (note 5), Entera rented office space and services from the subsidiary of the Company for a period of up to24 months commencing August 19, 2010, for a non-refundable, up-front fee in the amount of $36,000. The rent period ended on March31, 2011, when the JV agreement was terminated. f.According to the JV agreement (note 5), the subsidiary of the Company provided accounting services to Entera at a monthly fee in theamount of NIS 3,500 ($984). These services were ceased on March 31, 2011, when the JV agreement was terminated. g.Balances with related parties: August 31 2011 2010 Current assets - related parties - Entera - 7,689 Accounts payable and accrued expenses - KNRY 18,502 22,773 F - 33 ORAMED PHARMACEUTICALS INC.(A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 16 - SUBSEQUENT EVENTS a.On September 11, 2011, the Company entered into a fourth agreement with Hadasit, Dr. Miriam Kidron and Dr. Daniel Scurr ("the FourthAgreement"), to retain consulting and clinical trial services. According to the Fourth Agreement, Hadasit will be entitled to aconsideration of $200,000 to be paid by Oramed. b.As part of the share purchase agreement, as described in note 5, on November 14, 2011, D.N.A. paid the said promissory note . c.On October 30, 2011 The Israeli government has agreed to a initial acceptance of the recommendations noted in the tax chapter of thereport issued by the "committee toward an economical change" (i.e Trachtenberg Committee) which were handed to the government onSeptember 26, 2011 (hereby "government's decisions").Within these decisions the government has decided, among other things, that Corporate tax rate be a constant 25% in 2012, substitutingthe former decisions of a contestant declining rate which would reach 18% by 2016. Corporate taxes rates will be reconsidered no earlierthan 2014, with correspondence to further economic and fiscal conditions.The legislation bill has not yet matured to a formal legislation. Therefore the current changes mentioned above have no implication on the tax liability measurement in these consolidated reports forAugust 31 , 2011. F - 34 (a)(2) Financial Statements SchedulesWe do not have any financial statement schedules required to be supplied under this Item.(a)(3) ExhibitsRefer to (b) below.(b) Exhibits:3.1 Certificate of Incorporation (incorporated by reference from our current report on Form 8-K filed March 14, 2011). 3.2 Bylaws (incorporated by reference from our Current Report on Form 8-K filed on March 14, 2011). 3.3 Articles of Merger filed with the Nevada Secretary of State on March 29, 2006 (incorporated by reference to our Current Report on Form 8-K filed onApril 10, 2006). 3.4 Articles of Conversion filed with the Nevada Secretary of State on March 8, 2011 (incorporated by reference to our Current Report on Form 8-K filedon March 14, 2011). 3.5 Certificate of Conversion filed with the Delaware Secretary of State on March 8, 2011 (incorporated by reference to our Current Report on Form 8-Kfiled on March 14, 2011). 4.1 Specimen Stock Certificate (incorporated by reference from our Registration Statement on Form S-1, filed on March 25, 2011). 4.2 Form of Warrant Certificate (incorporated by reference from our current report on Form 8-K filed June 18, 2007) 53 10.1 Form of Securities Purchase Agreement for February 6, 2006 private placement (incorporated by reference from our current report on Form 8-K filedFebruary 6, 2006). 10.2 Agreement between us and Hadasit Medical Services and Development Ltd. dated February 17, 2006 concerning the acquisition of U.S. patentapplication 60/718716 (incorporated by reference from our current report on Form 8-K filed February 17, 2006). 10.3 Consulting Agreement between us and Dr. Miriam Kidron (incorporated by reference from our current report on Form 8-K filed February 17, 2006). 10.4 Agreement between us and Swiss Caps Ag dated October 30, 2006 (incorporated by reference from our current report on Form 8-K filed October 26,2006). 10.5 Stock Option Plan dated October 15, 2006 (incorporated by reference from our current report on Form 8-K filed on November 28, 2006). 10.6 Stock Option Agreement dated November 23, 2006 (incorporated by reference from our current report on Form 8-K filed on November 28, 2006). 10.7 Form of Subscription Agreement and Warrant Certificate (incorporated by reference from our current report on Form 8-K filed on June 18, 2007). 10.8 Form of Shares for Services Agreement (incorporated by reference from our current report on Form 8-K filed on August 3, 2007). 10.9 Master Services Agreement dated January 29, 2008 between us and OnQ Consulting (incorporated by reference from our current report on Form 8-Kfiled on February 1, 2008). 10.10 Consulting Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July 1, 2008 for the services of Nadav Kidron (incorporatedby reference from our current report on Form 8-K filed on July 2, 2008). 10.11 Consulting Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July 1, 2008 for the services of Miriam Kidron (incorporatedby reference from our current report on Form 8-K filed on July 2, 2008). 10.12 Oramed Pharmaceuticals Inc. 2008 Stock Incentive Plan (incorporated by reference from our current report on Form 8-K filed on July 2, 2008). 10.13 Form of Notice of Stock Option Award and Stock Option Award Agreement (incorporated by reference from our current report on Form 8-K filed onJuly 2, 2008). 10.14 Form of Stock Purchase Agreement (incorporated by reference from our current report on Form 8-K filed on July 15, 2008). 10.15 Employment Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and Yifat Zommer (incorporated by reference from our currentreport on Form 8-K filed on April 22, 2009). 10.16 Indemnification Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and Yifat Zommer (incorporated by reference from our currentreport on Form 8-K filed on April 22, 2009). 10.17 Agreement dated April 22, 2009, between Oramed Ltd. and ADRES Advanced Regulatory Services Ltd. (incorporated by reference from our currentreport on Form 8-K filed April 22, 2009). 10.18 Agreement dated July 8, 2009, between our company and Hadasit Medical Services and Development Ltd. (incorporated by reference from ourcurrent report on Form 8-K filed July 9, 2009). 10.19 Agreement dated January 7, 2009, between our company and Hadasit Medical Services and Development Ltd. (incorporated by reference from ourcurrent report on Form 8-K filed January 7, 2009). 10.20 Agreement dated June 1, 2010, between Oramed Ltd. and Laser Detect Systems Ltd. (incorporated by reference from our quarterly report on Form 10-Q filed July 14, 2010). 54 10.21 Manufacturing Supply Agreement dated July 5, 2010, between Oramed Ltd. and Sanofi-Aventis Deutschland GMBH (incorporated by reference fromour current report on Form 8-K filed July 14, 2010). 10.22 Securities Purchase Agreement, between Oramed Pharmaceuticals Inc. and Attara Fund, Ltd., dated as of December 21, 2010 (incorporated byreference from our current report on Form 10-Q filed January 13, 2011). 10.23 Common Stock Purchase Warrant issued to Attara Fund, Ltd. on January 10, 2011 (incorporated by reference from our current report on Form 10-Qfiled January 13, 2011). 10.24 Share Purchase Agreement dated February 22, 2011, between Oramed Ltd. and D.N.A Biomedical Solutions Ltd. (incorporated by reference from ourRegistration Statement on Form S-1, filed on March 25, 2011). 10.25 Patent Transfer Agreement dated February 22, 2011, between Oramed Ltd. and Entera Bio Ltd. (incorporated by reference from our RegistrationStatement on Form S-1, filed on March 25, 2011). 10.26 Form of Securities Purchase Agreement used in 2010-2011 private placement round (incorporated by reference from our Registration Statement onForm S-1, filed on March 25, 2011). 10.27 Form of Common Stock Purchase Warrant used in 2010-2011 private placement round (incorporated by reference from our Registration Statementon Form S-1, filed on March 25, 2011). 10.28 Form of Indemnification Agreements dated March 11, 2011, between our company and each of our directors and officers (incorporated by referencefrom our definitive proxy statement on Schedule 14A filed on January 31, 2011). 23.1* Consent of Kesselman & Kesselman, Certified Public Accountants. 23.2* Consent of MaloneBailey, LLP, Certified Public Accountants. 31.1* Certification Statement of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification Statement of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification Statement of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act Of 2002. _____________* Filed herewith 55 SIGNATURESPursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signedon its behalf by the undersigned, thereunto duly authorized.ORAMED PHARMACEUTICLAS INC./s/ NADAV KIDRONNadav Kidron,President and Chief Executive Officer(principal executive officer) /s/ YIFAT ZOMMERYifat Zommer,Chief Financial Officer(principal accounting officer)Date: November 28, 2011Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated on November 28, 2011. /s/ NADAV KIDRONNadav Kidron,President and Chief Executive Officer and Director /s/ MIRIAM KIDRONMiriam Kidron,Chief Medical and Technology Officer and Director /s/ LEONARD SANKLeonard Sank,Director /s/ HAROLD JACOBHarold Jacob,Director/S/ MICHAEL BERELOWITZMichael Berelowitz,Director 56 Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-163919)of Oramed Pharmaceuticals, Inc. of ourreport dated November 28, 2011 relating to the financial statements which appears in this Form 10-K. /s/ Kesselman & Kesselman,Tel Aviv, IsraelNovember 28, 2011Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference of our report dated December 10, 2007 relating to the inception through August 31, 2007 auditedfinancial statements of Oramed Pharmaceuticals, Inc. which appears in this Annual Report on Form 10-K for that period in the Registration Statement onForm S-8 no. (333-164288). /s/ MaloneBailey, LLP MaloneBailey, LLPwww.malone-bailey.comHouston, Texas November 29, 2011 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Nadav Kidron, certify that: 1. I have reviewed this Annual Report on Form 10-K of Oramed Pharmaceuticals Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e) and internal controls over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant 's internal control over financial reporting; and 5. the registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: November 28, 2011By: /s/ Nadav Kidron Nadav Kidron President and Chief Executive Officer EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Yifat Zommer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Oramed Pharmaceuticals Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e) and internal controls over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting. Date: November 28, 2011By: /s/ Yifat Zommer Yifat Zommer Chief Financial Officer EXHIBIT 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERAND PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18,UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each ofthe undersigned officers Oramed Pharmaceuticals Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that theAnnual Report for the fiscal year ended August 31, 2011 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition andresults of operations of the Company. Dated: November 28, 2011/s/ Nadav Kidron Nadav Kidron, President and Chief Executive Officer Dated: November 28, 2011/s/ Yifat Zommer Yifat Zommer, Chief Financial Officer A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff upon request. 

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