UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





(Mark
One)


x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE


ACT
OF 1934





For
the Fiscal Year Ended August 31, 2009





 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the transition period from _________ to __________





Commission
file number: 000-50298





ORAMED
PHARMACEUTICALS, INC.


(Exact
name of registrant as specified in its charter)





Nevada
                  
                  98-0376008(State
      or other jurisdiction of
                    incorporation
      ororganization)
                  
                  (IRS
      Employer Identification
                    No.)





Hi-Tech
Park 2/5


Givat-Ram


PO
Box 39098


Jerusalem
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:  None





Securities registered pursuant to
Section 12(g) ofthe 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 ̈Nox  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 ̈Nox  Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 YesxNo ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required 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 shorter period that the
registrant was required to submit and post such files.
 Yes ̈No ̈
  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 amendment to 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 ̈
              Accelerated filer ̈Non-accelerated filer ̈
              Smaller reporting companyx(Do not check if a smaller reporting company)
 
 Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act) Yes ̈Nox
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by referenceto
the average bid and asked price of such common equity, as of the last business
day of the registrant’s most
recently completed second fiscal quarter.$9,534,674 based on a
price of $0.25, 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
recently completed 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: 57,026,597 shares issued and
outstanding as of November 23, 2009.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None.
  
  ORAMED
PHARMACEUTICALS, INC.
 
 FORM
10-K
 
 TABLE
OF CONTENTS
 
 PART
      I
                  
                  
                  1ITEM
      1 - BUSINESS
                  
                  
                  1ITEM
      1A – RISK FACTORS
                  
                  
                  15ITEM
      2 – PROPERTIES
                  
                  
                  25ITEM
      3 - LEGAL PROCEEDINGS
                  
                  
                  25ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                  
                  
                  25PART
      II
                  
                  
                  26ITEM
      5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES
                  
                  
                  26ITEM
      6 – SELECTED
      FINANCIAL DATA
                  
                  
                  28ITEM
      7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS
                  
                  
                  28ITEM
      8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                  
                  
                  F-36ITEM
      9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
                  
                  
                  64ITEM
      9A(T) – CONTROLS AND PROCEDURES
                  
                  
                  64ITEM
      9B – OTHER INFORMATION
                  
                  
                  65PART
      III
                  
                  
                  66ITEM
      10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
                  
                  
                  66ITEM
      11 - EXECUTIVE COMPENSATION
                  
                  
                  69ITEM
      12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
                  
                  
                  75ITEM
      13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                  
                  
                  77ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
                  
                  
                  77
  
  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 Results of 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 identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Annual Report 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 can only be based on facts and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the heading “Risks Related 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 on these
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 any
forward-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 urged
to carefully review and consider the various disclosures made throughout the
entirety of this Annual Report on Form 10-K which attempt to advise interested
parties 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 “Investor Information/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 to those reports as soon
as reasonably practicable after we electronically file such materials with or
furnish them to the SEC. Our website address is www.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, DC 20549.  You can obtain additional
information about the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330. In addition, the SEC maintains an internet site (www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically 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., unless otherwise indicated.
  1
  DESCRIPTION
OF BUSINESS
 
 General
 
 We are a
pharmaceutical company engaged in the research and development of innovative
pharmaceutical solutions, including an orally ingestible insulin capsule or
tablet to be used for the treatment of individuals with diabetes, rectal
application of insulin, use of oral ingestible capsules or tablets for delivery
other polypeptides and use of rectal application for delivery of other
polypeptides.
 
 Oral
Insulin:Oramed
is seeking to revolutionize the treatment of diabetes through its proprietary
flagship product, an orally ingestible insulin capsule (ORMD0801) currently in
Phase 2 clinical trials. The Company’s 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 by 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 the stomach 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 in the formulation
process must not modify chemically or biologically, and the insulin and the
dosage form must be safe to ingest.
 
 The
Company’s 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. The Company’s studies have
confirmed the feasibility of lowering blood glucose levels within an orally
administered form of insulin that is both safe and effective.
 
 The
Company's 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 absorbed into cells, where the sugar is converted 
into energy needed for daily life. The cause of diabetes is attributed both to
genetics and environmental factors such as obesity and lack of exercise appear
to play roles.
 
 An
estimated 177 million people are suffering from diabetes worldwide. According to
the American Diabetes Association, there are 23.6 million children and adults in
the United States, or 7.8% of the population, who have diabetes. While an
estimated 17.9 million have been diagnosed with diabetes, unfortunately, 5.7
million people (or nearly one quarter) are unaware that they have the
disease.
 
 Intellectual
Property: The Company owns a portfolio of patents and patent applications
covering its technologies and is aggressively protecting these technology
developments on a worldwide basis.
 
 Management: We are led by a
highly-experienced management team knowledgeable in the treatment of diabetes.
The Company’s Chief Medical and Technology Officer, Miriam Kidron, PhD, is a
world-recognized pharmacologist and a biochemist and the innovator primarily
responsible for our Oral Insulin technology development and
know-how.
  2
 
 Scientific
Advisory Board: Our management team has access to our internationally
recognized Scientific Advisory Board whose members are thought-leaders in their
respective areas. The Advisory Board comprises of Dr. Nir Barzilai, Professor
Ele Ferrannini, Professor Avram Hershko, and Dr. Derek LeRoith.
 
 Strategy
 
 We plan
to continue to conduct clinical trials to show the effectiveness of our
technology.  We intend to conduct studies and other tests 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 and South Africa, in order to substantiate our
results as well as for purposes of future filings for drug approval in these
countries. We also plan to conduct further research and development by deploying
our proprietary drug delivery technology for the delivery of other polypeptides
in addition to insulin, and to develop other innovative pharmaceutical products,
flu vaccines, and use of rectal application for delivery of other
polypeptides.
 
 If our
oral insulin capsule or other drug delivery solutions show significant promise
in clinical trials, we plan to ultimately seek a strategic commercial partner,
or partners, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs. We
anticipate such partner or partners would be responsible for, or substantially
support, late stage clinical trials (Phase III) to ensure regulatory approvals
and registrations in the appropriate markets in a timely manner. We further
anticipate that such partner, or partners, 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. We have not yet engaged in any
meaningful discussions with potential partners and no assurance can be given
that any third party would be interested in partnering with us. Under certain
circumstances, we may determine to develop one or more of our oral dosage form
on our own, either world-wide or in select territories.
 
 In
addition to developing our own oral dosage form drug portfolio, we are, on an
on-going basis, considering in-licensing and other means of obtaining additional
technologies to complement and/or expand our current product portfolio. Our goal
is to create a well-balanced product portfolio that will enhance and compliment
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 to assess both the safety/tolerability and
absorption properties of our proprietary oral insulin. Based on the
pharmacokinetic and pharmacologic outcomes of these trials, we decided to
continue the development of our oral insulin product.
  3
  On
November 15, 2007, we successfully completed animal studies in preparation for
the Phase 1B clinical trial of our oral insulin capsule (ORMD 0801).  On
January 22, 2008, we commenced the non-FDA approved Phase 1B clinical trials
with our oral insulin capsule, in healthy human volunteers 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 (ORMD 0801) in Type II 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 (ORMD
0801) on Type I 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 which ADRES will provide services for the purpose of
filing anIND application with the FDA for a Phase 2 study according to theFDA requirements. The FDA
approval 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 insulin capsule (ORMD 0801) on
Type II diabetic volunteers. We are considering whether and when to conduct an
additional non-FDA approved Phase 2B study in India.
 
 Rectal
Application of Insulin and Other Polypeptides:We filed two additional
provisional patents for a suppository application to our technology portfolio.
The first patent focuses on a rectal application for insulin. The second patent
focuses on the usage of this rectal application to other polypeptides that at
present are only available in injection.
 
 On
January 30, 2008, we entered into a master service agreement with OnQ
Consulting; a clinical research organization located in Johannesburg, South
Africa, to conduct non FDA approved clinical trials for the rectal application
of insulin.  On February 4, 2009, we announced that we had concluded a
proof of concept study of the insulin suppositories.
 
 On
October 23, 2008 we commenced a non-FDA approved Phase 1A study to evaluate the
safety and efficacy of our insulin suppository (ORMD 0802) on healthy
volunteers, in South Africa.
 
 As
we believe that the potential commercial market for our oral insulin products
are significantly greater than the potential commercial market for our rectal
application products, we have determined to use our limited resources to
research and develop our oral insulin capsules and tablets and have temporarily
suspended our development of our recital application products.
  4
  GLP1
Analog: On September 16, 2008 we announced the launch of pre-clinical
trials of ORMD 0901, a GLP1-analog.  The pre-clinical trials include animal
studies which suggest that the GLP-1analog (exenatide -4) when combined
with Oramed’s absorption promoters is absorbed through the gastrointestinal
tract and retains its biological activity.
 
 On September 9, 2009, wereceived approval from the Institutional Review Board (IRB) in Israel to
commence human clinical trials of an oral GLP-1 Analog. The approval was granted
after successful pre-clinical results were reported. The trials will be
conducted on healthy volunteers at Hadassah University Medical Center in
Jerusalem.
 
 Glucagon-like
peptide-1 (GLP-1) is an incretin hormone - a type of gastrointestinal hormone
that stimulates the secretion of insulin from the pancreas. The incretin concept
was hypothesized when it was noted surprisingly that glucose ingested by mouth
(oral) stimulated two to three times more insulin release than 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, and increase 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.
 
 Raw Materials:Our oral insulin capsule is currently manufactured by Swiss Caps AG,
under a Clinical Trail Manufacturing Agreement. The raw materials required for
the manufacturing of the capsule are purchased from third parties, under
separate agreements.   We generally depend upon a limited
number of suppliers for the raw materials.  Although alternative sources of
supply for these materials are generally available, we could incur significant
costs and disruptions in changing suppliers.  The termination of our
relationships with our suppliers or the failure of these suppliers to meet our
requirements for raw materials on a timely and cost-effective basis could
materially adversely affect our business, prospects, financial condition and
results of operations.
 
 Patents
and Licenses
 
 The
following patent applications and provisional patent application are pending
with the United States Patent and Trademark Office (PTO):
 
 ·
              PCT/IL2006/001019, “Methods
      and Compositions for Oral Administration of Proteins”. The patent
      application was filed on August 31,
2006.
 
 ·
              11/513,343, “Methods and
      Compositions for Oral Administration of Proteins”. The patent
      application was filed on August 31,
2006.
 
 ·
              60/064,779,“Methods and Compositions for
      Oral Administration of Proteins”. The patent application was filed
      on March 26, 2008.
 
 ·
              PCT/IL2008/000546,“Methods and Compositions for
      Rectal Application for Insulin”. The patent application was filed
      on April 27, 2008.
 
 ·
              PCT/IL2008/000547,“Methodsand Compositions for Rectal
      Application for Insulin”. The patent application was filed on April
      27, 2008.
 
 ·
              61/071,538,“Methods and Compositions for
      Oral Administration of Exenatide”. The patent
      application was filed on May 5,
2008.
  5
 
 ·
              61/089,812,“Methods and Compositions for
      Oral Administration of Proteins”. The patent
      application was filed on August 18,
2008.
 
 Consistent
with our strategy to seek protection in key markets worldwide, we have been and
will continue to pursue the patent applications and corresponding foreign
counterparts of such applications.  We believe that our success will depend
on our ability to obtain patent protection for our intellectual
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 continuations in part as
  appropriate;
 
 ·
              Protect technological
      developments at various levels, in a complementary manner, including the
      base technology, as well as specific applications of the technology;
      and
 
 ·
              Establish comprehensive coverage
      in the U.S. and in all relevant foreign markets in anticipation of future
      commercialization opportunities.
 
 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 filed by 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 that have 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 the patents
and other proprietary rights held or licensed by us. Furthermore, there can be
no assurance that others have not developed or will not develop similar
products, 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 States are
maintained in secrecy for the initial period of time following filing, we also
cannot be certain that others did not first file applications for inventions
covered 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 our employees,
consultants, contractors, manufacturers, outside scientific collaborators and
sponsored researchers, board of directors, technical review board and other
advisors to execute confidentiality agreements upon the commencement of
employment or consulting relationships with us. These agreements provide that
all confidential information developed or made known to the individual during
the course of the individual's relationship with us is to be kept confidential
and not disclosed to third parties except in specific limited circumstances. We
also require signed confidentiality or material transfer agreements from any
company that is to receive our confidential information. In the case of
employees, consultants and contractors, the agreements provide that all
inventions conceived by the individual while rendering services to us shall be
assigned to us as the exclusive property of our company. There can be no
assurance, 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 would
have adequate remedies for any breach, or that our trade secrets or unpatentable
know-how will not otherwise become known or be independently developed by
competitors.
  6
 
 Our
success will also depend in part on our ability to commercialize our technology
without infringing the proprietary rights of others. No assurance can be given
that patents do not exist or could not be filed which would have an adverse
affect on our ability to market our technology or maintain our competitive
position with respect to our technology. If our technology components, products,
processes or other subject matter are claimed under other existing 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 be obtained on commercially
reasonable terms. Furthermore, the failure to either develop a commercially
viable alternative or obtain such licenses could result in 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 affect on our business, financial condition and results of
operations. If we are required to defend ourselves against charges of patent
infringement or to protect our proprietary rights against third parties,
substantial costs will be incurred regardless of whether we are successful. Such
proceedings are typically protracted with no certainty of success. An adverse
outcome could subject us to significant liabilities to third parties and force
us to curtail or cease our 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 March
8, 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 currently manufactures the oral
insulin capsule developed by the Company.
 
 During
January and April 2008, we entered into agreements with OnQ consulting, a
clinical research organization (“CRO”) located in Johannesburg, South Africa, to
conduct non-FDA Phase 1B and 2B clinical trials on our oral insulin capsules and
suppository in South Africa.
 
 During
April 2008, we entered into a five year master services agreement with SAFC, an operating division of
Sigma-Aldrich, Inc., pursuant to which SAFC is providing services for individual
projects, which may include 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 development services.
 
 On
September 8, 2008, we entered into Clinical Research Agreement with ETI Karle
Clinical Pvt. Ltd. (“ETI”), pursuant to which ETI will be conducting non-FDA
Phase 2A and 2B clinical trials of our oral insulin capsule in
India.
  7
 
 On April 21, 2009, we entered into
a consulting service agreement with ADRES, pursuant to which ADRES will provide
services for the purpose of filing anIND application with the FDA for a Phase 2 study in accordance withFDA requirements. The FDA
approval 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 Medical Center in
Jerusalem.
 
 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, we need to go through a
different regulatory process in each country in which we apply for such
approval. In some cases information gathered during the approval process in one
country can be used as supporting information for the approval process in
another country. 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 prior to their
marketing or introduction to the general public. Clinical testing, known as
clinical trials or
clinical studies, is
either conducted internally by life science, 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 we describe 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 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. The protocol 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.
  8
  Institutional Review Board.
An institutional review board is an independent committee of professionals and
lay persons which reviews clinical research studies involving human beings and
is required to adhere to guidelines issued by the FDA. The institutional review
board does not report to the FDA, 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 review board. 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, the advertisements which the company or contract research
organization conducting the study proposes to use to recruit participants, and
the form of consent which 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 III testing.  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 six months
      to a year.
 
 ·
              Phase II. Phase II
      trials involve testing up to 200 participants at a time who may suffer
      from the targeted disease or condition. Phase II testing 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 or
      condition.  Phase II testing also involves determining acceptable
      dosage levels of the drug.  If Phase II studies show that a new drug
      has an acceptable range of safety risks and probable effectiveness, a
      company will 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. The purpose 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 at
      multiple 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 completion of Phase III studies, assuming the sponsor of a potential product
in the United States believes it has sufficient information to support the
safety and effectiveness of its product, it submits an NDA to the FDA requesting
that the product be approved for marketing. The application is a comprehensive,
multi-volume filing that includes the results of all clinical studies,
information about the drug’s composition, and the sponsor’s plans for producing,
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 18 months. 
Once approved, drugs and other products may be marketed in the United States,
subject to any conditions imposed by the FDA.
  9
  Phase IV.  The FDA may
require that the sponsor conduct additional clinical trials following new drug
approval. The purpose of these trials, known as 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 has increased its reliance on
these trials. Phase IV studies usually involve thousands of participants. Phase
IV studies also may be initiated by the company sponsoring 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 safety of new forms of drug delivery for
approved drugs. Examples may be using an inhalation spray versus taking tablets
or a sustained-release form of medication versus 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 the severity of the
illness in question, the availability of alternative treatments, and the risks
and benefits demonstrated in the clinical trials.
 
 Other
Regulations
 
 Various
Federal and state laws, regulations, and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals, 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, among others, the United States Atomic
Energy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and
Health Act, the National Environmental Policy 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 extent of
governmental regulation which might result from future legislation or
administrative action cannot be accurately predicted.
 
 Competition
 
 Competition
in General
 
 Competition in the area of biomedical
and pharmaceutical research and development is intense and significantly depends
on scientific and technological factors. These factors include the availability
of patent and other protection for technology and products, the ability to
commercialize technological developments and the ability to obtain governmental
approval for testing, manufacturing and marketing. Our competitors include major
pharmaceutical, medical products, chemical and specialized biotechnology
companies, many of which have financial, technical and marketing resources
significantly greater than ours. In addition, many biotechnology companies have
formed collaborations with large, established companies to support research,
development and commercialization of products that may be competitive with ours.
Academic institutions, governmental agencies and other public and private
research organizations are also conducting research activities and seeking
patent protection and may commercialize products on their own or through joint
ventures. We are aware of certain other products manufactured or under
development by competitors that are used for the treatment of the diseases and
health conditions that we have targeted for product development. We can provide
no assurance that developments by others will not render our technology obsolete
or noncompetitive, that we will be able to keep pace with new technological
developments or that our technology will be able to supplant established
products and methodologies in the therapeutic areas that are targeted by us. The
foregoing factors could have a material adverse affect on our business,
prospects, financial condition and results of operations. These companies, as
well as academic institutions, governmental agencies and private research
organizations, also compete with us in recruiting and retaining highly qualified
scientific personnel and consultants.
  10
 
 Competition within our sector is
increasing, so we will encounter competition from existing firms that offer
competitive solutions in diabetes treatment solutions. These competitive
companies could develop products that are superior to, or have greater market
acceptance, than the products being developed 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 by regulatory authorities. In addition, the first product to
reach the market in a therapeutic or preventive area is often at a significant
competitive advantage relative to later entrants to the market. Accordingly, the
relative speed with which we, or our potential corporate partners, can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market are expected to be important
competitive factors. Our competitive 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 our technology, 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 are treatment options
for type I and type II diabetic patients:
 
 ·
              Insulin
      injections;
 
 ·
              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 more
    insulin.
 
 Several
entities who are developing oral insulin capsules and other alternative oral
insulin as well as the development stage are thought to be:
Diabetology (UK, Phase 2), Emisphere Technologies (US, Phase 2), Biocon (India),
Apollo Life Sciences (Australia, Phase 1), Generex (Canada, Phase 3) – Buccal
delivery, Biodel (US, Phase 3) – Sublingual delivery and MannKind (US) -Inhaled
delivery
  11
  Scientific
Advisory Board
 
 We
maintain a scientific advisory board consisting of internationally recognized
scientists who advise us on scientific and technical aspects of our business.
The scientific advisory board meets periodically to review specific projects and
to assess the value of new technologies and developments to us.  In
addition, individual members of the scientific advisory board meet with us
periodically to provide advice in particular areas of expertise. The scientific
advisory board consists of the following members, information with respect to
whom is set forth below: Professor Avram Hershko, Dr. Nir Barzilai, Professor
Ele Ferrannini and Dr. Derek LeRoith.
 
 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, a period which included service as a physician in
the Israel Defense Forces (1965-67). After a post-doctoral fellowship with
Gordon Tomkins at the University of San Francisco (1969-72), he joined the
faculty of the Haifa Technion becoming 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 and his colleagues showed that cellular proteins are
degraded by a highly selective proteolytic system. This system tags proteins for
destruction by linkage a protein called ubiquitin, which had previously been
identified in many tissues, but whose function was previously unknown.
Subsequent work in Hershko's and 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 of cell division, signal transduction and DNA
repair. Professor Hershko was awarded the Nobel Prize in Chemistry (2004)
jointly with his former PhD student Aaron Ciechanover and their colleague Irwin
Rose. His many honors include the Israel Prize for Biochemistry (1994), the
Gardner Award (1999), the Lasker Prize for Basic Medical Research (2000), the
Wolf Prize for Medicine (2001) and the Louisa Gross Horwitz Award (2001).
Hershko is a member of the Israel Academy 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, NY. Dr. LeRoith has worked at the NIH since 1979 in the field of
Endocrinology and Diabetes and rose to be Diabetes Branch at the National
Institutes of Health in Bethesda MD, a position he held until 2005. His main
interests have 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 on the insulin-like growth factors. Dr. LeRoith has made major
contributions in our understanding of the basic pathophysiology of type 2
diabetes and also the role of the IGFs in various disorders especially in
cancer, and is considered a world expert on these topics. In recognition of his
contributions he has received many lectureships worldwide and has been the
plenary speaker at numerous national and international symposia. He is the
editor of a number of diabetes- and growth factor-related journals, has been on
the advisory boards of a number of companies and co-chairs two national
committees that deal with 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 EASD, European Association for the Study of Diabetes, which
embraces scientists, physicians, laboratory workers, nurses and students from
all over the world who are interested in diabetes and related subjects for
Europe, such that the ADA, American Diabetes Association does in America.
Professor Ferrannini has worked with various institutions including the
Department of Internal Medicine, University of Pisa School of Medicine, and CNR
(National Research Council) Institute of Clinical Physiology, Pisa, Italy;
Diabetes Division, Department of Medicine, University of Texas Health Science
Center at San Antonio, 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 laude
honors completed a subspecialty in Diabetes and Metabolic Diseases from the
University of Torino. He has published over 350 original papers and 50 book
chapters and he is among the "highly cited scientists", according to the
Institute for Scientific Information.
 
 Dr. Nir Barzilai joined the
Oramed Scientific Advisory Board in January 2007.  He is the Director
of the Institute for Aging Research at the Albert Einstein College of Medicine.
He is currently an Associate Professor in the Department of Medicine, Molecular
Genetics and the Diabetes Research Center and is a member of the Divisions of
Endocrinology and Geriatrics. He is also the Director of the Montefiore Hospital
Diabetes Clinic. He has spent over 20 years in assisting patients
internationally and training in vast fields from Medicine, Geriatrics,
Endocrinology and Molecular Genetics. Dr. Barzilai has had a strong career in
diabetes studies between Israel, London and the United States. He has worked for
such esteemed institutions as Hadassah Research Hospital, NIH (National
Institute of Health), and many esteemed US based university hospitals including
Cornell and Yale.
 
 Employees
 
 We have
been successful in retaining the experienced personnel involved in our research
and development program. In addition, we believe we have successfully recruited
clinical/regulatory, quality assurance and other personnel needed to advance
through clinical studies or have engaged the services of experts in the field
for these requirements.  As of August 31, 2009, we contracted eight
individuals through employment or consulting agreements. Of our staff, two are
senior management, four are engaged in research and development work, and the
remaining in administration work.
 
 Facilities
 
 Our
principal executive offices are located in approximately 117 square meters of
office space in Givat-Ram, Jerusalem, Israel. The lease commenced on October 1,
2007 and is for a period of 51 months. The aggregate annual base rental for this
space is $7,548. We believe that our existing facilities are suitable and
adequate to meet our current business requirements.  In the event that
we should require additional or alternative facilities, we believe that such
facilities can be obtained on short notice at competitive
rates.
  13
 Corporate
History
 
 Oramed
was incorporated on April 12, 2002, in the State of Nevada under the name Iguana
Ventures Ltd. Following the incorporation, the Company was an exploration stage
company engaged in the acquisition and exploration of mineral properties. The
Company was unsuccessful in implementing its business plan as a mineral
exploration company. Accordingly, the Company decided to change the focus of its
business by completing a share exchange with the shareholders of Integrated
Security Technologies, Inc., a New Jersey private corporation (“ISTI”). On June
4, 2004, the Company changed its name to Integrated Security Technologies by
filing a Certificate of Amendment with the Nevada Secretary of
State.  Effective June 14, 2004 the Company effected a 3.3:1 forward
stock split, increasing the amount of authorized capital to 200,000,000 shares
of common stock with the par value of $.001 per share.  However, due
to disappointing results, the Company terminated the share exchange agreement
with the shareholders of ISTI.
 
 On March
8, 2006, the Company executed an agreement with Hadasit Medical Services and
Development Ltd. (“Hadasit”) to acquire provisional patent application
No. 60/718716and
related intellectual property.  The provisional patent applicationNo. 60/718716 relates to a method of preparing
insulin so that it may be taken orally to be used in the treatment for the
treatment of individuals with diabetes.On April 10, 2006, the Company
changed its name from Integrated Security Technologies, Inc. to Oramed
Pharmaceuticals Inc.  On August 31, 2006, based on provisional patent
application No. 60/718716, the Company filed a patent application under the
Patent Cooperation Treaty at the Israel Patent Office for “Methods and
Compositions for Oral Administration of Proteins.”
  14
 
 ITEM
1A – RISK FACTORS
 
 An
investment in our common stock involves a high degree of risk.  You
should consider carefully the following information about these risks, together
with the other information contained in this Annual Report on Form 10-K before
buying shares of our common stock.  Our business, prospects, financial
condition, and results of operations may be materially and adversely affected as
a result of any of the following risks.  The trading of our common
stock could decline as a result of any of these risks.  You could lose
all or part of your investment in our common stock. Some of the statements in
“Risk Factors” are forward 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. We estimate that our
cash reserves will not be sufficient to permit us to continue at our anticipated
level of operations for our fiscal year ended August 31, 2010. During 2010, we
plan to increase research and development, product development, and
administrative expenses relating to our business, including expenses related to
research and development related to our oral delivery platform. We intend to use
our cash reserves, as well as other funds in the event that they shall become
available on commercially reasonable terms, to finance these activities and
other activities described herein, although we can provide no assurance that
these additional funds will be available 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 our research 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 7 months from the date of this Annual
Report on Form 10-K. We estimate that we will require substantial additional
financing at various intervals in order to continue our research and development
programs, including significant requirements for operating expenses including
intellectual property protection and enforcement, for pursuit of regulatory
approvals, and for commercialization of our products. We can provide no
assurance that additional funding will be available on a timely basis, on terms
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
our technology. 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
  15
 
 ·
                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 and development programs or to
enter into license or other arrangements with third parties to commercialize
products or technologies that we would otherwise seek to develop ourselves and
commercialize ourselves. In such event, our business, prospects, financial
condition, and results of operations may be adversely affected as we may be
required to scale-back, eliminate, or delay development efforts or product
introductions or enter into royalty, sales or other agreements with third
parties in order to commercialize our products.
 
 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 losses and negative cash flows since inception. We currently have
no product revenues, and may not succeed in developing or commercializing any
products which could generate product or licensing revenues. We do not expect to
have any products on the market for several years. In addition, development of
our product candidates 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 one or 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 to market our product candidates.  Eventual
profitability will depend on our success in developing, manufacturing, and
marketing our product candidates. As of August 31, 2009 and 2008, we had
working capital of $2,805,733 and $4,483,940, respectively, and stockholders’
equity of $2,746,192 and
$4,593,060, respectively. We generated no revenues to date. For the period from
our inception on April 12, 2002 through August 31, 2009, the years ended August
31, 2009 and 2008, we incurred net losses of $(10,008,678), $(2,760,474), and $(2,769,271),
respectivelyWe may
never achieve profitability and expect to incur net losses in the foreseeable
future. See “Management's
Discussion and Analysis of Financial Condition and Results 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 for infringing 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 several pending patent applications in the
United States for our technologies covering oral administration of insulin and
other proteins, rectal application for insulin, and oral administration of
exenatides and proteins, and corresponding patent applications filed in Israel,
South Africa and India. Further, we intend to rely on a combination of trade
secrets and non-disclosure, and other contractual agreements and technical
measures to protect our rights in our technology. We intend to depend upon
confidentiality agreements with our officers, directors, employees, consultants,
and subcontractors, as well as collaborative partners, to maintain the
proprietary nature of our technology. These measures may not afford us
sufficient or complete protection, and others may independently develop
technology similar 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 third parties; 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 we should be found to infringe upon their patents, or
otherwise impermissibly utilize their intellectual property, our ability to
continue to use our technology could be materially restricted or prohibited. If
this event occurs, we may be required to obtain licenses from the holders of
this intellectual property, enter into royalty agreements, or redesign our
products so as not to utilize this intellectual property, each of which may
prove to be uneconomical or otherwise impossible. 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. These claims 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 do not 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. Competitors or potential
competitors may have filed applications for, or may have received patents and
may obtain additional and proprietary rights to compounds or processes used by
or competitive with ours. In addition, laws of certain foreign countries do not
protect intellectual property rights to the same extent as do the 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 efforts to form
strategic alliances, conduct clinical testing or manufacture and market any
products under development. If challenged, our patents may not be held valid. We
could also become involved in interference proceedings in connection with one or
more of our patents or patent applications to determine priority of invention.
If we become involved in any litigation, interference or other administrative
proceedings, we will likely incur substantial expenses and the efforts of our
technical and management personnel will be significantly diverted. In addition,
an adverse determination could subject us to significant liabilities 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 and selling 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 third parties.
Patent applications are, in many cases, maintained in secrecy until patents are
issued. The publication of discoveries in the scientific or patent literature
frequently occurs substantially later than the date on which the underlying
discoveries were made and patent applications are filed. In the event of
infringement or violation of another party's patent, we may be prevented from
pursuing product development or commercialization.  See “Business—Patents and
Licenses.”
 
 At
present, our success depends primarily on the successful commercialization of
the 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.  Our
oral insulin capsule is in a very early stage of clinical development and faces
a variety of risks and uncertainties. Principally, these risks include the
following:
 
 · future
clinical trial results may show that the oral insulin capsule is not well
tolerated by recipients at its effective doses or is not efficacious as compared
to placebo;
  17
 
 · future
clinical trial results may be inconsistent with previous preliminary testing
results and data from our earlier studies may be inconsistent 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 unforeseen difficulties 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 dependent upon our ability to
obtain and maintain experienced and committed partners to assist us with
obtaining clinical and regulatory approvals for, and the manufacturing,
marketing and distribution of, the oral insulin capsule on a worldwide
basis;
 
 · even if
our oral insulin capsule is successfully developed, commercially produced and
receive all necessary regulatory approvals, there is no 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 our products, 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 some other 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 the preclinical studies and clinical trials necessary to
obtain regulatory approval for our  product candidates in any
country.  We have entered into agreements with Hadasit Medical Center,
ETI Karle Clinical Pvt, Ltd., and OnQ Consulting to assist us in designing,
conducting and managing our various clinical trials in Israel, South Africa, and
India, respectively, as more fully described in “Description Business –
Partnerships and Collaborative Agreements.”  Any failure of such
consultants to fulfill their obligations could result in significant additional
costs as well as delays in designing, consulting and completing clinical 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 regulatory agencies to delay, suspend or terminate our
clinical trials at any phase.  These problems could include the
possibility that we may not be able to conduct clinical 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 clinical trials 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 the subjects
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 of the
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 failed clinical trials.  The FDA and foreign regulatory
agencies could also require additional clinical trials, which would result in
increased costs and significant development delays.  Our failure to
adequately demonstrate the safety and effectiveness of a pharmaceutical product
candidate under development could delay or prevent regulatory approval of the
product candidate and could have a material adverse effect on our business,
prospects, financial condition, and results of
operations.
  18
 
 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. We have completed
certain non-FDA clinical trials and pre-clinical trials for our products but
have yet to conduct any FDA approved trials. We have retained Advanced
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 oral insulin
capsule product but no application has yet been filed.
 
 We cannot
predict with any certainty the amount of time necessary to obtain regulatory
approvals, including from the FDA or other foreign regulatory authorities, and
whether any such approvals will ultimately be granted. In any event, review and
approval by the regulatory bodies is anticipated to 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 further development of such products could
be seriously delayed or terminated.  Moreover, obtaining approval for
certain products may require the testing on human subjects of substances whose
effects on humans are not fully understood or documented.  Delays in
obtaining necessary regulatory approvals of any proposed product 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 facts which arise
after development has been completed and regulatory approvals have been
obtained.  In this event we may be required to withdraw such product
from 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 supply available, if the
third party suppliers were to cease production or otherwise fail to supply us
with quality raw materials in sufficient quantities on a timely basis and we
were unable to contract on acceptable terms for these services with alternative
suppliers, our ability to produce our products and to conduct testing and
clinical trials would be materially adversely affected
 
 We
are highly dependant upon our ability to enter into agreements with
collaborative partners to develop, commercialize, and market our
products.
 
 Our long
term strategy is to ultimately seek a strategic commercial partner, or partners,
such as large pharmaceutical companies, with extensive experience in the
development, commercialization, and marketing of insulin applications and/or
other orally digestible drugs. We anticipate such partner or partners would be
responsible for, or substantially support, late stage clinical trials (Phase
III) and sales and marketing of our oral insulin capsule and other products.
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.
  19
 
 We have
not yet engaged in any meaningful discussions with potential partners and no
assurance can be given that any third party would be interested in partnering
with us. We currently lack the
resources to manufacture any of our product candidates on a large scale and we
have no sales, marketing or distribution capabilities.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, we may be unable to commercialize our
products, which would have a
material adverse effect upon our business, prospects, financial condition, and
results of operations.
 
 The biotechnology and biopharmaceutical
industries are characterized by rapid technological developments and a high
degree of competition.  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 a result, our
products could become obsolete before we recoup any portion of our related
research and development and commercialization expenses. These industries are
highly competitive, and this competition comes both from biotechnology firms and
from major pharmaceutical and chemical companies.  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 the development of our
products from universities and other research institutions and compete with
others in acquiring technology from such universities and institutions. In
addition, certain of our products may be subject to competition from products
developed using other technologies.  See “Business –
Competition”.
 
 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 be required to expand
our operational and financial systems significantly and to expand, train, and
manage our work force in order to manage the expansion of our operations. Our
failure to fully integrate our new employees into our operations could have a
material adverse effect on our business, prospects, financial condition, and
results of operations. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition for
these types of personnel from other technology companies and more established
organizations, many of which have significantly larger operations and greater
financial, technical, human, and other resources than we have. We may not be
successful in attracting and retaining qualified personnel on a timely basis, on
competitive terms, or at all. If we are not successful in attracting and
retaining these personnel, our business, prospects, financial condition, and
results 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 key personnel,
including Dr. Miriam Kidron, our Chief Medical and Technology Officer. The loss
or unavailability of the services of any of these individuals for any
significant period of time could have a material adverse effect on our business,
prospects, financial condition, and results of operations.  We do not
maintain “keyman” life insurance policies for any of our senior
executives.  In addition, recruiting and retaining qualified
scientific personnel to perform future research and development work will be
critical to our success. There is currently a shortage of employees with
expertise in developing, manufacturing and commercialization of products and
related clinical and regulatory affairs, and this shortage is likely to
continue. Competition for skilled personnel is intense and turnover rates are
high. Our ability to attract and retain qualified personnel may be
limited.  Our inability to attract and retain qualified skilled
personnel would have a material adverse effect on our business, prospects,
financial condition, and results of operations.
  20
 
 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 implement additional corporate governance
practices and adhere to a variety of reporting requirements and complex
accounting rules. Compliance with these public company obligations increases our
legal and financial compliance costs and place significant additional demands on
our finance and accounting staff and on our financial, accounting and
information systems.
  We
became a publicly traded company through the acquisition of a public shell
company, and we could be liable for unanticipated claims or liabilities as a
result thereof.
 
 The
Company was originally incorporated on April 12, 2002 as an exploration stage
company engaged in the acquisition and exploration of mineral properties. The
Company was unsuccessful in implementing its business plan as a mineral
exploration company and became a public shell company.  On May 27,
2004, the Company executed a share exchange with the shareholders of Integrated
Security Technologies, Inc., a New Jersey private corporation
(“ISTI”).  However, due to disappointing results, on May 31, 2005,
effective as of May 27, 2004 the Company terminated the share exchange agreement
with the shareholders of ISTI, and the Company again became a public shell
company.  The Company remained a public shell company until March 8,
2006, when we became a pharmaceutical company engaged in the development of
innovative pharmacological solutions.
  We face
substantial risks associated with being a former public shell company, including
absence of accurate or adequate public information concerning the public shell
company; undisclosed liabilities; improper accounting; claims or litigation from
former officers, directors, employees or stockholders; contractual obligations;
and regulatory requirements.   Although management performed due
diligence on the Company, there can be no assurance that such risks do not
occur. The occurrence of any such risk could materially adversely affect the
Company's financial condition.
 
 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 common stock when you want or at prices you find attractive.
 
 The price
of our common stock is quoted on the OTCBB and constantly changes. In recent
years, the stock market 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:
  21
 
 ·
                Clinical
      trial results,
 ·
                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 their competitors,
 ·
                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 that such sales
could occur, could adversely affect prevailing trading prices of our common
stock and could impair our ability to raise capital through future offerings of
equity or other equity-related securities.  We anticipate that we will
need to raise capital though offerings of equity and equity related
securities.  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 of shares 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 suitability requirements.
 
 The SEC
has adopted regulations that generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share, subject to
specific exemptions. The market price of our common stock is currently
less than $5.00 per share and therefore is a “penny stock” according to SEC
rules. This designation requires any broker or dealer selling these securities
to disclose certain information concerning the transaction, obtain a written
agreement from the purchaser, furnish the customer a document describing the
risks of investing in penny stocks and send monthly account statements showing
the market value of each penny stock held in the customer’s account. These rules
may restrict the ability of brokers or dealers to sell our common stock and may affect
the ability of investors hereunder to sell their shares.
  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. Such patterns
include:
  22
  ·
                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 causes investors to suffer
loss.
 
 We are
aware of the abuses that have occurred in the penny stock market. Although we do
not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, we will strive within the confines
of practical limitations to prevent such abuses with 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 the perception 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 that we deem
appropriate. Currently, we have outstanding 58,026,597 shares of common
stock.  Of these shares, 28,543,347 shares, are freely
tradable.  Giving effect to the exercise in full of all of our
outstanding warrants and options, we would have outstanding 75,744,294 shares of
common stock.
 
 Our
issuance of warrants and options to investors, employees and consultants and may
have a negative effect on the trading prices of our common stock 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, 2009, we had
outstanding 18,017,697 warrants and options (16,611,697 for the year ended
August 31, 2008). In addition to the dilutive 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 shares may be sold in the open market at any given
time, which could place downward pressure on the trading of our common
stock.
 
 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 retain future earnings, if
any, for reinvestment in the development and expansion of our business. Any
credit agreements which we may enter into with institutional lenders 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 directors and
will be dependent upon our financial condition, results of operations, capital
requirements, and any other factors that our board of directors decides is
relevant. See “Dividend
Policy” and “Description of Securities — Common
Stock”.
  23
 
 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. Since the
establishment of the State of Israel in 1948, a number of armed conflicts have
taken place between Israel and its Arab neighbors. In addition, since December
1987, the State of Israel has experienced severe civil unrest primarily in the
areas that came under its control in 1967. No prediction can be made as to
whether these problems will be resolved. Our business, prospects, financial
condition, and results of operations could be materially adversely affected if
major hostilities involving Israel should 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 such residents are
subject to being called to active duty at any time under emergency
circumstances. Some of our officers, directors, and employees currently are
obligated to perform annual military reserve duty. We can provide no assurance
that such requirements will not have a material adverse effect on our business,
prospects, financial condition, and results of operations in the future,
particularly if emergency circumstances occur.
 
 Because
all of our officers and directors are located in non-U.S. jurisdictions, you may
have no effective recourse against our management for misconduct.
 
 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 their assets are
located outside the United States. As a result, it may be difficult for
investors to enforce within the United States any judgments obtained against any
of our 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 to hear 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 Israeli court 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 of applicable 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 Israeli law.
  24
  ITEM
      1B.
                UNRESOLVED
      STAFF COMMENTS
  None.
  ITEM
2 – PROPERTIES
  Our
principal executive offices are located in approximately 117 square meters of
office space in Givat-Ram, Jerusalem, Israel. The lease commenced on October 1,
2007 and is for a period of 51 months. The aggregate annual base rental for this
space is $7,548. We believe that our existing facilities are suitable and
adequate to meet our current business requirements.  In the event that
we should require additional or alternative facilities, we believe 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 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 None
  25
  PART
II
 
 ITEM
5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
  Market
Price for our Common Stock
 
 Our
common stock is quoted on the OTC Bulletin Board (the “OTCBB”) under the symbol
“ORMP.OB”. The quarterly high and low reported bid prices for our common stock
as quoted on the OTCBB for the periods indicated are as follows:
 
 High
                          
                          
                          LowYear
      Ended August 31, 2008Three
      Months Ended November 30, 2007
                          
                          $
                          0.48
                          
                          
                          $
                          0.23Three
      Months Ended February 29, 2008
                          
                          $
                          0.67
                          
                          
                          $
                          0.21Three
      Months Ended May 31, 2008
                          
                          $
                          0.66
                          
                          
                          $
                          0.45Three
      Months Ended August 31, 2008
                          
                          $
                          1.00
                          
                          
                          $
                          0.60Year
      Ended August 31, 2009Three
      Months Ended November 30, 2008
                          
                          $
                          0.76
                          
                          
                          $
                          0.36Three
      Months Ended February 28, 2009
                          
                          $
                          0.52
                          
                          
                          $
                          0.25Three
      Months Ended May 31, 2009
                          
                          $
                          0.62
                          
                          
                          $
                          0.20Three
      Months Ended August 31, 2009
                          
                          $
                          0.59
                          
                          
                          $
                          0.40
 
 The
foregoing quotations were provided by Yahoo! Finance and the quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.  The last reported bid price per share
of common stock as quoted on the OTCBB was $0.46 on November 24,
2009.
  Holders
  As of
November 23, 2009, there were 57,026,597 shares of our common stock issued and
outstanding that are held of record by 61 registered stockholders. We believe
that a number of stockholders hold their shares of our common stock in brokerage
accounts and registered in the name of stock depositories.
  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 the foreseeable future. We intend to
retain future earnings to fund ongoing operations and future capital
requirements of our business. Any future determination to pay cash dividends
will be at the discretion of our board of directors and will be dependent upon
our financial condition, results of operations, capital requirements and such
other factors as our board deems relevant.
  26
 
 Recent
Sales of Unregistered Securities
 
 On
September 11, 2009, we issued 569,887 shares of our common stock to Swiss Cap AG
as remuneration for services rendered during 2009, in the amount of
$203,699.   The
shares were sold in a private transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. No underwriters were involved in the
transaction or received any commissions or other
compensation.
  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, 2009.
  Securities
Authorized for Issuance under Equity Compensation Plans
 
 2006
Stock Option Plan
 
 On
October 15, 2006, the Company’s 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 that have expired or been
terminated for any reason prior to being exercised may be reissued.
 As of August 31, 2009, options with respect to 2,950,000 shares
were outstanding under the 2006 Plan, which amount reflects the
aggregate grant of options with respect to 3,350,000 shares, of
which 400,000 have been forfeited through August 31,
2009.
 
 2008
Stock Incentive Plan
 
 On May 5,
2008, the Company’s board of directors adopted the 2008 Stock Incentive Plan
(the “2008 Plan”) in order to attract and retain quality personnel. Under the
2008 Stock Option Plan, 8,000,000 shares have been reserved for the grant of
options, which may be issued at the discretion of our board of directors from
time to time. As of August 31, 2009, options exercisable for an aggregate of
4,312,000 shares have been granted, 978,000 of which have been
forfeited.
 
 On August
14, 2007 the Company granted options to purchase up to 3,361,360 shares at an
exercise price of $0.001 for five years to Miriam Kidron. These options are not
governed by any of the plans detailed above.
 
 The
following table sets forth information with respect to the 2006 Plan and the
2008 Plan as of August 31, 2009:
  Number of securities
                                        to be issued upon
                                        exercise of
                                        outstanding options,
                                        warrants and rights
                                      
                                      
                                      Weight-average
                                        exercise price of
                                        outstanding options,
                                        warrants and rights
                                      
                                      
                                      Number of securities remaining
                                        available for future issuance
                                        under equity compensation plans
                                        (excluding securities reflected in
                                        column (A))Plan category
                                      
                                      
                                      (A)
                                      
                                      
                                      
                                      (B)
                                      
                                      
                                      
                                      (C)Equity
      compensation plans approved by security holders
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Equity
      compensation plans not approved by security holders
                                      
                                      
                                      9,645,360
                                      
                                      
                                      $
                                      0.35
                                      
                                      
                                      
                                      3,738,000Total
                                      
                                      
                                      9,645,360
                                      
                                      
                                      $
                                      0.35
                                      
                                      
                                      
                                      3,738,
      000
  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 ended August 31, 2009 and
2008.
 
 Overview
of Operations
 
 We are a
pharmaceutical company engaged in the research and development of innovative
pharmaceutical solutions, including an orally ingestible insulin pill to be used
for the treatment of individuals with diabetes, rectal application of insulin,
flu vaccines, use of oral ingestible pills for delivery other polypeptides and
use of rectal application for delivery of other polypeptides.
 
 Short
Term Business Strategy
 
 We plan
to conduct further research and development on the technology covered by the
patent application "Methods and Composition for Oral Administration of
Proteins", which we acquired from Hadasit Medical Services and Development Ltd.,
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 in delivering active insulin for the treatment of
diabetes. The enzymes and vehicles that are added to the insulin in the
formulation process must not modify chemically or biologically the insulin and
the dosage form must be safe to ingest. We plan to continue to conduct clinical
trials to show the effectiveness of our technology.  We intend to
conduct the clinical trials necessary to file an IND application with the FDA.
Additional clinical trials are planned in other countries 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 these countries. We also plan to
conduct further research and development by deploying our proprietary drug
delivery technology for the delivery of other polypeptides in addition to
insulin, and to develop other innovative pharmaceutical products, including an
insulin suppository and use of rectal application for delivery of other
polypeptides.
 
 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 strategic commercial partner,
or partners, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs. We
anticipate such partner or partners would be responsible for, or substantially
support, late stage clinical trials (Phase III) to ensure regulatory approvals
and registrations in the appropriate markets in a timely manner. We further
anticipate that such partner, or partners, 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. We have not yet engaged in any
meaningful discussions with potential partners and no assurance can be given
that any third party would be interested in partnering with us. Under certain
circumstances, 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 of obtaining additional technologies to complement
and/or expand our current product portfolio. Our goal is to create a
well-balanced product portfolio that will enhance and compliment 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 period from inception
(April 12, 2002) through August 31, 2009 of $10,008,678, as well as negative
cash flow from operating activities. Based upon our existing spending
commitments, estimated at $5.8 million for the twelve months following September
1, 2009, and our cash availability, we do not have sufficient cash resources to
meet our liquidity requirements through August 31, 2010. Accordingly, these
factors raise substantial doubt about our ability to continue as a going
concern. Management is in the process of evaluating various financing
alternatives as we will need to finance future research and development
activities and general and administrative expenses through fund raising in the
public or private equity markets. Although there is no assurance that we will be
successful with those initiatives, management believes that it will be able to securethe necessary financing as a result of ongoing financing discussions with
third 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. Our continuation 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
 
 Valuation of options and
warrants: We granted options to purchase shares of our common stock to
employees and consultants and issued warrants in connection with fund
raising.
 
 We
account for share based payments in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004), “Share-based Payment” (“SFAS
123R”). SFAS 123R requires awards classified as equity awards be accounted for
using the grant-date fair value method. The fair value of share-based payment
transactions is recognized as an expense over the requisite service period, net
of estimated 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 accelerated method based on the
multiple-option award approach.
  29
  When
stock options are granted as consideration for services provided by consultants
and other non-employees, the transaction is accounted for based on the fair
value of the consideration received or the fair value of the stock options
issued, whichever is more reliably measurable, pursuant to the guidance in
Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services” (ËITF 96-18”). 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 service period 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 differences between the
financial accounting and tax bases of assets and liabilities under the
applicable tax laws. Deferred tax balances are computed using the tax 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. We have provided a full valuation allowance
with respect to its deferred tax assets.
 
 Regarding
the Subsidiary, paragraph 9(f) of FAS 109, “Accounting for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were not
reflected in the computation of deferred tax assets and
liabilities.
 
 As of
September 1, 2007, we adopted FASB Interpretation No. 48, ‘‘Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109’’
(‘‘FIN 48’’). FIN 48 specifies how tax benefits for uncertain tax positions are
to be recognized, measured and derecognized in financial statements; requires
certain disclosures of uncertain tax positions; specifies how reserves for
uncertain tax positions should be classified on the balance sheet; and provides
transition and interim-period guidance, among other provisions. On May 2, 2007,
the FASB issued FASB Staff Position No. FIN 48-1, ‘‘Definition of Settlement in
FASB Interpretation No. 48-1’’ (‘‘FSP FIN 48-1’’). FSP FIN 48-1 provides
guidance regarding how an entity should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits.
 
 The
following table summarizes certain statements of operations data for us for the
twelve months period ended August 31, 2009 and 2008:
 
 Year endedOperating Data:
                      
                      August 31, 2009
                      
                      
                      August 31, 2008Research
      and development expenses
                      
                      $
                      1,522,188
                      
                      
                      $
                      1,210,494General
      and administrative expenses
                      
                      
                      1,261,930
                      
                      
                      
                      1,469,517Financial
      income, net
                      
                      
                      (21,047
                      )
                      
                      
                      (72,904
                      )Loss
      before taxes on income
                      
                      
                      (2,763,071
                      )
                      
                      
                      (2,607,107
                      )Taxes
      on income
                      
                      
                      (2,597
                      )
                      
                      
                      162,164Net
      loss for the period
                      
                      $
                      (2,760,474
                      )
                      
                      $
                      (2,769,271
                      )Loss
      per common share – basic and diluted
                      
                      $
                      (0.05
                      )
                      
                      $
                      (0.06
                      )Weighted
      average common shares outstanding
                      
                      
                      56,645,820
                      
                      
                      
                      48,604,889
  30
 
 Research
and development expenses
 
 Research
and development expenses include costs directly attributable to the conduct of
research and development programs, including the cost of salaries, payroll
taxes, employee benefits, costs of registered patents materials, supplies, the
cost of services provided by outside contractors, including services related to
our clinical trials, clinical trial expenses, the full cost of manufacturing
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-party contractors. We outsource a
substantial portion of our clinical trial activities, utilizing external
entities such as contract research organizations, independent clinical
investigators, and other third-party service providers to assist us with the
execution of our clinical studies. For each clinical trial that we conduct,
certain clinical 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 which patients 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 primarily by CROs. CROs
typically perform most of the start-up activities for our trials, including
document preparation, site identification, 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 of materials,
cost of manufacturing of the oral insulin capsules, payments for patient
recruitment and treatment, costs related to the maintenance of our registered
patents, costs related to the filings of patent applications, as well as
salaries and related expenses of research and development staff.
 
 During
the year ended August 31, 2009, research and development expenses totaled
$1,522,188, compared to $1,210,494 for the year ended August 31, 2008. The
increase is mainly attributable to increased clinical trial activities,
materials and consulting costs. In August 2009, Oramed Ltd., our wholly owned
Israeli subsidiary, was awarded a government grant amounting to a total net
amount of NIS 3.1 million (approximately $813,000), from the Office of the Chief
Scientist (OCS) of the Ministry of Industry, Trade and Labor of Israel. This
grant will be used for research and development expenses for the period of
February 2009 to January 2010. The grant is subject to repayment according to
the terms determined by the OCS and applicable law.  See "—Government
Grants" below. The funds will be designated and used by Oramed Ltd. to support
further R&D and clinical study of its oral insulin capsule and Oral
GLP1-Analog.. The research and development expenses for the year ended August
31, 2009 are presented less a participation amount of $400,405 which was
incurred from February 1, 2009 to August 31, 2009. The research and development
costs include stock based compensation costs, which during the year ended August
31, 2009 totaled $264,861 as compared to $285,336 during the year ended August
31, 2008.
  31
 
 Government
Grants
 
 The
Government of Israel encourages research and development projects through the
Office of Chief Scientist of the Israeli Ministry of Industry, Trade and Labor,
or the OCS, pursuant to the Law for the Encouragement of Industrial Research and
Development, 1984, as amended, commonly referred to as the “R&D
Law”.  Under the R&D Law, a research and development plan that
meets specified 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
year ended August 31, 2009, we recognized research and development grants in an
amount of $400,405. As of August 31, 2009, 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 the products developed pursuant to the funded
plans, including revenues from licenses.  Royalties are payable up to
100% of the amount of such grants, or up to 300% as detailed below, linked to
the U.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, up to 10% of a
company’s approved Israeli manufacturing volume, measured on an aggregate basis,
may be transferred out of Israel. In addition, upon the approval of the Chief
Scientist, a greater portion of the manufacturing volume may be performed
outside of Israel, provided that the grant recipient pays royalties at an
increased rate, which may be substantial, and the aggregate repayment amount is
increased 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
further permits the OCS, among other things, to approve the transfer of
manufacturing rights outside Israel in exchange for an import of different
manufacturing into 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 that part 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 for the execution of the program.  This
declaration will be a significant factor in the determination of the OCS whether
to approve a program and the amount and other terms of benefits to be
granted.  For example, an increased royalty rate and repayment amount
might be required in such cases.
 
 The
R&D Law also provides that know-how developed under an approved research and
development program may not be transferred to third parties in Israel without
the approval of the research committee.  Such approval is not required
for the sale or export of any products resulting from such research or
development. The R&D Law further provides that the know-how developed under
an approved research and development program may not be transferred to any 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 for such OCS-funded
know-how (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 in connection 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 grant
recipient 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
holdings of the means of control of the recipient that results in a non-Israeli
becoming an interested party directly in the recipient, and requires the new
interested party to undertake 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 of certain 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 serving as an officer or
director of the company.  A person is presumed to have control if such
person holds 50% or more of the means of control of a company.  “Means
of control” refers to voting rights or the right to appoint directors or the
chief executive officer.  An “interested party” of a company includes
a holder of 5% or more of its outstanding share capital or voting rights, its
chief executive officer and directors, someone who has the right to appoint its
chief executive officer or at least one director, and a company with respect to
which any of the foregoing interested parties owns 25% or more of the
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 more of 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.
  32
 
 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, 2009, general and administrative expenses totaled
$1,261,930 compared to $1,469,517 for the year ended August 31, 2008. Costs
incurred related to general and administrative activities during the year ended
August 31, 2009 reflect a decrease of professional, legal and consulting
expenses and a decrease in investor relations and public relations expenses.
During the year ended August 31, 2009, as part of our general and administrative
expenses, we incurred $288,338 related to stock options granted to employees and
consultants, as compared to $378,113 during the year ended August 31,
2008.
 
 Financial
income/expense, net
 
 During
the year ended August 31, 2009, we generated interest income on available cash
and cash equivalents balance which were offset by bank charges. During the year
ended August 31, 2008, we incurred imputed interest expenses on convertible
notes issued as well as bank charges.
 
 The
decrease in the interest income for the year ending August 31, 2009 as compared
with the year ended August 31, 2008 is attributable to the decrease in interest
rates in both the United States and the state of Israel.
 
 Liquidity
and Capital Resources
 
 Through
August 31, 2009, we incurred losses in an aggregate amount of $10,008,678. We
have financed our operations through the private placements of equity and debt
financing. Since inception through August 31, 2009, we have financed our
operations through the private placements of equity and debt financings, raising
a total of $8,308,785, net of transaction costs. We will seek to obtain
additional financing through similar sources. As of August 31, 2009, we had
$1,716,866of available
cash as well as $1,000,000 in short term interest bearing investments. The
Company anticipates it will require approximately $5.8 million to finance its
activities during the twelve months following September 1, 2009.
 
 Management
is in the process of evaluating various financing alternatives as we will need
to finance future research and development activities and general and
administrative expenses through fund raising in the public or private equity
markets. Although there is no assurance that we will be successful with those
initiatives, management believes that it will be able to secure the necessary
financing as a result of ongoing financing discussions with third party
investors and existing shareholders as well asreceive additionalfunding from the
OCS.
  33
 
 Our
recent financing activities include the following:
 
 ·
              On
      August 3, 2007, we completed a private placement for the sale of 510,000
      units at a purchase price of $0.50 per unit for a total consideration of
      $255,000. Each unit consisted of oneshareof common stock and one share
      purchase warrant. Each share purchase warrant entitles the holder to
      purchase one share of common stock for a period of 3 years at an exercise
      price of $0.75.
  ·
              On
      September 7, 2007, we issued 283,025 shares of common stock valued at
      $113,210 to a third party, for services rendered in the prior
      year.
  ·
              On
      November 8, 2007, we issued 10,000 shares as a finder’s fee to a placement
      agent valued at $2,900.
  ·
              On
      July 14, 2008 wecompleted a private placementto twenty-nine accreditedinvestorspursuant to which we sold to the investors anaggregateof8,524,669 shares of common stockat a purchase price
      of $0.60 per share.  The investors
      also received three year warrants to purchase an aggregate of4,262,337 shares of common stock at
      an exercise price of $0.90 per share. The Company paid $85,000 to adirector as a finders fee and issued
      an aggregate of 143,333 shares of common stock to four other individuals
      as finders fees in connection with the private
      placement.
  ·
              On
      October 17, 2008, we issued 203,904 shares of common stock valued at
      $152,928 to a third party, for services rendered in the prior
      year.
  ·
              On
      September 11, 2009, we issued 569,887 shares of common stock valued at
      $203,699 to a third party, for services rendered in the prior
      year.
  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 be expected that
there will be changes in some budgetary items. Our planned expenditures for the
twelve months beginning September 1, 2009 are as follows:
 
 Category
                    
                    AmountResearch
      & Development, net of OCS funds
                    
                    $
                    4,259,000General
      & Administrative expenses
                    
                    
                    1,511,000Finance
      income, net
                    
                    
                    10,000Taxes
      on income
                    
                    
                    13,000Total
                    
                    $
                    5,793,000
 
 As previously indicated we are planning
to conduct further clinical studies as well as file an IND application with the
FDA for our orally ingested insulin. Our ability to proceed with these
activities is dependent on several major factors including the ability to
attract sufficient financing on terms acceptable to us.
  34
 
 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.
  35
  ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 TABLE OF
CONTENTS
 
 PageREPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM - Report of Kesselman & Kesselman
                    
                    
                    F-37REPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM - Report of Malone &
      Bailey, PC
                    
                    
                    F-38CONSOLIDATED
      FINANCIAL STATEMENTS:Balance
      sheets
                    
                    
                    F-39Statements
      of operations
                    
                    
                    F-40Statements
      of changes in stockholders’ equity
                    
                    
                    F-41Statements
      of cash flows
                    
                    
                    F-42Notes
      to financial statements
                    
                    
                    F-43
      - F-63
 
  F-36
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Shareholders
of
 Oramed
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,
2009 and 2008, and the related consolidated statements of operations, changes in
stockholders’ equity and cash flows for the years then ended and cumulatively,
for the period from September 1, 2007 to August 31, 2009 (not separately
presented herein) . These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not 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 December 10, 2007, expressed an unqualified
opinion on the cumulative amounts but included an emphasis of a matter. Our
opinion, insofar as it relates to amounts included 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 that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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, 2009 and 2008, and the consolidated results of their operations and
their cash flows for the years then ended and cumulatively, for the period from
September 1, 2007 to August 31, 2009 (not separately presented herein), in
conformity with accounting principles generally accepted in the United States of
America.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1a to the financial
statements, the Company has recurring losses for the period from inception
(April 12, 2002) through August 31, 2009 and presently the Company does not have
sufficient cash resources to meet its requirements in the following twelve
months. These reasons raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1a. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 Kesselman
      & KesselmanTel
      Aviv, IsraelNovember
      25, 2009
  F-37
  REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
 
 To the Board of
Directors
 Oramed 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 these financial 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 and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.The
Comapnyis not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness ofthe Company’s internal control over financial
reporting. Accordingly, we express no such opinion.An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis 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 its cash flows for the periods
described in conformity with accounting principles generally accepted in the
United States of America.
  MALONE & BAILEY,
PC
 www.malone-bailey.com
 Houston, Texas
  December 10,
2007
  F-38
  ORAMED
PHARMACEUTICALS, INC.
  (A
Development Stage Company)
  CONSOLIDATED
BALANCE SHEETS
  U.S.
dollars
 
 August
      312009
                  
                  
                  2008AssetsCURRENT
      ASSETS:Cash
      and cash equivalents
                  
                  $
                  1,716,866
                  
                  
                  $
                  2,267,320Short
      term investments (Note 2)
                  
                  
                  1,000,000
                  
                  
                  
                  2,728,000Restricted
      cash (Note 1n)
                  
                  
                  16,000Accounts
      receivable - other
                  
                  
                  36,939
                  
                  
                  
                  38,822Prepaid
      expenses
                  
                  
                  4,119
                  
                  
                  
                  363,752Grants
      receivable from the Chief Scientist
                  
                  
                  400,405Total
      current assets
                  
                  
                  3,174,329
                  
                  
                  
                  5,397,894LONG TERM DEPOSITS(Note
      6b)
                  
                  
                  12,161
                  
                  
                  
                  10,824PROPERTY AND EQUIPMENT, NET(Note 4)
                  
                  
                  75,361
                  
                  
                  
                  98,296Total
      assets
                  
                  $
                  3,261,851
                  
                  
                  $
                  5,507,014Liabilities
      and stockholders' equityCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses (note 9)
                  
                  $
                  321,344
                  
                  
                  $
                  736,052Account
      payable with former shareholder
                  
                  
                  47,252
                  
                  
                  
                  47,252Total
      current liabilities
                  
                  
                  368,596
                  
                  
                  
                  783,304PROVISION
      FOR UNCERTAIN TAX POSITION (Note 12f)
                  
                  
                  147,063
                  
                  
                  
                  130,650COMMITMENTS(Note
      6)STOCKHOLDERS’
      EQUITY:Common
      stock, $ 0.001 par value (200,000,000 authorized shares; 56,456,710 and
      56,252,806 shares issued and outstanding as of August 31, 2009 and 2008,
      respectively)
                  
                  
                  56,456
                  
                  
                  
                  56,252Additional
      paid-in capital
                  
                  
                  12,698,414
                  
                  
                  
                  11,785,012Deficit
      accumulated during the development stage
                  
                  
                  (10,008,678
                  )
                  
                  
                  (7,248,204
                  )Total
      stockholders' equity
                  
                  
                  2,746,192
                  
                  
                  
                  4,593,060Total
      liabilities and stockholders’ equity
                  
                  $
                  3,261,851
                  
                  
                  $
                  5,507,014
 
 The
accompanying notes are an integral part of the financial
statements.
  F-39
  ORAMED
PHARMACEUTICALS, INC.
  (A
Development Stage Company)
  CONSOLIDATED
STATEMENTS OF OPERATIONS
  U.S.
dollars
 
 Periodfrom April12, 2002(inception)Year ended
                      
                      
                      throughAugust 31
                      
                      
                      August 31,2009
                      
                      
                      2008
                      
                      
                      2009RESEARCH AND DEVELOPMENT
      EXPENSES, NET(Note 10)
                      
                      $
                      1,522,188
                      
                      
                      $
                      1,210,494
                      
                      
                      $
                      5,144,859IMPAIRMENT
      OF INVESTMENT
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      434,876GENERAL AND ADMINISTRATIVE
      EXPENSES(note 11)
                      
                      
                      1,261,930
                      
                      
                      
                      1,469,517
                      
                      
                      
                      4,257,551OPERATING
      LOSS
                      
                      
                      2,784,118
                      
                      
                      
                      2,680,011
                      
                      
                      
                      9,837,286FINANCIAL
      INCOME
                      
                      
                      (38,602
                      )
                      
                      
                      (83,185
                      )
                      
                      
                      (136,108
                      )FINANCIAL
      EXPENSE
                      
                      
                      17,555
                      
                      
                      
                      10,281
                      
                      
                      
                      147,933LOSS
      BEFORE TAXES ON INCOME
                      
                      
                      2,763,071
                      
                      
                      
                      2,607,107
                      
                      
                      
                      9,849,111TAXES ON INCOME(note
      12)
                      
                      
                      (2,597
                      )
                      
                      
                      162,164
                      
                      
                      
                      159,567NET
      LOSS FOR THE PERIOD
                      
                      $
                      2,760,474
                      
                      
                      $
                      2,769,271
                      
                      
                      $
                      10,008,678BASIC
      AND DILUTED LOSS PER COMMON SHARE
                      
                      $
                      (0.05
                      )
                      
                      $
                      (0.06
                      )WEIGHTED
      AVERAGE NUMBER OF COMMON STOCK USED IN COMPUTING BASIC AND DILUTED LOSS
      PER COMMON STOCK
                      
                      
                      56,645,820
                      
                      
                      
                      48,604,889
 
 The
accompanying notes are an integral part of the financial
statements.
  F-40
  ORAMED
PHARMACEUTICALS INC.
 (A
development stage company)
 CONSOLIDTAED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 U.S.
dollars
  DeficitaccumulatedAdditional
                        
                        
                        during the
                        
                        
                        TotalCommon Stock
                        
                        
                        paid-in
                        
                        
                        development
                        
                        
                        stockholders'Shares
                        
                        
                        $
                        
                        
                        capital
                        
                        
                        stage
                        
                        
                        equityBALANCE AS OF
      APRIL 12, 2002(inception)
                        
                        
                        34,828,200
                        
                        
                        $
                        34,828
                        
                        
                        $
                        18,872
                        
                        
                        
                        
                        
                        $
                        53,700CHANGES DURING
      THE PERIOD FROM APRIL 12, 2002 THROUGH AUGUST 31, 2007
      (audited):SHARES
      CANCELLED
                        
                        
                        (19,800,000
                        )
                        
                        
                        (19,800
                        )
                        
                        
                        19,800
                        
                        
                        
                        
                        
                        
                        -SHARES
      ISSUED FOR INVESTMENT IN ISTI-NJ
                        
                        
                        1,144,410
                        
                        
                        
                        1,144
                        
                        
                        
                        433,732
                        
                        
                        
                        
                        
                        
                        434,876SHARES
      ISSUED FOR OFFERING COSTS
                        
                        
                        1,752,941
                        
                        
                        
                        1,753
                        
                        
                        
                        (1,753
                        )
                        
                        
                        
                        
                        
                        -SHARES
      ISSUED FOR CASH
                        
                        
                        27,181,228
                        
                        
                        
                        27,181
                        
                        
                        
                        2,095,800
                        
                        
                        
                        
                        
                        
                        2,122,981SHARES
      ISSUED FOR  SERVICES
                        
                        
                        125,000
                        
                        
                        
                        125
                        
                        
                        
                        98,625
                        
                        
                        
                        
                        
                        
                        98,750STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
      DIRECTORS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,968,547
                        
                        
                        
                        
                        
                        
                        1,968,547STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
    CONSULTANTS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        177,782
                        
                        
                        
                        
                        
                        
                        177,782DISCOUNT
      ON CONVERTIBLE NOTE RELATED TO BENEFICIAL CONVERSION
    FEATURE
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        108,000
                        
                        
                        
                        
                        
                        
                        108,000CONTRIBUTIONS
      TO PAID IN CAPITAL
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        18,991
                        
                        
                        
                        
                        
                        
                        18,991COMPREHENSIVE
      LOSS:NET
      LOSS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (4,478,917
                        )
                        
                        
                        (4,478,917
                        )OTHER
      COMPREHENSIVE LOSS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (16
                        )
                        
                        
                        (16
                        )IMPUTED
      INTEREST
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        8,437
                        
                        
                        
                        
                        
                        
                        
                        8,437BALANCE
      AS OF AUGUST 31, 2007
                        
                        
                        45,231,779
                        
                        
                        
                        45,231
                        
                        
                        
                        4,946,833
                        
                        
                        
                        (4,478,933
                        )
                        
                        
                        513,131RECEIPTS
      ON ACCOUNT OF SHARES AND WARRANTS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        6,061
                        
                        
                        
                        
                        
                        
                        
                        6,061SHARES
      ISSUED FOR CONVERSION OF CONVERTIBLE NOTE
                        
                        
                        550,000
                        
                        
                        
                        550
                        
                        
                        
                        274,450
                        
                        
                        
                        
                        
                        
                        
                        275,000SHARES
      AND WARRANTS ISSUED FOR CASH – NET OF ISSUANCE EXPENSES
                        
                        
                        10,178,002
                        
                        
                        
                        10,178
                        
                        
                        
                        5,774,622
                        
                        
                        
                        
                        
                        
                        
                        5,784,800SHARES
      ISSUED FOR  SERVICES
                        
                        
                        293,025
                        
                        
                        
                        293
                        
                        
                        
                        115,817
                        
                        
                        
                        
                        
                        
                        
                        116,110STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
      DIRECTORS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        459,467
                        
                        
                        
                        
                        
                        
                        
                        459,467STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
    CONSULTANTS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        203,982
                        
                        
                        
                        
                        
                        
                        
                        203,982IMPUTED
      INTEREST
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,780
                        
                        
                        
                        
                        
                        
                        
                        3,780NET
      LOSS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,769,271
                        )
                        
                        
                        (2,769,271
                        )BALANCE
      AS OF AUGUST 31, 2008
                        
                        
                        56,252,806
                        
                        
                        
                        56,252
                        
                        
                        
                        11,785,012
                        
                        
                        
                        (7,248,204
                        )
                        
                        
                        4,593,060SHARES
      ISSUED FOR  SERVICES RENDERED
                        
                        
                        203,904
                        
                        
                        
                        204
                        
                        
                        
                        152,724
                        
                        
                        
                        
                        
                        
                        
                        152,928SHARES
      TO BE ISSUED FOR SERVICES RENDERED
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        203,699
                        
                        
                        
                        
                        
                        
                        
                        203,699STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
      DIRECTORS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        436,025
                        
                        
                        
                        
                        
                        
                        
                        436,025STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
    CONSULTANTS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        117,174
                        
                        
                        
                        
                        
                        
                        
                        117,174IMPUTED
      INTEREST
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,780
                        
                        
                        
                        
                        
                        
                        
                        3,780NET
      LOSS
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,760,474
                        )
                        
                        
                        (2,760,474
                        )BALANCE
      AS OF AUGUST 31, 2009
                        
                        
                        56,456,710
                        
                        
                        $
                        56,456
                        
                        
                        $
                        12,698,414
                        
                        
                        $
                        (10,008,678
                        )
                        
                        $
                        2,746,192
  The
accompanying notes are an integral part of the consolidated financial
statements.
  F-41
  ORAMED
PHARMACEUTICALS, INC.
  (A
Development Stage Company)
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
  Period from April
                      12, 2002
                      (inception date)
                      throughYear ended August 31
                    
                    
                    August 31,2009
                    
                    
                    2008
                    
                    
                    2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                    
                    $
                    (2,760,474
                    )
                    
                    $
                    (2,769,271
                    )
                    
                    $
                    (10,008,678
                    )Adjustments
      required to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                    
                    
                    30,488
                    
                    
                    
                    15,454
                    
                    
                    
                    45,942Amortization
      of debt discount
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    108,000Exchange
      differences on long term deposits
                    
                    
                    641
                    
                    
                    
                    (1,642
                    )
                    
                    
                    (1,001
                    )Stock based
      compensation
                    
                    
                    553,199
                    
                    
                    
                    663,449
                    
                    
                    
                    3,362,977Common stock issued for
      services
                    
                    
                    152,928
                    
                    
                    
                    116,110
                    
                    
                    
                    367,788Common stockto beissued for
      services
                    
                    
                    203,699
                    
                    
                    
                    
                    
                    
                    
                    203,699Impairment of
      investment
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    434,876Imputed
      interest
                    
                    
                    3,780
                    
                    
                    
                    3,780
                    
                    
                    
                    15,997Changes in operating assets and
      liabilities:Prepaid
      expenses and other current assets
                    
                    
                    (38,889
                    )
                    
                    
                    (390,668
                    )
                    
                    
                    (441,463
                    )Restricted
      cash
                    
                    
                    (16,000
                    )
                    
                    
                    
                    
                    
                    
                    (16,000
                    )Accounts payable and accrued
      expenses
                    
                    
                    (414,708
                    )
                    
                    
                    395,180
                    
                    
                    
                    321,344Provision for uncertain tax
      position
                    
                    
                    16,413
                    
                    
                    
                    130,650
                    
                    
                    
                    147,063Total
      net cash used in operating activities
                    
                    
                    (2,268,923
                    )
                    
                    
                    (1,836,958
                    )
                    
                    
                    (5,459,456
                    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
                    
                    
                    (7,553
                    )
                    
                    
                    (112,014
                    )
                    
                    
                    (121,303
                    )Short
      term investments
                    
                    
                    (1,000,000
                    )
                    
                    
                    (2,728,000
                    )
                    
                    
                    (3,728,000
                    )Proceeds
      from sale of  short term investments
                    
                    
                    2,728,000
                    
                    
                    
                    
                    
                    
                    
                    2,728,000Lease
      deposits, net
                    
                    
                    (1,978
                    )
                    
                    
                    (3,738
                    )
                    
                    
                    (11,160
                    )Total
      net cash provided by (used in) investing activities
                    
                    
                    1,718,469
                    
                    
                    
                    (2,843,752
                    )
                    
                    
                    (1,132,463
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds from sales of common
      stocks andwarrants
      -net of issuance
      expenses
                    
                    
                    
                    
                    
                    
                    5,029,801
                    
                    
                    
                    7,961,481Receipts on account of shares
      issuances
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    6,061Proceeds from convertible
      notes
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    275,000Proceeds from short term note
      payable
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    120,000Payments of short term note
      payable
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (120,000
                    )Shareholder
      advances
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    66,243Net
      cash provided by financing activities
                    
                    
                    
                    
                    
                    
                    5,029,801
                    
                    
                    
                    8,308,785INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    
                    (550,454
                    )
                    
                    
                    349,091
                    
                    
                    
                    (550,454
                    )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                    
                    
                    2,267,320
                    
                    
                    
                    1,918,229CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                    
                    $
                    1,716,866
                    
                    
                    $
                    2,267,320
                    
                    
                    $
                    1,716,866Non
      cash investing and financing activities:Receipts on account of shares issuance - reclassified from liability
      to
                      shareholder's equity
                    
                    
                    
                    
                    
                    $
                    6,061Stock issued for receipts on account of shares issuance and convertible
      notes
                    
                    
                    
                    
                    
                    $
                    1,030,000Discount
      on convertible note related to beneficial conversion
    feature
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    108,000Shares
      issued for offering costs
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    1,753Contribution
      to paid in capital
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    18,991
 
 The
accompanying notes are an integral part of the financial
statements.
  F-42
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
1 -  SIGNIFICANT ACCOUNTING POLICIES:
 
 a.
                General:
  OramedPharmaceuticals Inc. (the “Company”)was incorporated on April 12, 2002, under the laws of the State of
Nevada. From incorporation until March 3, 2006, the Company was an exploration
stage company engaged in the acquisition and exploration of mineral properties.
On March 8, 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
tobe used for the
treatment of individuals with diabetes, see also note 6a.
  The
Company has been in the development stage since its formation and has not yet
generated any revenues from its planned operations.
  On May 14, 2007, the Company
incorporated a wholly-owned subsidiary in Israel, Oramed Ltd., which is engaged
in research and development. Unless the context indicates otherwise, the term
“Group” refers to Oramed Pharmaceuticals Inc. and its Israeli subsidiary, Oramed
Ltd (the “Subsidiary”).
  The group is engaged in research and
development in the biotechnology field and is considered a development stage
company in accordance with Statement of financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by
Development Stage Enterprises”.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has net losses for the
period from inception (April 12, 2002) through August 31, 2009 of
$10,008,678, as well as negative cash flow from operating
activities. Presently, the Company does not have sufficient cash resources to
meet its requirements in the twelve months following September 1, 2009. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management is in the process of evaluating various financing
alternatives as the Company will need to finance future research and development
activities and general and administrative expenses through fund raisingin
the public or private equity markets. Although there is no assurance that the
Company will be successful with those initiatives, management believes that it
will be able to secure the necessary financing as a result of ongoing financing
discussions with third party investors, existing shareholders, as well as on
going funding from the Office of the Chief Scientist  ("OCS"), (see
note 6h).
  These
consolidated financial statements do not include any adjustments that may be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent on its ability to obtain
additional financing as may be required and ultimately to attain
profitability.
  F-43
  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 United States 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 and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the financial statement 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 based compensation.
 
 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 are translated into dollars using
historical and current exchange rates for non-monetary and monetary balances,
respectively. For foreign transactions 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 as depreciation)
– historical exchange rates. The resulting transaction gains or losses are
carried to financial income or expenses, as appropriate.
  e.
                Principles
      of consolidation
  The
consolidated financial statements include the accounts of the Company and its
subsidiary. All inter-company transactions and balances have been eliminated in
consolidation.
 
 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
  F-44
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 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 the financial accounting and
tax bases of assets and liabilities under the applicable tax laws. Deferred tax
balances are computed using the tax 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. The
Company has provided a full valuation allowance with respect to its deferred tax
assets.
  Regarding
the Subsidiary, paragraph 9(f) of FAS 109, “Accounting for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were not
reflected in the computation of deferred tax assets and liabilities
  2.  Uncertainty in income tax
 As of
September 1, 2007, the Company adopted FASB Interpretation No. 48, ‘‘Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109’’
(‘‘FIN 48’’). FIN 48 specifies how tax benefits for uncertain tax positions are
to be recognized, measured and derecognized in financial statements; requires
certain disclosures of uncertain tax positions; specifies how reserves for
uncertain tax positions should be classified on the balance sheet; and provides
transition and interim-period guidance, among other provisions. On May 2, 2007,
the FASB issued FASB Staff Position No. FIN 48-1, ‘‘Definition of Settlement in
FASB Interpretation No. 48-1’’ (‘‘FSP FIN 48-1’’). FSP FIN 48-1 provides
guidance regarding how an entity should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits.
 
 h.
                Research
      and development
 
 Research
and development expenses include costs directly attributable to the conduct of
research and development programs, including the cost of salaries, employee
benefits, costs of 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-party contractors. The Company out sources a
substantial portion of its clinical trial activities, utilizing external
entities such as contract research organizations, independent clinical
investigators, and other third-party service providers to assist the Company
with the execution of its clinical studies. For each clinical trial that the
Company conducts, certain clinical 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 which patients enter the trial, and the period over which
clinical investigators or contract research organizations are expected to
provide services.
  F-45
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 Clinical
activities which relate principally to clinical sites and other administrative
functions to manage the Company’s clinical trials are performed primarily by
contract research organizations (“CROs”). CROs typically perform most of the
start-up activities for the Company’s trials, including document preparation,
site identification, screening and preparation, pre-study visits, training, and
program management.
 
 Grants
received from the OCS are recognized when the grants become receivable, provided
there is reasonable assurance that the Company will comply with the conditions
attached to the grant and there is reasonable assurance the grant will be
received. The grants are deducted from the related research and development
expenses as the costs are incurred. See also note 6h.
 
 i.
                Cash
      equivalents
 
 The
Company considers all short term, highly liquid investments, which include
short-term deposits with original maturities of three months or less from the
date of purchase that are not restricted as to withdrawal or use and are readily
convertible to known amounts of cash, to be cash equivalents.
 
 j.
                Comprehensive
      loss
 
 The
      Company has no other comprehensive loss components other than net loss for
      the fiscal years of 2008 and 2009.
 
 k.
                Loss
      per share
  Basic and
diluted net losses per share of common stock are computed by dividing the net
loss for the period by the weighted average number of shares of common stock
outstanding and shares relating to receipts on account of shares in equity
during the period. Outstanding stock options,  warrants and
convertible notes have been excluded from the calculation of the diluted loss
per share because all such securities are anti-dilutive for all periods
presented. The total number of common stock options, warrants and convertible
notes excluded from the calculation of diluted net loss was 18,017,697 for the
year ended August 31, 2009 (16,611,697 for the year ended August 31,
2008).
  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 that the carrying amount of the
assets may not be recoverable. In the event the sum of the expected future cash
flows (undiscounted and without 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.
  F-46
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
  m.
                Stock
      based compensation
  The
Company accounts for share based payments in accordance with Statement of
Financial Accounting Standards No. 123 (revised 2004), “Share-based Payment”
(“SFAS 123R”). SFAS 123R requires awards classified as equity awards be
accounted for using the grant-date fair value method. The fair value of
share-based payment transactions is recognized as an expense over the requisite
service period, net of estimated forfeitures. The Company estimated forfeitures
based 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 using the accelerated method 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 for based on the fair
value of the consideration received or the fair value of the stock options
issued, whichever is more reliably measurable, pursuant to the guidance in
Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services” (EITF 96-18). 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 service period using the straight-line
method.
  F-47
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 n.
                Fair
      value measurement:
  On
September 1, 2008, the Company adopted the methods of fair value as described in
SFAS No. 157 (“SFAS 157”), which defines fair value, establishes a framework for
measuring fair value in accordance with GAAP and expands disclosure about fair
value measurements to value its financial assets and liabilities. As defined in
SFAS No. 157, fair value is based on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. In order to increase consistency and
comparability in fair value measurements, SFAS No. 157 establishes a fair value
hierarchy that prioritizes observable and unobservable inputs used to measure
fair value into three broad levels, which are described as follows:
  Level 1:
                  Quoted
      prices (unadjusted) in active markets that are accessible at the
      measurement date for assets or liabilities. The fair value hierarchy gives
      the highest priority to Level 1
inputs.
  Level 2:
                  Observable
      prices that are based on inputs 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 priority to Level 3
  inputs.
  As of
August 31, 2009 the only assets or liabilities measured at fair value comprise
of derivatives, which have a negligible fair value, measured based on observable
prices (level 2).
  In order
to secure the fulfillment of the Company’s obligations under the derivatives
agreements, the Company has placed a deposit with the bank in an amount of
$16,000.
  The
adoption of SFAS 157 did not have a material impact on the Company’s results of
operations and financial condition.
  o.
                Concentration
      of credit risks
  Financial
instruments that subject the Company to credit risk consist primarily of cash
and cash equivalents and deposit, which are deposited in major financial
institutions. The company is in the opinion the credit risk in respect of these
balances is remote.
  F-48
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 p.
                Newly
      issued  and recently adopted accounting
      pronouncements:
  1.
                In
      May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”).
      SFAS 165 sets forth the period after the balance sheet date during which
      management of a reporting entity should evaluate events or transactions
      that may occur for potential recognition or disclosure in the financial
      statements, the circumstances under which an entity should recognize
      events or transactions occurring after the balance sheet date in its
      financial statements, and the disclosures that an entity should make about
      events or transactions that occurred after the balance sheet date. SFAS
      165 will be effective for interim or annual periods ending after June 15,
      2009 and will be applied prospectively. The Company adopted the provisions
      of FAS 165. The adoption of SFAS No. 165 did not have a material impact on
      the Company’s condensed financial condition, results of operations or cash
      flows.
  2.
                In
      June 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards
      Codification and the Hierarchy of Generally Accepted Accounting Principles
      — A Replacement of FASB Statement No. 162” (“SFAS 168”). Statement 168
      establishes the FASB Accounting Standards CodificationTM (Codification) as
      the single source of authoritative U.S. generally accepted accounting
      principles (U.S. GAAP) recognized by the FASB to be applied by
      nongovernmental entities. Rules and interpretive releases of the SEC under
      authority of federal securities laws are also sources of authoritative
      U.S. GAAP for SEC registrants. SFAS 168 and the Codification are effective
      for financial statements issued for interim and annual periods ending
      after September 15, 2009. When effective, the Codification will supersede
      all existing non-SEC accounting and reporting standards. All other
      nongrandfathered non-SEC accounting literature not included in the
      Codification will become nonauthoritative. Following SFAS 168, the FASB
      will not issue new standards in the form of Statements, FASB Staff
      Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will
      issue Accounting Standards Updates, which will serve only to: (a) update
      the Codification; (b) provide background information about the guidance;
      and (c) provide the bases for conclusions on the change(s) in the
      Codification. The Company does not expect that the adoption of SFAS 168 to
      have a material impact on the Company’s financial
    statements.
  q.
                Reclassifications
  Certain
figures in respect of prior years have been reclassified to conform to the
current year presentation.
  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 US Dollars and bear interest of
1.4% and 2.56%-2.66% per annum as of August 31, 2009 and 2008,
respectively.
  F-49
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (continued)
  NOTE
3 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
  The
financial instruments of the Group consist mainly of cash and cash equivalents,
current receivables and accounts payable and accruals.
  The fair
value of the financial instruments included in the working capital of the Group
is identical or close to their carrying value.
  NOTE
4 - PROPERTY AND EQUIPMENT, Net:
  a.
                Composition
      of property and equipment, grouped by major classifications, is as
      follows:
  August
      312009
                      
                      
                      2008Cost:Leasehold
      improvements
                      
                      $
                      76,029
                      
                      
                      $
                      76,029Office
      furniture and equipment
                      
                      
                      19,941
                      
                      
                      
                      17,684Computers
      and peripheral equipment
                      
                      
                      25,333
                      
                      
                      
                      20,037121,303
                      
                      
                      
                      113,750Less
      - accumulated depreciation and amortization
                      
                      
                      45,942
                      
                      
                      
                      15,454$
                      75,361
                      
                      
                      $
                      98,296
  b.
                Depreciation
      expense totaled $30,488 and $15,454  in the years ended August
      31, 2009 and 2008, respectively.
  NOTE
5 - CONVERTIBLE NOTES
  In
February 2007,the Company borrowed
$125,000 on a convertible note without interest, due on demand and unsecured.
The note is convertible at $0.50 per share. The Company analyzed the note under
EITF 98-5 and EITF 00-27 todetermine if it
contained a beneficial conversion feature. It was determined the note did
contain a beneficial conversion feature with an intrinsic value of $60,000.
Because the note is due on demand, the entire amount of the beneficial
conversion feature was amortized immediately to interest
expense.
  In May
2007, the Company borrowed $150,000 on a convertible note without interest, due
on demand and unsecured. The note is convertible at $0.50 per share. The Company
analyzed the note under EITF 98-5 and EITF 00-27 to determine if it contained a
beneficial conversion feature. It was determined the note did contain a
beneficial conversion feature with an intrinsic value of $48,000. Because the
note is due on demand, the entire amount of the beneficial conversion feature
was amortized immediately to interest expense.
 
 The
Company analyzed the conversion option of both notes and determined it did not
require derivative treatment under FAS 133 and EITF 00–19.
 
 During
the year ended August 31, 2008, the Company received conversion notices
regarding the above mentioned convertible notes. The common stocks underlying
the convertible notes were issued on July 1, 2008.
  F-50
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
  NOTE
6 - COMMITMENTS:
  a.
                Under
      the terms of the First Agreement with Hadasit (note 1a above), the Company
      retained Hadasit to provide consulting and clinical trial services. As
      remuneration for the services provided under the agreement, Hadasit is
      entitled to $200,000. The primary researcher for Hadasit is Dr. Miriam
      Kidron, a director and officer of the Company. The funds paid to Hadasit
      under the agreement are deposited by Hadasit 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.
  On
January 7, 2009, the Company entered into a second agreement with Hadasit (the
“Second Agreement”) to provide for the closing referenced in the First
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 First Agreement to the Company, and certain other patents filed by the
Company after the First Agreement as a result of the collaboration between the
Company and Hadasit.
  On July
8, 2009 the Company entered into a third agreement with Hadasit, Prof. Itamar
Raz and Dr. Miriam Kidron ("the Third Agreement"), to provide consulting and
clinical trial services. According to the Third Agreement, Hadasit will be
entitled to a total consideration of $400,000 to be paid by Oramed. $200,000 of
this amount was agreed in the terms of the First Agreement, and the remaining of
$200,000 will be paid in accordance with the actual progress of the study. The
total amount that was paid through August 31, 2009 was $229,255.
 
 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, 2009 and 2008 were $44,092 and $20,325,
respectively. The future lease payments under the lease agreement are $39,812,
$21,527 and $8,629 for the years ending August 31, 2010, 2011 and 2012
respectively.
  As
security for its obligation under the lease agreements the Subsidiary deposited
$12,161, 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 period of 51
      months, and will end at December 31, 2011. The monthly lease payment is
      2,396 NIS and is linked to the increase in the Israeli consumer price
      index, (as of August 31, 2009 the monthly payment in the Company's
      functional currency is $629, the future annual lease payment under the
      agreement are $7,548).
  As
security for its obligation under this lease agreement the Company provided a
bank guarantee in an amount equal to three monthly lease payments.
  F-51
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 6 - COMMITMENTS(continued):
 
 d.
                During
      January and April 2008 the Company entered into agreements with OnQ
      consulting, a clinical research organization (CRO) located in
      Johannesburg, South Africa, to conduct Phase 1B and 2B clinical trials on
      its oral insulin capsules. The total cost estimated for the studies is
      $229,681 of which $107,599 was paid through August 31,
    2009.
 
 e.
                As
      to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note
      8a.
 
 f.
                On
      September 8, 2008, the Company entered into Clinical Research agreement
      with ETI Karle Clinical Pvt. Ltd. (“ETI”), pursuant to the agreement ETI
      will be conducting clinical trials for the Company in India. In
      consideration for the services provided under the agreement, ETI will be
      entitled to estimated cash compensation of $227,604, of
      which  $45,038 was paid though August 31,
  2009.
 
 g.
                On
      April 22, 2009, the subsidiary entered into a consulting service agreement
      withADRES
      Advanced Regulatory Services Ltd. (“ADRES”) pursuant to which ADRES
      will provide consulting services relating to quality assurance and
      regulatory processes and procedures in order to assist the subsidiary in
      submission of a U.S. IND according to FDA regulations. In consideration
      for the services provided under the agreement, ADRES will be entitled to a
      total cash compensation of $211,000, of which the amount $110,000
      will be paid as a monthly fixed fee of $10,000 each month for 11 months
      commencing May 2009, and the remaining $101,000 will be paid based on
      achievement of certain milestones. $50,000 of the total amount was paid
      though August 31, 2009.
 
 h.
                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 and development 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 was partly 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 developed from a project so funded, up to 100%
of the amount of the grant received by the company (dollar linked) with the
addition of annual interest at a rate based on LIBOR.
 
 At August
31, 2009, the subsidiary has not yet realized any revenues from the said project
and did not incur any royalty liability.
  F-52
 ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE
7 - 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, 2009 and 2008:
  a.
                  On
      July 14, 2008, the Company entered into a Securities Purchase Agreement
      with twenty-nine accredited investors for the sale of 8,524,669 units at a
      purchase price of $0.60 per unit for total consideration of $5,114,799.
      Each unit consisted of one share of the Company's common stock and one
      common stock purchase warrant. Each warrant entitles the holder to
      purchase half a share of common stock exercisable for three years at an
      exercise price of $0.90 per
share.
 No
warrants were exercised throughout August 31, 2009.
 
 The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to the warrants was estimated by using the Black
Scholes option-pricing model at $1,124,564 and was based on the following
assumptions: dividend yield of 0%; expected volatility of 117.9%; risk-free
interest rates of 2.8%; and expected lives of 3 years.
 
 As
finders fee, in connection with the securities purchase agreement, the Company
paid $85,000 cash fee to a director (see note 13a), as well as issued 143,333
shares of the Company's common stock for other individuals.
  b.
                  As to shares issued as part of
      stock based compensation plan see Note
8.
  c.
                  As
      to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note
      8a.
 
 NOTE
8 - 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 Board of 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 for each 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 on a historical
volatility, by statistical analysis of the daily share price for past periods.
The expected term is the length of time until the expected dates of exercising
the options, based on estimated data regarding employees’ exercise
behavior.
  F-53
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
  NOTE 8 - STOCK BASED COMPENSATION(continued):
 
 The
following are stock options and warrants transactions made during the years
ended August 31, 2008 and 2009:
  a.
                On
      October 30, 2006 the Company entered into a Clinical Trial Manufacturing
      Agreement with Swiss Caps AG (“Swiss”), pursuant to
      which Swiss would manufacture and deliver the oral insulin capsule
      developed by the Company. In consideration for the services being provided
      to the Company by Swiss, the Company agreed to pay a certain predetermined
      amounts which are to be paid in common stocks of the Company, the number
      of stocks to be issued is based on the invoice received from Swiss, and
      the stock market price 10 days after the invoice was issued. The Company
      accounted the transaction with Swiss according to FAS 150 "Accounting for Certain
      Financial Instruments with Characteristics of both Liabilities and
      Equity".
  During
the years ended on August 31 2008 and 2009, the Company issued 283,025 and
203,904 shares of its common stock, respectively, to Swiss as remuneration for
the services provided in the amount of $113,210 and $152,928, respectively. As
for shares issued following August 31, 2009 see note 14.
  b.
                On
      September 4, 2007, 300,000 options were granted to two outside
      consultants, at an exercise price of $0.45 per share (equivalent to the
      traded market price on the date of grant), the options vest in twelve
      equal monthly installments over the first year and those options expired
      on September 4, 2009. On September 4, 2009, these options were
      expired.
  c.
                On
      October 30, 2007, 100,000 options were granted to an advisory board
      member, at an exercise price of $0.76 per share (over the traded market
      price on the date of grant), the options vest in eighteen equal monthly
      installments from the date of grant and expire on October 30,
      2010.
  d.
                On
      May 7, 2008, an aggregate of 1,728,000 options were granted to Nadav
      Kidron, the Company’s President, Chief Executive Officer and director, and
      Miriam Kidron, the Company’s Chief Medical and Technology Officer and
      director, both are related parties through KNRY Ltd. (see note 13c), at an
      exercise price of $0.54 per share (equivalent to the traded market price
      on the date of grant), 288,000 of the options vested immediately on the
      date of grant and the remainder will vest in twenty equal monthly
      installments. These options expire on May 7,
  2018.
  e.
                On
      July 17, 2008, 100,000 options were granted to an advisory board member,
      at an exercise price of $0.62 per share (equivalent to the traded market
      price on the date of grant), the options vest in four equal quarterly
      installments commencing on September 17, 2008 and expire on July 17,
      2011.
  f.
                On
      October 12, 2008, 828,000 options were granted to an employee of the
      subsidiary, at an exercise price of $0.47 per share (equivalent to the
      traded market price on the date of grant). The options vest in three equal
      annual installments commencing on November 1, 2009 and expire on October
      11, 2018. On March 31, 2009 the employee ended his services with the
      Company and the options were forfeited before they had vested. The Company
      recognized an expense of $71,406 during the six months ended February 28,
      2009 and reversed that expense in the three months ended May 31, 2009.
  F-54
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 8 - STOCK BASED COMPENSATION(continued):
  g.
                On
      October 12, 2008, 56,000 options were granted to an employee of the
      subsidiary, at an exercise price of $0.47 per share (equivalent to the
      traded market price on the date of grant). The options vest in two equal
      annual installments commencing on May 1, 2009 and expire on October 11,
      2018.
  h.
                On
      January 11, 2009, an aggregate of 600,000 options were granted to two
      Board of Directors members and 150,000 options were granted to an employee
      of the subsidiary. All 750,000 options were granted  at an
      exercise price of $0.43 per share (equivalent to the traded market price
      on the date of grant). The options vest in three equal annual installments
      commencing on January 1, 2010 and expire on January 10, 2019. On May 31,
      2009 such employee left the Company and the options were forfeited before
      they had vested. The Company recognized an expense of $4,354 during the
      year and reversed that expense.
  i.
                On
      January 11, 2009, an aggregate of 300,000 options were granted to three
      Scientific Advisory Board members, at an exercise price of $0.76 per share
      (higher than the traded market price on the date of grant) The options
      vest in four equal quarterly installments commencing on April 1, 2009 and
      expire on January 10, 2019.
  j.
                On
      June 3, 2009, 400,000 options were granted to an employee of the
      subsidiary, at an exercise price of $0.47 per share (equivalent to the
      traded market price on the date of grant). The options vest in three equal
      annual installments, commencing October 19, 2010, and expire on October
      19, 2019.
  k.
                On
      August 20, 2009, 100,000 options were granted to an employee of the
      subsidiary, at an exercise price of $0.42 per share (equivalent to the
      traded market price on the date of grant). The options vest in three equal
      annual installments commencing August 20, 2010, and expire on August 20,
      2019.
  F-55
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 8 - STOCK BASED COMPENSATION(continued):
 
 The fair
value of each option grant is estimated on the date of grant using the Black
Scholes option-pricing model with the following assumptions:
 
 For options granted inyear ended August 312009
                                          
                                          
                                          2008Expected
      option life (years)
                                          
                                          1.0-9.8
                                          
                                          
                                          1.0-5.4Expected
      stock price volatility (%)
                                          
                                          113.1-130.5
                                          
                                          
                                          116.3-118.0Risk
      free interest rate (%)
                                          
                                          0.7-3.6
                                          
                                          
                                          2.2-3.4Expected
      dividend yield (%)
                                          
                                          0.0
                                          
                                          
                                          0.0
  A summary
of the status of the stock options granted to employees and directors as of
August 31, 2009 and 2008, and changes during the year ended on those dates, is
presented below:
  Year ended August 31,2009
                    
                    
                    2008Weighted
                    
                    
                    
                    
                    
                    WeightedNumber
                    
                    
                    average
                    
                    
                    Number
                    
                    
                    averageof
                    
                    
                    exercise
                    
                    
                    of
                    
                    
                    exerciseoptions
                    
                    
                    price
                    
                    
                    options
                    
                    
                    price$
                    
                    
                    
                    
                    
                    
                    $Options
      outstanding atbeginning
      of year
                    
                    
                    7,289,360
                    
                    
                    
                    0.29
                    
                    
                    
                    5,561,360
                    
                    
                    
                    0.21Changes
      during the year:Granted
      – at market price
                    
                    
                    2,134,000
                    
                    
                    
                    0.45
                    
                    
                    
                    1,728,000
                    
                    
                    
                    0.54Forfeited
                    
                    
                    (978,000
                    )
                    
                    
                    0.46Options
      outstanding at endof
      year
                    
                    
                    8,445,360
                    
                    
                    
                    0.31
                    
                    
                    
                    7,289,360
                    
                    
                    
                    0.29Options
      exercisable at endof
      year
                    
                    
                    7,001,360
                    
                    
                    
                    
                    
                    
                    
                    6,137,360Weighted
      average fairvalue
      of options grantedduring
      the year
                    
                    $
                    0.45
                    
                    
                    
                    
                    
                    
                    $
                    0.45
  F-56
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 8 - STOCK BASED COMPENSATION(continued):
 
 Costs
incurred in respect of stock based compensation for employees and directors, for
year ended August 31, 2009 and 2008 were $436,025 and $459,467,
respectively.
 
 The
following table presents summary information concerning the options outstanding
as of August 31, 2009:
 
 WeightedAverage
                            
                            
                            WeightedRange of
                            
                            
                            
                            
                            Remaining
                            
                            
                            averageexercise
                            
                            Number
                            
                            
                            Contractual
                            
                            
                            exercise
                            
                            
                            Aggregateprices
                            
                            outstanding
                            
                            
                            Life
                            
                            
                            price
                            
                            
                            intrinsic value$
                            
                            
                            
                            
                            
                            Years
                            
                            
                            $
                            
                            
                            $0.001
                            
                            
                            3,361,360
                            
                            
                            
                            2.95
                            
                            
                            
                            0.001
                            
                            
                            
                            1,542,8640.45
      to 0.62
                            
                            
                            4,584,000
                            
                            
                            
                            6.80
                            
                            
                            
                            0.43
                            
                            
                            
                            39,0000.76
      to 0.90
                            
                            
                            500,000
                            
                            
                            
                            0.23
                            
                            
                            
                            0.76
                            
                            
                            
                            -8,445,360
                            
                            
                            
                            5.12
                            
                            
                            
                            0.29
                            
                            
                            
                            1,581,864
 
 The
following table presents summary information concerning the options exercisable
as of August 31, 2009:
 
 WeightedAverage
                          
                          
                          WeightedRange of
                          
                          
                          
                          
                          Remaining
                          
                          
                          averageexercise
                          
                          Number
                          
                          
                          Contractual
                          
                          
                          exercise
                          
                          
                          Aggregateprices
                          
                          exercisable
                          
                          
                          Life
                          
                          
                          price
                          
                          
                          intrinsic value$
                          
                          
                          
                          
                          
                          Years
                          
                          
                          $
                          
                          
                          $0.001
                          
                          
                          3,361,360
                          
                          
                          
                          2.95
                          
                          
                          
                          0.001
                          
                          
                          
                          1,542,8640.45
      to 0.62
                          
                          
                          3,140,000
                          
                          
                          
                          5.57
                          
                          
                          
                          0.49
                          
                          
                          
                          17,0000.76
      to 0.90
                          
                          
                          500,000
                          
                          
                          
                          0.23
                          
                          
                          
                          0.76
                          
                          
                          
                          -7,001,360
                          
                          
                          
                          4.26
                          
                          
                          
                          0.24
                          
                          
                          
                          1,559,864
  Unrecognized
compensation as determined under FAS 123R as of August 31, 2009 totaled $65,094,
to be recorded over the next 4 months.
  F-57
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 8 - STOCK BASED COMPENSATION(continued):
  A summary
of the status of the stock options granted to non-employees as of August 31,
2009, and changes during the year ended on this date, is presented
below:
  Year ended August 312009
                    
                    
                    2008Weighted
                    
                    
                    
                    
                    
                    WeightedNumber
                    
                    
                    average
                    
                    
                    Number
                    
                    
                    averageof
                    
                    
                    exercise
                    
                    
                    of
                    
                    
                    exerciseoptions
                    
                    
                    price
                    
                    
                    options
                    
                    
                    price$
                    
                    
                    
                    
                    
                    
                    $Options
      outstanding atbeginning of
    year
                    
                    
                    900,000
                    
                    
                    
                    0.65
                    
                    
                    
                    750,000
                    
                    
                    
                    0.76Changes
      during the year:Granted – at market
      price
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    150,000
                    
                    
                    
                    0.71Granted – at an
      exerciseprice above
    marketPrice
                    
                    
                    300,000
                    
                    
                    
                    0.76
                    
                    
                    
                    400,000
                    
                    
                    
                    0.53Expired
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (400,000
                    )
                    
                    
                    0.76Options
      outstanding at endof year
                    
                    
                    1,200,000
                    
                    
                    
                    0.68
                    
                    
                    
                    900,000
                    
                    
                    
                    0.65Options
      exercisable at endof year
                    
                    
                    900,000
                    
                    
                    
                    
                    
                    
                    
                    733,333
 
 The
Company recorded stock compensation of $117,174 and $203,982 during the year
ended August 31, 2009 and 2008 respectively, related to consulting
services.
 
 The
following table presents summary information concerning the options granted to
non-employees outstanding as of August 31, 2009:
 
 WeightedAverage
                          
                          
                          WeightedRange of
                          
                          
                          
                          
                          Remaining
                          
                          
                          averageexercise
                          
                          Number
                          
                          
                          Contractual
                          
                          
                          exercise
                          
                          
                          Aggregateprices
                          
                          outstanding
                          
                          
                          Life
                          
                          
                          price
                          
                          
                          intrinsic value$
                          
                          
                          
                          
                          
                          Years
                          
                          
                          $
                          
                          
                          $0.45
      to 0.62
                          
                          
                          400,000
                          
                          
                          
                          0.48
                          
                          
                          
                          0.49
                          
                          
                          
                          3,0000.76
      to 0.90
                          
                          
                          800,000
                          
                          
                          
                          3.85
                          
                          
                          
                          0.77
                          
                          
                          
                          -1,200,000
                          
                          
                          
                          2.73
                          
                          
                          
                          0.68
                          
                          
                          
                          3,000
  F-58
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 8 - STOCK BASED COMPENSATION(continued):
  The
following table presents summary information concerning the options exercisable
as of August 31, 2008:
  WeightedAverage
                          
                          
                          WeightedRange of
                          
                          
                          
                          
                          Remaining
                          
                          
                          averageexercise
                          
                          Number
                          
                          
                          Contractual
                          
                          
                          exercise
                          
                          
                          Aggregateprices
                          
                          exercisable
                          
                          
                          Life
                          
                          
                          price
                          
                          
                          intrinsic value$
                          
                          
                          
                          
                          
                          Years
                          
                          
                          $
                          
                          
                          $0.45
      to 0.62
                          
                          
                          400,000
                          
                          
                          
                          0.48
                          
                          
                          
                          0.49
                          
                          
                          
                          3,0000.76
      to 0.90
                          
                          
                          500,000
                          
                          
                          
                          0.55
                          
                          
                          
                          0.77
                          
                          
                          
                          -900,000
                          
                          
                          
                          0.52
                          
                          
                          
                          0.65
                          
                          
                          
                          3,000
  NOTE
9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
 Year endedAugust 31,2009
                      
                      
                      2008Service
      providers
                      
                      $
                      274,291
                      
                      
                      $
                      635,762Tax
      provisions
                      
                      
                      12,504
                      
                      
                      
                      31,514Related
      parties
                      
                      
                      
                      
                      
                      
                      28,062Payroll
      and related expenses
                      
                      
                      34,547
                      
                      
                      
                      40,714$
                      321,344
                      
                      
                      $
                      736,052
 
 NOTE
10 - RESEARCH AND DEVELOPMENT EXPENSES:
 
 Periodfrom April12, 2002(inception)Year ended
                                  
                                  
                                  throughAugust 31,
                                  
                                  
                                  August 31,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009Clinical
      trials
                                  
                                  $
                                  1,304,779
                                  
                                  
                                  $
                                  538,056
                                  
                                  
                                  $
                                  2,368,105Payroll
      and consulting fees
                                  
                                  
                                  272,116
                                  
                                  
                                  
                                  240,209
                                  
                                  
                                  
                                  695,578Costs
      for registration of patents
                                  
                                  
                                  17,775
                                  
                                  
                                  
                                  89,645
                                  
                                  
                                  
                                  118,465Compensation
      costs in respect of warrantsgranted
      to employees, directors andconsultants
                                  
                                  
                                  264,861
                                  
                                  
                                  
                                  285,336
                                  
                                  
                                  
                                  2,216,663Other
                                  
                                  
                                  63,062
                                  
                                  
                                  
                                  57,248
                                  
                                  
                                  
                                  146,453Less
      – grants from the OCS
                                  
                                  
                                  (400,405
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (400,405
                                  )$
                                  1,522,188
                                  
                                  
                                  $
                                  1,210,494
                                  
                                  
                                  $
                                  5,144,859
  F-59
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE
11 - GENERAL AND ADMINISTRATIVE EXPENSES
 
 Periodfrom April12, 2002(inception)Year ended
                        
                        
                        throughAugust 31
                        
                        
                        August 31,2009
                        
                        
                        2008
                        
                        
                        2009Compensation
      costs in respect of warrantsgranted
      to employees, directors andconsultants
                        
                        $
                        288,338
                        
                        
                        $
                        378,113
                        
                        
                        $
                        1,146,314Professional
      services
                        
                        
                        240,523
                        
                        
                        
                        391,309
                        
                        
                        
                        1,011,802Consulting
      fees
                        
                        
                        155,359
                        
                        
                        
                        151,037
                        
                        
                        
                        480,678Travel
      costs
                        
                        
                        132,531
                        
                        
                        
                        141,862
                        
                        
                        
                        410,704Write
      off of debt
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        275,000Business
      development
                        
                        
                        73,286
                        
                        
                        
                        154,357
                        
                        
                        
                        227,643Payroll
      and related expenses
                        
                        
                        205,122
                        
                        
                        
                        95,244
                        
                        
                        
                        300,366Insurance
                        
                        
                        25,068
                        
                        
                        
                        23,630
                        
                        
                        
                        48,698Other
                        
                        
                        141,703
                        
                        
                        
                        133,965
                        
                        
                        
                        356,346$
                        1,261,930
                        
                        
                        $
                        1,469,517
                        
                        
                        $
                        4,257,551
 
 NOTE
12 - TAXES ON INCOME:
 
 Taxes on
income included in the consolidated statements of operations represent current
taxes due to taxable income of the US Company and its subsidiary.
 
 a.
                Corporate
      taxation in the U.S.
 
 The
applicable corporate tax rate for the Company is 35%.
 
 As of
August 31, 2009, the Company has an accumulated tax loss carryforward of
approximately $3,606,510 (August 31, 2008 approximately - $3,425,168). Under USA
tax laws, carryforward tax losses expire 20 years after the year in which it
incurred, in the case of the 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 2009 is 26%.
 
 On
July 23, 2009, the Economic Efficiency (Legislation Amendments to the
Implementation of the Economic Plan for the Years 2009 and 2010) Law, 2009
(hereinafter – the 2009 Amendment) was published in the Official
Gazette.  Inter alia, the 2009 Amendment provides for a further
gradual reduction of the corporate tax rate in tax years 2011 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, 2009, the Subsidiary has an accumulated tax loss carryforward of
approximately $1,115,041.
  F-60
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 12 - TAXES ON INCOME(continued):
 
 c.
                Deferred
      income taxes:
  August 312009
                    
                    
                    2008In
      respect of:Net
      operating loss carryforward
                    
                    $
                    1,507,587
                    
                    
                    $
                    1,194,401Less
      - Valuation allowance
                    
                    
                    (1,507,587
                    )
                    
                    
                    (1,194,401
                    )Net
      deferred tax assets
                    
                    
                    -,-
                    
                    
                    
                    -,-
  Realization
of deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. As the achievement of required future
taxable income is uncertain, the Company recorded a full valuation
allowance.
 
 d.
                Income
      loss before taxes on income and income taxes included in the income
      statements:
  PeriodfromApril12, 2002(inception)Year ended
                                                  
                                                  
                                                  throughAugust 31
                                                  
                                                  
                                                  August 31,2009
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2009Loss
      before taxes on income:U.S.
                                                  
                                                  $
                                                  248,890
                                                  
                                                  
                                                  $
                                                  2,315,686
                                                  
                                                  
                                                  $
                                                  7,134,126Outside
      U.S.
                                                  
                                                  
                                                  2,514,181
                                                  
                                                  
                                                  
                                                  291,421
                                                  
                                                  
                                                  
                                                  2,877,1492,763,071
                                                  
                                                  
                                                  
                                                  2,607,107
                                                  
                                                  
                                                  
                                                  10,011,275Taxes
      on income:Current:U.S.
                                                  
                                                  
                                                  16,664
                                                  
                                                  
                                                  
                                                  39,799
                                                  
                                                  
                                                  
                                                  56,463Outside
      U.S.
                                                  
                                                  
                                                  (19,261
                                                  )
                                                  
                                                  
                                                  122,365
                                                  
                                                  
                                                  
                                                  103,104$
                                                  (2,597
                                                  )
                                                  
                                                  $
                                                  162,164
                                                  
                                                  
                                                  $
                                                  159,567
 F-61
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 12 - TAXES ON INCOME(continued):
 
 e.
                Reconciliation
      of the theoretical tax expense to actual tax
  expense
 
 Following
is a reconciliation of the theoretical tax expense, assuming all income is taxed
at the regular tax rates applicable to companies in U.S., and the actual tax
expense:
 
 Period fromApril12, 2002(inception)Year ended
                                                                  
                                                                  
                                                                  throughAugust 31
                                                                  
                                                                  
                                                                  August 31,2009
                                                                  
                                                                  
                                                                  2008
                                                                  
                                                                  
                                                                  2009Loss
      before income taxes as reported inthe
      consolidated statement of operations
                                                                  
                                                                  $
                                                                  (2,763,071
                                                                  )
                                                                  
                                                                  $
                                                                  (2,607,107
                                                                  )
                                                                  
                                                                  $
                                                                  (9,849,111
                                                                  )Computed
      “expected” tax benefit
                                                                  
                                                                  
                                                                  (967,075
                                                                  )
                                                                  
                                                                  
                                                                  (912,487
                                                                  )
                                                                  
                                                                  
                                                                  (3,447,189
                                                                  )Increase(decrease) in income taxesresulting
      from:Change
      in the balance of the valuationallowance
      for deferred tax losses
                                                                  
                                                                  
                                                                  528,143
                                                                  
                                                                  
                                                                  
                                                                  714,048
                                                                  
                                                                  
                                                                  
                                                                  1,722,544Disallowable
      deductions
                                                                  
                                                                  
                                                                  149,043
                                                                  
                                                                  
                                                                  
                                                                  200,916
                                                                  
                                                                  
                                                                  
                                                                  1,431,509Increase
      in taxes resulting fromdifferent
      tax rates applicable to nonU.S.
      subsidiary
                                                                  
                                                                  
                                                                  270,879
                                                                  
                                                                  
                                                                  
                                                                  29,037
                                                                  
                                                                  
                                                                  
                                                                  305,640Uncertain
      tax position
                                                                  
                                                                  
                                                                  16,413
                                                                  
                                                                  
                                                                  
                                                                  130,650
                                                                  
                                                                  
                                                                  
                                                                  147,063Taxes
      on income for the reported year
                                                                  
                                                                  $
                                                                  (2,597
                                                                  )
                                                                  
                                                                  $
                                                                  162,164
                                                                  
                                                                  
                                                                  $
                                                                  159,667
  f.
                Uncertainty
      in Income Taxes
  The
Company adopted FIN 48 effective September 1, 2007. FIN 48 requires significant
judgment in determining what constitutes an individual tax position as well as
assessing the outcome of each tax position. Changes in judgment as to
recognition or measurement of tax positions can materially affect the estimate
of the effective tax rate and consequently, affect the operating results of the
Company. The Company had no unrecognized tax benefits as of September 1, 2007.
As a result of the implementation of FIN 48 the Company recoded an additional
provision for income taxes in the amount of $130,650 due to uncertainty in its
tax position. The Company recognizes interest and penalties related to its tax
contingencies as income tax expense. As of August 31, 2009 and 2008, the Company
recorded $47,881 and $37,469, respectively, of penalties related to tax
contingencies.
 
 F-62
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 NOTE 12 - TAXES ON INCOME(continued):
  The
Company do 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 2002 through 2008. As of August 31, 2009,
the Company did not record any change to its unrecognized tax
benefits.
 
 NOTE
13 - RELATED PARTIES - TRANSACTIONS:
  a.
                During
      the fiscal years of 2008 and 2009 the Company paid to directors $15,000
      and $16,000, respectively, for managerial
  services.
  In
addition, one of the directors received $85,000 as a finders fee, in connection
with the Company’s private placement on July 14, 2008.
  b.
                As
      to the agreements with Hadassit, see note
6a.
  c.
                On
      July 1, 2008, the subsidiary entered into a consulting agreement with KNRY
      Ltd. (“KNRY”), an Israeli company owned by Nadav Kidron, whereby Mr. Nadav
      Kidron, through KNRY, will provide services as President and Chief
      Executive Officer of both Oramed and the subsidiary (the “Nadav Kidron
      Consulting Agreement”).  Additionally, on July 1, 2008, the
      subsidiary entered into a consulting agreement with KNRY whereby Dr.
      Miriam Kidron, through KNRY, will provide services as Chief Medical and
      Technology Officer of both Oramed and the subsidiary (the “Miriam Kidron
      Consulting Agreement” and together with the Nadav Kidron Consulting
      Agreement, the “Consulting Agreements”).  The Consulting
      Agreements replaced the employment agreements entered into between the
      Company and KNRY, dated as of August 1, 2007, pursuant to which Nadav
      Kidron and Miriam Kidron, respectively, provide services to Oramed and the
      subsidiary.
 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 NIS50,400 + Value-Added-Tax per month (as of August 31, 2009
the monthly payment in the Company's functional currency is $13,224+VAT) and
(ii) will be reimbursed for reasonable expenses incurred in connection with
performance of the Consulting Agreements.
 
 NOTE
14 – SUBSEQUENT EVENTS
 
 The
Company has performed an evaluation of subsequent events through November 24
2009, which is the date the financial statements were issued.
 
 a)
                On
      September 11, 2009, the Company issued 569,887 shares of its common stock
      to Swiss as remuneration for the services provided, in the amount of
      $203,699.
 b)
                On
      November 23, 2009, 100,000 options were granted to a consultant of the
      subsidiary at an exercise price of $0.76 per share. The options vest in
      three equal annual installments commencing on November 23, 2010 and will
      expire on November 23, 2014.
 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. The options vest in
      three equal annual installments commencing on November 23, 2010 and will
      expire on November 23, 2019.
 
 F-63
  ITEM
9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 None
 
 ITEM
9A(T) – CONTROLS AND PROCEDURES
  (a)      Disclosure Controls and
Procedures
  Our
management, including our chief executive officer and chief financial officer,
has evaluated the effectiveness of our disclosure controls and procedures as of
August 31, 2009. Based on such review, our chief executive officer and chief
financial officer have determined that in light of their conclusion with respect
to the effectiveness of our internal control over our financial reporting as of
such date, that the company did not have in place effective controls and
procedures designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange 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 and reported, within the time
periods specified in the Commission’s rules and forms.
  (b)      
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 maintaining adequate
internal control over our financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s
internal control over financial reporting is defined as a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control 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 accordance with generally
      accepted accounting principles, and that our receipts and expenditures are
      being made only in accordance with authorizations of our management and
      directors; and
 ·
              provide
      reasonable assurance regarding the prevention or timely detection of
      unauthorized acquisition, use or disposition of assets that could have a
      material effect on our financial
statements.
  64
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we evaluated the
effectiveness of our internal control over financial reporting as of August 31,
2009 based on the framework for Internal Control-Integrated Framework set forth
by The Committee of Sponsoring Organizations of the Treadway Commission. Due to
the inherent limitations of our company, derived from our small size and the
limited number of employees, management evaluation concluded that there is a
material weakness with respect to segregation of duties that may not provide
reasonable assurance regarding the reliability of internal control over
financial reporting and may not prevent or detect misstatements. Specifically,
our CFO serves as our only qualified internal accounting and financial reporting
personnel and as such performs all accounting and financial reporting functions
without the benefit of independent checks, confirmations or backup other than
bookkeeping functions performed by an outside accounting firm. In addition,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate 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 there is no reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and that the Company’s internal controls over financial
reporting were not effective as of August 31, 2009.
  During
the year ended August 31, 2009, management started an extensive program of
documenting all process related to the financial reporting, in order to
strengthen our internal controls over financial reporting in order to reasonably
ensure that reliability of financial reporting and the preparation of financial
statements.
  This
management report on internal control over financial reporting shall not be
deemed to be filed for purposes of Section 18 of the Securities Exchange Act of
1934, as amended or otherwise subject to the liabilities of that
Section.
  This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Commission that permit us to
provide only management’s report in this Annual Report.
  (c)      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 ended August 31,
2009 that have materially affected, or are reasonable likely to materially
affect our internal control over financial reporting.
  ITEM
9B – OTHER INFORMATION
  None
  65
  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
                        
                        PositionNadav
      Kidron
                        
                        35
                        
                        President,
      Chief Executive Officer and DirectorMiriam
      Kidron
                        
                        68
                        
                        Chief
      Medical and Technology Officer and DirectorLeonard
      Sank
                        
                        44
                        
                        DirectorHarold
      Jacob
                        
                        55
                        
                        Director
      and member of the Scientific Advisory BoardYifat
      Zommer
                        
                        35
                        
                        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 and significant employee, indicating the principal
occupation during that period, and the name and principal business of the
organization in which such occupation and employment were carried
out.
 
 Mr. Nadav
Kidron was appointed as President, Chief Executive Officer and director
in March 2006. From 2003 to 2006, he was the managing director at the Institute
of Advanced Jewish Studies – Bar Ilan University. From 2001 to 2003, he was a
legal intern at Wine Mishaiker and Erenstof Law Offices in Jerusalem, Israel.
Mr. Kidron obtained his LLB from Bar – Ilan University and is currently enrolled
in the International MBA program at Bar – Ilan University.
 
 Dr. Miriam
Kidronwas
appointed as Chief Medical and Technology Officer and director in March 2006.
Dr. Kidron is a pharmacologist and a biochemist with a PhD in biochemistry. From
1990 to 2007, Dr. Kidron has been a senior researcher in the Diabetes Unit at
Hadassah University Hospital in Jerusalem, 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 a member of the American, European
and Israeli Diabetes Associations. Dr. Kidron is a recipient of the Bern
Schlanger Award.
 
 Mr. Leonard
Sank was appointed as a director in October 2007. Mr. Sank is a South
African entrepreneur and business man who is devoted to entrepreneurial
endeavors and initiatives. He has over 20 years of experience in playing an
important leadership role in developing businesses. He was a director in
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 a
director of Macsteel Service Centres SA Pty Ltd., South Africa’s largest private
company.   He also serves on the board of local non-profit
charity organizations in Cape Town, where he resides.
   66
  Dr. Harold Jacobwas appointed as a director in July 2008.Since 1998, Dr. Jacob has served
as the president of Medical Instrument, a company which provides a range of
support and consulting services to start-up and early stage companies as well as
patenting its own proprietary medical devices. Dr. Jacob has 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 the years 1997 to 2003, a
company that developed the first swallowable wireless pill camera for inspection
of the intestine. He has licensed patents to a number of companies including
Kimberly Clark Ballard. Since 2003, Dr. Jacob has served as the CEO of
NanoVibronix, a medical device company using surface acoustics to prevent
catheter acquired infection as well as other applications. He practiced clinical
gastroenterology in New York and served as Chief of Gastroenterology at St.
Johns Episcopal Hospital and South Nassau Communities Hospital in the years
1986-1995, and was a Clinical Assistant Professor of Medicine at SUNY during the
years 1983-1990. Dr. Jacob founded and served as Editor in Chief of Endoscopy
Review and has authored numerous publications in the field of
gastroenterology
 
 Ms. Yifat Zommerwas appointed as Chief Financial Officer, Treasurer and Secretary in
April 2009. From April 2007 to October 2008, Ms. Zommer served as Chief
Financial Officer of Witech Communications Ltd., a subsidiary of IIS
Intelligence Information Systems Ltd, a company operating in the field of video
transmission using wireless communications. From April 2006 to April 2007, Ms.
Zommer acted as Chief Financial Officer for CTWARE Ltd, a telecommunication
company. Prior to that she was an audit manager in PricewaterhouseCoopers (PwC),
where she served for five years. Ms. Zommer holds a Bachelor of Accounting and
Economics degree from the Hebrew University and Business Administration (MBA)
from Tel-Aviv University. Ms. Zommer is a certified 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 of stockholders and serves until the next such
meeting and until his or her successor is duly elected.  The board of
directors may also appoint additional directors 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 of directors has determined that
Leonard Sank and Harold Jacob are independent as defined under the rules
promulgated by the NASDAQ Stock Market. For the past three years, we have not
held an annual meeting of stockholders. We intend to hold an annual meeting of
stockholders during fiscal year 2010.
 
 There have been no events under any
bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or
decrees material to the evaluation of the ability and integrity of any director,
executive officer, or control person of the Company during the past five
years.
 
 Board
Meeting Attendance
 
 During
the year ended August 31, 2009, our board held eight meetings and took actions
by written consent on 17 occasions.  No incumbent director of 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 as a
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
director served on such committees). Board members are encouraged to attend our
annual meetings of stockholders.
  67
 
 Committees
 
 As of
August 31, 2009 the Board has not established any committees. The Board intends
to establish an audit and compensation committee during the year ending August
31, 2010.
 
 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 2009, we believe that during fiscal year 2009, other than as set forth below,our executive
officers, directors and all persons who own more than ten percent of a
registered class of our equity securities complied with all Section 16(a) filing
requirements, except that one transaction from June 2009 on a Form 4 was
inadvertently not timely reported on behalf of Yifat Zommer, our Chief Financial
Officer.
 
 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 at
www.oramed.com.
  68
 
 ITEM
11 - EXECUTIVE COMPENSATION
 
 Summary
Compensation Table
 
 The following table sets forth the
compensation earned during the years ended August 31 2008 and 2009 by our
President and Chief Executive Officer, our Chief Medical and Technology Officer,
our Chief Financial Officer and former Chief Financial Officer (the “Named Executive
Officers”):
  Name
      and Principal
                                                      Position
                                                    
                                                    Year
                                                      (1)
                                                    
                                                    Salary
                                                      ($)
                                                    
                                                    
                                                    Option
      Awards
                                                      ($)
                                                      (2)
                                                    
                                                    
                                                    All
      Other
                                                      Compensation
                                                      ($)
                                                      (3)
                                                    
                                                    
                                                    Total
                                                      ($)Nadav
      Kidron
                                                    
                                                    2009
                                                    
                                                    
                                                    155,359
                                                    
                                                    
                                                    
                                                    153,855
                                                    
                                                    
                                                    
                                                    15,474
                                                    
                                                    
                                                    
                                                    324,688President
      and CEO and director (4)
                                                    
                                                    2008
                                                    
                                                    
                                                    151,037
                                                    
                                                    
                                                    
                                                    216,504
                                                    
                                                    
                                                    
                                                    14,511
                                                    
                                                    
                                                    
                                                    382,053Miriam
      Kidron
                                                    
                                                    2009
                                                    
                                                    
                                                    154,983
                                                    
                                                    
                                                    
                                                    153,855
                                                    
                                                    
                                                    
                                                    11,539
                                                    
                                                    
                                                    
                                                    320,377Chief
      Medical and Technology Officer and director (5)(6)
                                                    
                                                    2008
                                                    
                                                    
                                                    145,405
                                                    
                                                    
                                                    
                                                    216,504
                                                    
                                                    
                                                    
                                                    10,774
                                                    
                                                    
                                                    
                                                    372,683Yifat
      Zommer
                                                      CFO
      and Secretary(7)
                                                    
                                                    2009
                                                    
                                                    
                                                    20,468
                                                    
                                                    
                                                    
                                                    19,946
                                                    
                                                    
                                                    
                                                    11,245
                                                    
                                                    
                                                    
                                                    51,659Chaime
      Orlev
                                                    
                                                    2009
                                                    
                                                    
                                                    59,300
                                                    
                                                    
                                                    Nil
                                                    
                                                    
                                                    
                                                    25,544
                                                    
                                                    
                                                    
                                                    84,844CFO
      and Secretary(8)
                                                    
                                                    2008
                                                    
                                                    
                                                    23,484
                                                    
                                                    
                                                    Nil
                                                    
                                                    
                                                    
                                                    7,981
                                                    
                                                    
                                                    
                                                    31,466
 _______________
 
 1
                  The
      information is provided for each fiscal year which begins on September 1
      and ends on August 31.2
                  The
      amounts reflect the compensation expense in accordance with FAS 123(R) of
      these option awards. The assumptions used to determine the fair value of
      the option awards for fiscal years ended August 31, 2009 and 2008 are set
      forth in the notes to of our audited consolidated financial statements
      included in our Form 10-K for fiscal year ended August 31, 2009. Our Named
      Executive Officers will not realize the value of these awards in cash
      unless and until these awards are exercised and the underlying shares
      subsequently sold.3
                  See
      All Other Compensation Table below.4
                  Mr.
      Kidron was appointed as our President, CEO and Director on March 8, 2006
      and received compensation from our subsidiary through KNRY, an Israeli
      entity owned by Mr. Kidron. See “Employment and Consulting
      Agreements.”5
                  Dr.
      Kidron was appointed as our Chief Medical and Technology Officer and
      Director on March 8, 2006 and received compensation from our subsidiary
      through KNRY, an Israeli entity owned by Mr. Kidron. See “Employment and
      Consulting Agreements.”6
                  See
      “Certain Relationships and Related Transactions and Director Independence”
      for a description of management fees received by Dr. Kidron from
      Hadasit.7
                  Ms.
      Zommer was appointed as our CFO and Secretary on April 19,
      20098
                  Mr.
      Orlev served as our CFO and Secretary from May 1, 2008 through March 31,
      2009.
  69
  All
Other Compensation Table
 
 All Other
Compensation amounts in the Summary Compensation Table consist of the
following:
 
 Name
                      
                      Year
                      
                      Automobile
                        Related
                        Expenses
                        ($)
                      
                      
                      Manager’s
                        Insurance *
                        ($)
                      
                      
                      Education
                        Fund*
                        ($)
                      
                      
                      Total
                        ($)Nadav
      Kidron
                      
                      2009
                      
                      
                      15,474
                      
                      
                      Nil
                      
                      
                      Nil
                      
                      
                      
                      15,474Miriam
      Kidron
                      
                      2009
                      
                      
                      11,539
                      
                      
                      Nil
                      
                      
                      Nil
                      
                      
                      
                      11,539Chaime
      Orlev
                      
                      2009
                      
                      
                      15,662
                      
                      
                      
                      7,762
                      
                      
                      
                      2,120
                      
                      
                      
                      25,544Yifat
      Zommer
                      
                      2009
                      
                      
                      6,540
                      
                      
                      
                      3,163
                      
                      
                      
                      1,542
                      
                      
                      
                      11,245
 ____
 
 *
                Manager’s
      insurance and education funds are customary benefits provided to employees
      based in Israel. Manager’s insurance is a combination of severance savings
      (in accordance with Israeli law), defined contribution tax-qualified
      pension savings and disability insurance premiums. An Education fund is a
      savings fund of pre-tax contributions to be used after a specified period
      of time for educational or other permitted
  purposes.
  70
 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, 2009.
 
 Option AwardsName
                                            
                                            Number of
                                              Securities
                                              Underlying
                                              Unexercised
                                              Options (#)
                                              Exercisable
                                            
                                            
                                            Number of
                                              Securities
                                              Underlying
                                              Unexercised
                                              Options (#)
                                              Unexercisable
                                            
                                            
                                            Option
                                              Exercise
                                              Price
                                              ($)
                                            
                                            Option
                                              Expiration
                                              DateNadav
      Kidron
                                            
                                            
                                            850,000
                                            (1)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            0.45
                                            
                                            08/01/12720,000
                                            (2)
                                            
                                            
                                            144,000
                                            (2)
                                            
                                            
                                            0.54
                                            
                                            05/06/18Miriam
      Kidron
                                            
                                            
                                            3,361,360
                                            (3)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            0.001
                                            
                                            08/13/12850,000
                                            (1)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            0.45
                                            
                                            08/01/12720,000
                                            (2)
                                            
                                            
                                            144,000
                                            (2)
                                            
                                            
                                            0.54
                                            
                                            05/06/18Yifat
      Zommer
                                            
                                            
                                            -
                                            
                                            
                                            
                                            400,000
                                            (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 an exercise 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 exercise price of $0.54 per share, 144,000 of such
      options vested immediately on the date of grant and the remainder will
      vest in twenty equal monthly 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 vested immediately 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 October 19, 2010, and
      expire on October 19, 2019.
  Stock
Option Plans
 
 2006 Stock Option Plan
 
 On October 15, 2006, the Company’s
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 that have expired or been terminated for any
reason prior to being exercised may be reissued.  As of August 31,
2009, options with respect to 2,950,000 shares were outstanding under
the 2006 Plan, which amount reflects the aggregate grant of options with
respect to 3,350,000 shares, of which 400,000 have been forfeited through
August 31, 2009.
 
 2008 Stock Incentive Plan
 
 On May 5, 2008, the Company’s board of
directors adopted the 2008 Stock Incentive Plan (the “2008 Plan”) in order to
attract and retain quality personnel. The 2008 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 employees of the Company or a parent or
subsidiary of the Company. Awards other than incentive stock options may be
granted to employees, directors and consultants. Under the 2008 Plan, 8,000,000
shares have been reserved for the grant of options, which may be issued at the
discretion of our board of directors from time to time. As of August 31, 2009,
options with respect to 4,312,000 shares have been granted under the 2008 Plan,
978,000 of which have been forfeited.
  71
 
 On August 14, 2007 the Company granted
to Miriam Kidron options to purchase up to 3,361,360 shares at an exercise price
of $0.001; the options vested immediately 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 made
the following stock options grants to the Named Executive Officers and directors
during the year ending August 31, 2009:
 
 ·
                On
      October 12, 2008 we granted options under the 2008 Plan to purchase up to
      828,000 shares of our common stock at an exercise price of $0.47 to Chaime
      Orlev our former Chief Financial Officer. The options were forfeited On March 31, 2009 when Mr.Orlev ended his
      services with theCompany.
 ·
                On
      January 11, 2009 we granted options under the 2008 Plan to purchase up to
      300,000 shares of our common stock at an exercise price of $0.43 to each
      of our two independent directors – Mr. Leonard Sank and Dr. Harold Jacob.
      The option will expire on January 10,
2019.
 ·
                On
      June 3, 2009 we granted options under the 2008 Plan to purchase up to
      400,000 shares of our common stock at an exercise price of $0.47 to Yifat
      Zommer our Chief Financial Officer. The option will expire on October 18,
      2019.
 
 Employment
and Consulting Agreements
 
 Effective
August 1, 2007 we entered into employment agreements with KNRY Ltd. (“KRNY”),
pursuant to which Nadav Kidron and Dr. Miriam Kidron provided employment
services to our company. Based on the agreements, Nadav Kidron served as the
President and Chief Executive officer and Miriam Kidron served as the Chief
Medical and Technology Officer of the Company. As remuneration for such
services, KNRY was paid $20,000 per month, commencing on August 1,
2007.
 
 On July
1, 2008, Oramed Ltd., our Israeli subsidiary, entered into a consulting
agreement with KNRY, whereby Mr. 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 Chief Medical and Technology Officer of both
the Company and Oramed Ltd. (the “Miriam Kidron Consulting Agreement” and
together with the Nadav Kidron Consulting Agreement, the “Consulting
Agreements”). The Consulting Agreements replace the employment agreements
entered into between the Company and KNRY, dated as of August 1, 2007 referenced
above.
  72
  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 a gross amount
of NIS50,400 + Value-Added-Tax per month and (ii) will be reimbursed for
reasonable 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 and for 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 to indemnify 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 executive officer, to the maximum
extent permitted by law.
 
 The
Company, through its Israeli subsidiary, Oramed Ltd., has entered into an
employment agreement with Yifat Zommer as of April 19, 2009, pursuant to which
Ms. Zommer was appointed as Chief Financial Officer, Treasurer and Secretary of
Oramed. On August 31, 2009, the agreement was amended, pursuant to which Ms.
Zommer's gross monthly salary will be NIS 22,000 ($5,773). 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 ($6,350).
 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.
 
 Director
Compensation
 
 Directors
are entitled to reimbursement for reasonable travel and other out-of-pocket
expenses incurred in connection with attendance at meetings of our board of
directors. Effective September 1, 2008, each independent director is entitled to
receive as remuneration for his or her service as a member of the board a sum
equal to $8,000 per annum, to be paid quarterly and shortly after the close of
each quarter. The board of directors may award special remuneration to any
director undertaking any special services on behalf of us other than services
ordinarily required of a director.
 
 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.
 
 The
following table sets forth director compensation for the year ended August 31,
2009.
 
 Name of Director
                        
                        Fees
                          Earned or
                          Paid in
                          Cash
                          ($)
                        
                        
                        Option Awards
                          (1)
                          ($)
                        
                        
                        Total
                          ($)Nadav
      Kidron (2)Miriam
      Kidron (2)Leonard
      Sank
                        
                        
                        8,000
                        
                        
                        
                        45,206
                        
                        
                        
                        53,206Harold
      Jacob
                        
                        
                        8,000
                        
                        
                        
                        45,206
                        
                        
                        
                        53,206
  73
  
 1
                The amounts reflect the
      compensation expense in accordance with FAS 123(R) of these option awards.
      The assumptions used to determine the fair value of the option awards are
      set forth in Note 8 of our audited consolidated financial statements
      included in this Form 10-K. Our directors will not realize the value of
      these awards in cash unless and until these awards are exercised and the
      underlying shares subsequently
sold.
 2
                Please
      refer to the summary compensation table for executive compensation with
      respect to the named
individual.
  74
 
 ITEM
12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
 
 The
following table sets forth certain information regarding beneficial ownership of
our common stock as of August 31, 2009 by (i) by each person who is known
by us to own beneficially more than 5% of the Common Stock, (ii) by each of
the Named Executive Officers and (iv) by all our directors and executive
officers as a group. On such date, we had 57,026,597 shares of Common Stock
outstanding.
 
 As used
in the table below and elsewhere in this form, the term “beneficial ownership” with
respect to a security consists of sole or shared 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 the disposition, with respect to the
security through any contract, arrangement, understanding, relationship, or
otherwise, including a right to acquire such power(s) during the next 60 days
following August 31, 2009.
 
 Name and address of Beneficial
                                Owner
                              
                              Number of Shares
                              
                              
                              Percentage of Shares
                                Beneficially OwnedNadav
      Kidron †‡
                                10
      Itamar Ben Avi St.
                                Jerusalem,
      Israel
                              
                              
                              12,013,735
                              (1)
                              
                              
                              20.48
                              %Zeev
      Bronfeld
                                6
      Uri St.
                                Tel-Aviv,
      Israel
                              
                              
                              6,158,517
                              
                              
                              
                              10.80
                              %Miriam
      Kidron †‡
                                2
      Elza St.
                                Jerusalem,
      Israel
                              
                              
                              5,003,360
                              (2)
                              
                              
                              8.07
                              %Apollo
      Nominees Inc
                                One
      Financial Place Suite 100
                                Lower
      Collymore Rock
                                St.
      Michael, Barbados
                              
                              
                              4,517,501
                              (3)
                              
                              
                              7.70
                              %Hadassit
      Medical Research
                                Services
      & Development Ltd
                                P.O.
      Box 12000
                                Jerusalem,
      Israel
                              
                              
                              4,141,532
                              
                              
                              
                              7.26
                              %Leonard
      Sank †
                                3
      Blair Rd Camps Bay
                                Cape
      Town, South Africa
                              
                              
                              3,982,650
                              (4)
                              
                              
                              6.79
                              %Harold
      Jacob †
                                Haadmur
      Mebuyon 26
                                Jerusalem,
      Israel
                              
                              
                              100,000
                              (5)
                              
                              
                              0.18
                              %Yifat
      Zommer
                              
                              
                              Nil
                              
                              
                              
                              NilAll
      current Executive Officers and Directors as a group (five
      persons)
                              
                              
                              21,099,945
                              ()
                              
                              
                              32.26
                              %
  75
  
 *
                Less
      than 1%
 †
                Indicates
      Director
 ‡
                Indicates
      Officer
 (1)
                Includes
      1,642,000 shares of common stock issuable upon the exercise of outstanding
      stock options.
 (2)
                Includes
      5,003,360 shares of common stock issuable upon the exercise of outstanding
      stock options.
 (3)
                Includes
      1,645,834 shares of common stock issuable upon the exercise of warrants
      beneficially owned by the referenced
entity.
 (4)
                Includes
      1,625,000 shares of common stock issuable upon the exercise of warrants
      beneficially owned by the referenced
entity.
 (5)
                Consists
      of 100,000 shares of common stock issuable upon the exercise of
      outstanding stock options.
 (6)
                Includes
      8,370,3600 shares of common stock issuable upon the exercise of
      outstanding stock options.
  76
  ITEM
13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 
 Except as
otherwise indicated below, during fiscal 2009 we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $120,000, and in which, to our knowledge, any of our directors,
officers, five percent beneficial security holder, or any member of the
immediate family of the foregoing persons has 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 unaffiliated third
parties. Based on our experience in the business sectors in which we operate and
the terms of our transactions with unaffiliated third parties, we believe that
all of the transactions described below met this policy standard at the time
they occurred.
 
 On July
14, 2008 wecompleted a private placementto 29 accreditedinvestorspursuant to which we sold to the investors anaggregateof8,524,669 shares of common stockat a purchase price of
$0.60 per share, in the aggregate,
$5,114,801.  The investors also received three year warrantsto purchase an aggregate of4,262,337 shares of common stock at an
exercise price of $0.90 per share. We paid $85,000 toLeonard Sank, one
of our directors,asa
finder’s fee and issued an aggregate of 143,333 shares of
common stock to four other individuals as
finder’s fees in connection with the private
placement.
 
 The board
of directors has determined that Leonard Sank and Harold Jacob are independent
as defined under the rules promulgated by the NASDAQ Stock Market.
 
 On March
8, 2006, and July 8, 2009, we entered into two agreements with Hadasit to
provideconsulting and clinical
trial services for total consideration of $400,000. The clinical trials
to be conducted by Hadasit are managed by Dr. Kidron, our Chief Medical and
Technology Officer and Director, through its research fund in Hadasit. The fees
paid by the Company to Hadasit are deposited into a Hadasit research account in
the name of Dr. Kidron. Pursuant to the general policy of Hadasit with respect
to its research funds, Dr. Kidron is entitled to receive a management fee in the
rate of 10% of all the funds deposited into this research fund. including the
funds paid by the Company under the said agreements. Since March 2006, only the
funds paid by the Company are deposited in this account.
 
 See
“Employment and Consulting Agreements” above for information as to the
agreements with our employees and consultants.
 
 ITEM
14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 We
incurred the following fees to Kesselman & Kesselman, certified public
accountants in Israel, a member of PricewaterhouseCoopers International Limited,
for services rendered during the fiscal years ended August 31, 2009 and
2008:
 
 Summary:
                      
                      2009
                      
                      
                      2008Audit
      fees(1)
                      
                      $
                      60,000
                      
                      
                      $
                      105,965Tax
      fees(2)
                      
                      $
                      15,000
                      
                      
                      $
                      32,630
  77
  (1)
                Amount
      represents fees paid for professional  services for the audit of
      our  consolidated  annual
      financial  statements and review  of our
      interim  consolidated  financial  statements  included  in
      quarterly reports and services that are normally provided by our
      accountants in connection with statutory 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 entire Board of Directors acts as our
audit committee. No formal pre-approval process has been
adopted.
  78
  PART
IV
  ITEM
      15.
                EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
 (a)(1)     Financial
Statements
  The
following financial statements are filed as part of this report:
 
 PageREPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM - Report of Kesselman & Kesselman
                  
                  F-37REPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM - Report of Malone & Bailey, PC
                  
                  F-38CONSOLIDATED
      FINANCIAL STATEMENTS:Balance sheets
                  
                  F-39Statements of
      operations
                  
                  F-40Statements of changes in
      stockholders’ equity
                  
                  F-41Statements of cash
      flows
                  
                  F-42Notes to financial
      statements
                  
                  F-43
      - F-63
 
 (a)(2)     Financial
Statements Schedules
 
 We do not
have any financial statement schedules required to be supplied under this
Item.
 
 (a)(3)
Exhibits
 
 Refer to
(b) below.
 
 (b)          Exhibits:
  3.1                      Articles
of Incorporation (incorporated by reference from our Registration Statement on
Form SB-2, filed on November 29, 2002).
  3.2                      Bylaws
(incorporated by reference from our Current Report on Form 8-K filed on April
10, 2006).
  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 on April 10,
2006).
  4.1                      Specimen
Stock Certificate (incorporated by reference from our Registration Statement on
Form SB-2, filed on November 29, 2002).
  4.2                      Form
of Warrant Certificate (incorporated by reference from our current report on
Form 8-K filed July 15, 2008)
  10.1                    Form
of Securities Purchase Agreement for February 6, 2006 private placement
(incorporated by reference from our current report on Form 8-K filed February 6,
2006)
  10.2                    Agreement
between our company and Hadasit Medical Services and Development Ltd. dated
February 17, 2006 concerning the acquisition of U.S. patent application
60/718716 (incorporated by reference from our current report on Form 8-K filed
February 17, 2006).
  79
  10.3                    Consulting
Agreement between our company and Dr. Miriam Kidron (incorporated by reference
from our current report on Form 8-K filed February 17, 2006).
  10.4                    Agreement
between our company 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)
  10.12                  Master
Services Agreement dated January 29, 2008 between Oramed Pharmaceuticals Inc.
and OnQ Consulting (incorporated by reference from our current report on Form
8-K filed on February 1, 2008)
  10.13                  Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July 1,
2008 for the services of Nadav Kidron (incorporated by reference from our
current report on Form 8-K filed on July 2, 2008)
 
 10.14                  Consulting
Agreement by and between Oramed Ltd. and KNRY, Ltd. entered into as of July 1,
2008 for the services of Miriam Kidron (incorporated by reference from our
current report on Form 8-K filed on July 2, 2008)
 
 10.15                  Oramed
Pharmaceuticals Inc. 2008 Stock Incentive Plan (incorporated by reference from
our current report on Form 8-K filed on July 2, 2008)
 
 10.16                  Form
of Notice of Stock Option Award and Stock Option Award Agreement (incorporated
by reference from our current report on Form 8-K filed on July 2,
2008).
 
 10.17                  Form
of Stock Purchase Agreement (incorporated by reference from our current report
on Form 8-K filed on July 15, 2008)
 10.18                  Employment
Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and Yifat
Zommer (incorporated by reference from our current report on Form 8-K filed on
April 22, 2009).
 10.18                  Indemnification
Agreement, dated as of April 19, 2009, by and between Oramed Ltd. and Yifat
Zommer (incorporated by reference from our current report on Form 8-K filed on
April 22, 2009).
 10.19                  Agreement
dated April 22, 2009, between Oramed Ltd. and ADRES Advanced Regulatory Services
Ltd. (incorporated by reference from our current report on Form 8-K filed April
22, 2009).
 
 10.20                  Agreement
dated July 8, 2009, between our company and Hadasit Medical Services and
Development Ltd. (incorporated by reference from our current report on Form 8-K
filed July 9, 2009).
 
 10.21                  Agreement
dated January 7, 2009, between our company and Hadasit Medical Services and
Development Ltd. (incorporated by reference from our current report on Form 8-K
filed January 7, 2009).
 
 10.22                  Form
of Indemnification Agreements dated November 2, 2008, between our company and
each of our directors and officers (incorporated by reference from our current
report on Form 8-K filed November 6, 2009).
 
 14.1                    Code
of Ethics (incorporated by reference from our current report on Form 8-K filed
on November 29, 2007)
  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
  80
  32.1*                  Certification
Statement of the Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act Of 2002
 
 *       Filed
herewith
  81
  SIGNATURES
 
 Pursuant
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 signed on 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 25, 2009
 
 Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant in the
capacities as on November 25, 2009.
 
 /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
 82