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, 2010
 
  ̈
              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
      or organization)
              (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) of the Act: Common Stock, $0.001 par value
  Indicate
by check mark if the registrant is a well-known seasoned issuer as defined in
Rule 405 of the Securities Act.
 Yes ̈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 company x
 (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 computedby reference to 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
quarterwas$15,857,742 based on a
price of $0.41, 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: 58,756,535 shares issued and outstanding as of November
23, 2010.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None.
  
  ORAMED
PHARMACEUTICALS, INC.
 
 FORM
10-K
 
 TABLE
OF CONTENTS
 
 PART I
                      1ITEM
      1 - BUSINESS
                      1ITEM
      1A – RISK FACTORS
                      14ITEM
      1B – UNRESOLVED STAFF COMMENTS
                      25ITEM
      2 – PROPERTIES
                      25ITEM
      3 - LEGAL PROCEEDINGS
                      25ITEM
      4 - REMOVED AND RESERVED
                      25PART II
                      26ITEM
      5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
                        MATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES
                      26ITEM
      6 – SELECTED FINANCIAL DATA
                      29ITEM
      7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND
                        RESULTS OF OPERATIONS
                      29ITEM
      7A – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
    RISK
                      36ITEM
      8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                      36ITEM
      9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING
                        AND FINANCIAL DISCLOSURE
                      36ITEM
      9A – CONTROLS AND PROCEDURES
                      37ITEM
      9B – OTHER INFORMATION
                      38PART III
                      39ITEM
      10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
                      39ITEM
      11 - EXECUTIVE COMPENSATION
                      41ITEM
      12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                        MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
                      45ITEM
      13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR
                        INDEPENDENCE
                      47ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
                      47ITEM
      15 - EXHIBITS AND FINANCIALSTATEMENTS SCHEDULES
                      49
  
  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. and our subsidiary, Oramed Ltd., 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 orally ingestible capsules or tablets for
delivery of other polypeptides and use of rectal application for delivery of
other polypeptides.
  Oral
Insulin:We are
seeking to revolutionize the treatment of diabetes through our proprietary
flagship product, an orally ingestible insulin capsule (ORMD0801) currently in
Phase 2 clinical trials. Our technology allows insulin to travel from the
gastrointestinal tract via the portal vein to the bloodstream, revolutionizing
the manner in which insulin is delivered. It enables its passage in a more
physiological manner than current delivery methods of insulin.
  Through
our research and development efforts, we are developing an oral dosage form that
will withstand the harsh chemical environment of 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.
  Our
research and development team has performed numerous animal studies to optimize
the composition and functionality of their oral insulin (ORMD0801) modality and
to demonstrate its safety and efficacy. Our studies have confirmed the
feasibility of lowering blood glucose levels with an orally administered form of
insulin that is both safe and effective.
  Our
technology is a platform that has the potential to deliver medications and
vaccines orally that today can only be delivered via injection.
  Diabetes:Diabetes is a disease in
which the body does not produce or properly use insulin. Insulin is a hormone
that causes sugar to be absorbed into cells, where the sugar is converted into
energy needed for daily life. The cause of diabetes is attributed both to
genetics (type 1 diabetes) and, most often, to environmental factors such as
obesity and lack of exercise (type 2 diabetes).
  According
to the International Diabetes Federation ("IDF"), an estimated 285 million
people worldwide currently live with diabetes. In the United States there are
approximately 26.8 million people with diabetes, or 8.7% of the United States
population. The IDF predicts that the number of people worldwide with diabetes
will exceed 435 million in 2030 if the current rate of growth continues
unchecked.
  Diabetes
now affects seven percent of the world’s adult population and claims four
million lives every year. The disease is a leading cause of blindness, kidney
failure, heart attack, stroke and amputation. Diabetes will cost the world
economy at least $376 billion in 2010, or 11.6% of total world healthcare
expenditure. By 2030, this number is projected to exceed $490 billion. More than
80% of diabetes spending is in the world’s richest countries and not in the
poorer countries, where over 70% of people with diabetes now live.
  The
regions with the highest comparative prevalence rates are North America, where
10.2% of the adult population has diabetes, followed by the Middle East and
North Africa with 9.3%. The regions with the highest number of people living
with diabetes are the Western Pacific, where some 77 million people have
diabetes and South East Asia with 59 million.
  2
 
 Each year
seven million people develop diabetes.  The most dramatic increases in
type 2 diabetes have occurred in populations where there have been rapid and
major improvements in living standards, demonstrating the important role played
by lifestyle factors and the potential for reversing the global
epidemic.
  Intellectual
Property: We own a portfolio of patents and patent applications covering
our technologies and we are 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.
Our 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.
 
 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 is comprised of Dr. Nir Barzilai, Professor
Ele Ferrannini, Professor Avram Hershko, Dr. Derek LeRoith and Dr. John
Amatruda.
 
 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. While our strategy is to partner with
an appropriate party, 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 complement
our existing drug portfolio.
  3
 
 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.
  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 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 2 diabetic
volunteers at Hadassah Medical Center in Jerusalem. On August 6, 2008, we
announced the successful results of this trial.
  In July
2008 we were granted approval by the Institutional Review Board Committee of
Hadassah Medical Center in Jerusalem to conduct a non-FDA approved Phase 2A
study to evaluate the safety and efficacy of our oral insulin capsule (ORMD
0801) on type 1 diabetic volunteers. On September 24, 2008, we announced the
beginning of this trial. On July 21, 2009 we reported positive results from this
trial.
  On April
21, 2009, we entered into a consulting service agreement with ADRES Advanced
Regulatory Services Ltd. (“ADRES”), pursuant to which ADRES will provide
services for the purpose of filing an IND application with the FDA for a Phase 2
study according to the FDA requirements. The 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 2 diabetic volunteers. On May 6, 2010, we reported that the capsule was
found to be well tolerated and exhibited a positive safety profile. No
cumulative adverse effects were reported throughout this first study of extended
exposure to the capsule. We are considering whether and when to conduct an
additional non-FDA approved Phase 2B study in India.
  GLP-1
Analog: On September 16, 2008 we announced the launch of pre-clinical
trials of ORMD 0901, a GLP-1 analog.  The pre-clinical trials
include animal studies which suggest that the GLP-1 analog (exenatide
-4) when combined with Oramed’s absorption promoters is absorbed through the
gastrointestinal tract and retains its biological activity.
  On
September 9, 2009, we received 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 are being conducted on healthy volunteers at Hadassah University
Medical Center in Jerusalem. We anticipate that the results of these trials will
be released in the near future.
  4
  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.
  On July
5, 2010, our subsidiary entered into a Manufacturing Supply Agreement (MSA) with
Sanofi-Aventis Deutschland GMBH ("sanofi-aventis"). According to the MSA,
sanofi-aventis will supply our subsidiary with specified quantities of
recombinant human insulin to be used for clinical trials in the
USA.
  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
  We
maintain a proactive intellectual property strategy which includes patent
filings in multiple jurisdictions, including the United States and other
commercially significant markets. We hold 34 patent applications currently
pending with respect to various compositions, methods of production oral
administration of proteins and exenatide. Expiration dates for pending patents
will in 2026 – 2028.
  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.
  5
  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.
  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.
  6
  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 us.
  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 April
21, 2009, we entered into a consulting service agreement with ADRES, pursuant to
which ADRES will provide services for the purpose of filing an IND application
with the FDA for a Phase 2 study in accordance with FDA requirements. The 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.
  On
February 10, 2010, we entered into agreements with Vetgenerics Research G. Ziv
Ltd., a clinical research organization (CRO), to conduct a toxicology trial on
our oral insulin capsules.
 
 On May 2,
2010, we entered into an additional agreement with SAFC Pharma, a division of
the Sigma-Aldrich Corporation, to develop a process to produce one of our oral
capsule ingredients.
 
 On July
5, 2010, our subsidiary entered into a Manufacturing Supply Agreement (MSA) with
Sanofi-Aventis Deutschland GMBH ("sanofi-aventis"). According to the MSA,
sanofi-aventis will supply our subsidiary with specified quantities of
recombinant human insulin to be used for clinical trials in the
USA.
 
 Out-Licensed
Technology
  On June
1, 2010, our subsidiary, Oramed Ltd., entered into an agreement with D.N.A Biomedical Solutions
Ltd(formerly,
Laser Detect Systems Ltd),,an Israeli company listed
on the Tel Aviv Stock Exchange("D.N.A"), for the
establishment of a new company to be called Entera Bio Ltd.
("Entera").
  Under the
terms of a license agreement that was entered into between Oramed and Entera, we
will out-license technology to Entera, on an exclusive basis, for the
development of oral delivery drugs for certain indications to be agreed upon
between the parties.  The out-licensed technology differs from our
main delivery technology that is used for oral insulin and GLP 1 Analog and is
subject to different patent applications. Entera's initial development effort
will be an oral formulation for the treatment of osteoporosis. The license will
be royalty-free unless our ownership interest in Entera decreases to 30% or less
of its outstanding share capital, in which case royalties will be payable with
respect to revenues derived from certain indications. Under certain
circumstances, Entera may receive ownership of the licensed technology, in which
case we would receive a license back on the same terms.
  D.N.A
invested $600,000 in Entera in two parts of $400,000 in August 2010 and $200,000
in November 2010, and Entera is owned in equal parts by Oramed and D.N.A,
subject to dilution by future issuances of shares. Entera's Chief Executive
Officer, Dr. Phillip Schwartz, will be granted options to purchase ordinary
shares of Entera, reflecting 9.9% of Entera's share capital, upon full exercise.
In the event that Entera has not obtained third-party financing by June 1, 2011,
or such other date mutually agreed upon by the parties, each of Oramed and D.N.A
will be required to make a capital contribution to Entera in the amount of
$150,000.
  7
  Mr. Zeev
Bronfeld, who is one of D.N.A's controlling shareholders, holds approximately
10.71% of our outstanding common stock (see "Securities Ownership of Certain
Beneficial Owners and Management").
  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.
  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.
  8
  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.
  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.
  9
  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.
  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.
  10
  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 1 and type 2 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
  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, Dr. Derek LeRoith and Dr. John Amatruda.
  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).
  11
  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.
  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.
  Dr. John Amatruda joined the
Oramed Scientific Advisory Board in February 2010. He graduated from Yale
University, received his MD degree from the Medical College of Wisconsin and did
his internship and residency in Internal Medicine and Fellowship in
Endocrinology and Metabolism at The Johns Hopkins Hospital.  He is
board certified in Internal Medicine and Endocrinology and Metabolism and
continues to see patients. Dr. Amatruda was a Professor of Medicine at The
University of Rochester School of Medicine where he was head of the Clinical
Research Center, fully funded as principle investigator on two NIH grants, and
acting Head of the Endocrine Metabolism Unit. From 1992 to 2002, he started and
ran a drug discovery group at Bayer Corp where he served as Vice President and
Therapeutic Area Research Head, as well as a Professor of Medicine Adjunct at
Yale University School of Medicine. He assisted in the approval of Acarbose and
his group put several compounds into clinical development including the first
glucagon receptor antagonist. From 2002 to 2009, Dr. Amatruda held various
positions at Merck, including Vice President and Therapeutic Area Head for
Metabolism and Atherosclerosis and acting Therapeutic Area head for
Cardiovascular. These groups filed NDAs for Vytorin, Januvia and Janumet. Most
recently Dr. Amatruda was Senior Vice President and Franchise Head for Diabetes
and Obesity and a member of the Research Management Committee at Merck. Dr.
Amatruda is an author on over 150 papers, abstracts, reviews and book chapters,
primarily in the areas of insulin action in vitro systems and in clinical
diabetes and obesity.
  12





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, 2010, 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 are involved in administration work.




Facilities





Our
principal executive offices are comprised of approximately 117 square meters of
office space located 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 fee for this space is $7,532. 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.




Corporate
History





Oramed was incorporated on April 12,
2002, in the State of Nevada under the name Iguana Ventures Ltd. Following the
incorporation, we were an exploration stage company engaged in the acquisition
and exploration of mineral properties. We were unsuccessful in implementing its
business plan as a mineral exploration company. Accordingly, we decided to
change the focus of our business by completing a share exchange with the
shareholders of Integrated Security Technologies, Inc., a New Jersey private
corporation (“ISTI”). On June 4, 2004, we changed our name to Integrated
Security Technologies by filing a Certificate of Amendment with the Nevada
Secretary of State.  Effective June 14, 2004 we effected a 3.3:1
forward stock split, increasing 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, we terminated the share
exchange agreement with the shareholders of ISTI.




On March
8, 2006, we executed an agreement with Hadasit Medical Services and Development
Ltd. (“Hadasit”) to acquire provisional patent application No. 60/718716 and
related intellectual property.  The provisional patent application No.
60/718716 relates to a method of preparing insulin so that it may be taken
orally to be used in the treatment for the treatment of individuals with
diabetes.  On April 10, 2006, we changed our name from Integrated
Security Technologies, Inc. to Oramed Pharmaceuticals Inc.  On August
31, 2006, based on provisional patent application No. 60/718716, we filed a
patent application under the Patent Cooperation Treaty at the Israel Patent
Office for “Methods and Compositions for Oral Administration of
Proteins.”




13


ITEM
1A – RISK FACTORS





An
investment in our securities involves a high degree of risk.  You
should consider carefully the following information about these risks, together
with the other information contained in this Annual Report on Form 10-K before
making an investment decision.  Our business, prospects, financial
condition, and results of operations may be materially and adversely affected as
a result of any of the following risks.  The value of our securities
could decline as a result of any of these risks.  You could lose all
or part of your investment in our securities. Some of the statements in “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
ending August 31, 2011. During 2011, 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 six 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




·           effects
of commercialization activities and facility expansions if and as
required.




14


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, 2010 and August 31, 2009, we had working capital of $938,225 and $2,805,733,
respectively, and stockholders’ equity of $830,272 and $2,746,192, respectively.
We generated no revenues to date. For the period from our inception on April 12,
2002 through August 31, 2010, the year ended August 31, 2010 and the year ended
August 31, 2009, we incurred net losses of $(12,986,054), $(2,977,376), and
$(2,760,474), respectively.  We 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.




15


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;




·           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;




16


·           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.




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.




17


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 dependent 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.




While our
strategy is to partner with an appropriate party, 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”.




18


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.




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.




19


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.




We were originally incorporated on
April 12, 2002 as an exploration stage company engaged in the acquisition and
exploration of mineral properties. We were unsuccessful in implementing its
business plan as a mineral exploration company and became a public shell
company.  On May 27, 2004, we executed a share exchange with the
shareholders of Integrated Security Technologies, Inc., a New Jersey private
corporation (“ISTI”).  However, due to disappointing results, on May
31, 2005, effective as of May 27, 2004 we terminated the share exchange
agreement with the shareholders of ISTI, and we again became a public shell
company.  We 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 us, there can be no assurance that such risks do not occur. The
occurrence of any such risk could materially adversely affect our financial
condition.




Entera
Ltd., our new joint venture with D.N.A, may not be successful




Our
transaction with D.N.A, Entera Ltd., may not realize all of its intended
benefits. In connection with Entera


·           we
may be required to contribute additional funds to Entera to enable its continued
operations;


·           we
may have difficulties in retaining key employees who are necessary to manage the
new company; and


·           there
can be no assurance that Entera’s operations will ever result in profits that
are distributed to us as shareholders.





Moreover,
because Entera is a 50% held company, we do not have complete control over its
operations, including business decisions which may impact Entera’s
profitability.




Healthcare
policy changes, including pending proposals to reform the U.S. healthcare
system, may harm our future business.




Healthcare
costs have risen significantly over the past decade. There have been and
continue to be proposals by legislators, regulators and third-party payors to
keep these costs down. Certain proposals, if passed, would impose limitations on
the prices we will be able to charge for the products that we are developing, or
the amounts of reimbursement available for these products from governmental
agencies or third-party payors. These limitations could in turn reduce the
amount of revenues that we will be able to generate in the future from sales of
our products and licenses of our technology.




Recently,
the United States Congress enacted and President Obama signed into law
healthcare reform legislation that may significantly impact the pharmaceutical
industry. In addition to requiring most individuals to have health insurance and
establishing new regulations on health plans, this legislation will require
discounts under the Medicare drug benefit program and increased rebates on drugs
covered by Medicaid. In addition, the legislation imposes an annual fee, which
will increase annually, on sales by branded pharmaceutical manufacturers
starting in 2011. The financial impact of these discounts, increased rebates and
fees and the other provisions of the legislation on our business is unclear and
there can be no assurance that our business will not be materially adversely
affected. In addition, these and other ongoing initiatives in the United States
have  increased and will continue to increase pressure on drug
pricing. The announcement or adoption of any such initiative could have an
adverse effect on potential revenues from any product that we may successfully
develop.




20


Various
healthcare reform proposals have also emerged at the state level. We cannot
predict what healthcare initiatives, if any, will be implemented at the federal
or state level, or the effect any future legislation or regulation will have on
us. However, an expansion in government’s role in the U.S. healthcare industry
may lower the future revenues for the products we are developing and adversely
affect our future business, possibly materially.




Risks
Related to our Common Stock




As the market price of our common
stock may fluctuate significantly, this may make it difficult for you to sell
your shares of common stock when you want or at prices you find attractive.




The price
of our common stock is quoted on the over-the-counter bulletin board ("OTCBB")
and constantly changes. In recent years, the 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:




·           Clinical
trial results and the timing of the release of such 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.




21


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.




If
our common stock is deemed to be a “penny stock,” it may make it more difficult
for investors to sell their shares due to suitability requirements. Low-priced
stocks are sometimes the subject of fraud and abuse.




The
Securities and Exchange Commission, or the SEC, has adopted regulations that
generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share, subject to specific exemptions, such as if the
issuer of the security has net tangible assets in excess of $2,000,000. The
market price of our common stock is currently less than $5.00 per share andour
net tangible assets as of August 31, 2009 are less than
$2,000,000.  Therefore, our common stock is currently a “penny stock”
according to SEC rules. Designation as a "penny stock" requires any broker or
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 penny stocks.




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. These could affect
low-priced stocks, such as ours, even if they do not qualify as "penny stocks"
under the SEC rules.  Such patterns include:




·           Control
of the market for the security by one or a few broker-dealers;




·          
“Boiler room” practices involving high-pressure sales tactics;




·           Manipulation
of prices through prearranged matching of purchases and sales;




·           The
release of misleading information;




·           Excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers;
and




·           Dumping
of securities by broker-dealers after prices have been manipulated to a desired
level, which hurts the price of the stock and causes investors to suffer
loss.




We are
aware of the abuses that have occurred in the market for low-priced stocks.
Although we do not expect to be in a position to dictate 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 58,756,535 shares of common
stock.  Of these shares, 35,741,879 shares, are freely
tradable.  Giving effect to the exercise in full of all of our
outstanding warrants and options, we would have outstanding 72,650,218 shares of
common stock.




22


Our
issuance of warrants and options to investors, employees and consultants 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, 2010, we had
outstanding 15,584,897 warrants and options (18,017,697 as of August 31, 2009).
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 “Market Price
and Dividends” and “Description of Common
Stock”.




Our
shares of common stock are not listed for trading on a national securities
exchange.




Our
common stock currently trades on the OTCBB and is not
listed for trading on any national securities exchange. Investments in
securities trading on the OTCBB are generally
less liquid than investments in securities trading on a national securities
exchange. The failure of our shares to be approved for trading on a national
securities exchange may have the effect of limiting the trading activity of our
common stock and reducing the liquidity of an investment in our common
stock.




Risks
Related to Conducting Business in Israel




We
are affected by the political, economic, and military risks of locating our
principal operations in Israel.




Our
operations are located in the State of Israel, and we are directly affected by
political, economic, and security conditions in that country. 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.




23


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




Not
applicable.




ITEM
2 – PROPERTIES




Our
principal executive offices are comprised of approximately 117 square meters of
office space located in Givat-Ram, Jerusalem, Israel. The lease commenced on
October 1, 2007 and is for a period of 51 months. The aggregate annual base
rental fee for this space is $7,532. 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 - [REMOVED AND RESERVED]




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 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, 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
                      
                      
                      $
                      0.40Year
      Ended August 31, 2010Three
      Months Ended November 30, 2009
                      
                      $
                      0.64
                      
                      
                      $
                      0.43Three
      Months Ended February 28, 20010
                      
                      $
                      0.48
                      
                      
                      $
                      0.37Three
      Months Ended May 31, 20010
                      
                      $
                      0.55
                      
                      
                      $
                      0.41Three
      Months Ended August 31, 20010
                      
                      $
                      0.51
                      
                      
                      $
                      0.36





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 $0.32 on November 22,
2010.




Holders




As of
November 23, 2010, there were 58,565,535 shares of our common stock issued and
outstanding that are held of record by 59 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 November 9, 2010, we issued 253,714
shares of our common stock to Swiss Cap AG as remuneration for services rendered
during 2010, in the amount of $88,880.   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.





On
November 16, 2010, we consummated a private placement by selling 937,500 units
at a purchase price of $0.32 per unit for a total consideration of $300,000.
Each unit consisted of oneshareof common stockand 0.35share
purchase warrant. Each share purchase warrant entitles the holder to purchase
one share of common stock for a period of 5 years at an exercise price of
$0.50. The private placement was exempt from registration pursuant to
Section 4(2) of the Securities Act.




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,
2010.




Securities
Authorized for Issuance under Equity Compensation Plans





2006
Stock Option Plan





On
October 15, 2006, our board of directors adopted the 2006 Stock Option Plan (the
“2006 Plan”) in order to attract and retain quality personnel. Under the 2006
Plan, 3,000,000 shares have been reserved for the grant of options by the board.
In addition, under the terms of the 2006 Plan, options that have expired or been
terminated for any reason prior to being exercised may be reissued.
 As of August 31, 2010, options with respect to 1,700,000 shares
were outstanding under the 2006 Plan, which amount reflects the
aggregate grant of options with respect to 3,350,000 shares, of
which 1,650,000 expired through August 31, 2010.




2008
Stock Incentive Plan





On May 5,
2008, our board of directors adopted the 2008 Stock Incentive Plan (the “2008
Plan”) in order to attract and retain quality personnel. 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 our employees or our
parent or subsidiary. 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, 2010,
options with respect to 6,739,200 shares have been granted under the 2008 Plan,
978,000 of which have been forfeited.




Other




On August
14, 2007 we granted Dr. Miriam Kidron options to purchase up to 3,361,360 shares
at an exercise price of $0.001; the options vested immediately and have an
expiration date of August 14, 2012. These options are not governed by any of the
plans detailed above.




27


The
following table sets forth information with respect to our equity compensation
plans as of August 31, 2010:
 
 Plan category
                                      
                                      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))(A)
                                      
                                      
                                      (B)
                                      
                                      
                                      (C)Equity
      compensation plans approved by security holders
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Equity
      compensation plans not approved by security holders
                                      
                                      
                                      10,822,560
                                      
                                      
                                      $
                                      0.25
                                      
                                      
                                      
                                      3,538,000Total
                                      
                                      
                                      10,822,560
                                      
                                      
                                      $
                                      0.25
                                      
                                      
                                      
                                      3,538,
      800
  28
  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, 2010 and
2009.
 
 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 orally ingestible pills for delivery of 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. While our strategy is to partner with
an appropriate party, 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.
  29
  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, 2010 of $12,986,054, as well as negative
cash flow from operating activities. Based upon our existing spending
commitments, estimated at $5.2 million for the twelve months following September
1, 2010, and our cash availability, we do not have sufficient cash resources to
meet our liquidity requirements through August 31, 2011. 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
 
 Our
significant accounting policies are more fully described in the notes to our
consolidated financial statements. We believe that the accounting policies below
are critical for one to fully understand and evaluate our financial condition
and results of operations.
 
 The
discussion and analysis of our financial condition and results of operations is
based on our financial statements, which we prepared in accordance with U.S.
generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported revenues and expenses during the reporting periods. On an ongoing
basis, we evaluate such estimates and judgments. We base our estimates on
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
  30
  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 the guidance that 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.
  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. 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
our subsidiary, Oramed Ltd., the guidance  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.
 
 The
following table summarizes certain statements of operations data for us for the
twelve months period ended August 31, 2010 and 2009:
 
 Year endedOperating Data:
                    
                    August 31, 2010
                    
                    
                    August 31, 2009Research
      and development expenses, net
                    
                    $
                    1,463,886
                    
                    
                    $
                    1,574,074General
      and administrative expenses
                    
                    
                    1,508,667
                    
                    
                    
                    1,210,044Financial
      income, net
                    
                    
                    (10,148
                    )
                    
                    
                    (21,047
                    )Loss
      before taxes on income
                    
                    
                    (2,962,405
                    )
                    
                    
                    (2,763,071
                    )Taxes
      on income
                    
                    
                    14,971
                    
                    
                    
                    (2,597
                    )Net
      loss for the period
                    
                    $
                    (2,977,376
                    )
                    
                    $
                    (2,760,474
                    )Loss
      per common share – basic and diluted
                    
                    $
                    (0.05
                    )
                    
                    $
                    (0.05
                    )Weighted
      average common shares outstanding
                    
                    
                    57,389,991
                    
                    
                    
                    56,645,820
  31
  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 contract
research organizations, or 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.
  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 of the Ministry of Industry,
Trade and Labor of Israel, or the OCS. This grant was used for research and
development expenses for the period of February 2009 to June 2010. The grant is
subject to repayment according to the terms determined by the OCS and applicable
law.  See "—Government Grants" below. The funds were designated and
used by Oramed Ltd. to support further R&D and clinical study of its oral
insulin capsule and Oral GLP1-Analog.
  During
the year ended August 31, 2010, research and development expenses totaled
$1,463,886, compared to $1,574,074 for the year ended August 31, 2009. The
decrease is mainly attributable to a decrease in purchase of clinical materials.
The research and development costs include stock based compensation costs, which
during the year ended August 31, 2010, totaled $341,203 as compared to $264,861
during the year ended August 31, 2009.
  32
  Government
Grants
 
 The
Government of Israel encourages research and development projects through 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
years ended August 31, 2010 and 2009, we recognized research and development
grants in an amount of $350,198 and $400,405, respectively. As of August 31,
2010, 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.
  33
  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.
  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, 2010, general and administrative expenses totaled
$1,508,667 compared to $1,210,044 for the year ended August 31, 2009. Costs
incurred related to general and administrative activities during the year ended
August 31, 2010 reflect an increase of professional, legal and consulting
expenses and an increase in business development costs. During the year ended
August 31, 2010, as part of our general and administrative expenses, we incurred
$466,623 related to stock options granted to employees and consultants, as
compared to $288,338 during the year ended August 31, 2009.
 
 Financial
income/expense, net
 
 During
the year ended August 31, 2010, we generated interest income on available cash
and cash equivalents balance which were offset by bank charges. During the year
ended August 31, 2009, 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, 2010 as compared
with the year ended August 31, 2009 is attributable to the decrease in interest
rates in both the United States and the State of Israel, and to decrease in cash
and cash equivalents.
 
 Liquidity
and Capital Resources
 
 Since
inception through August 31, 2010, we incurred losses in an aggregate amount of
$12,986,054. We have financed our operations through the private placements of
equity and debt financing, 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, 2010, we had $1,199,638 of available cash as well as $100,000 in
short term interest bearing investments. We anticipate that we will require
approximately $5.2 million to finance our activities during the twelve months
following September 1, 2010.
  34
  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 as receive additional funding from
the OCS.
  During
our fiscal years 2009 and 2010 we issued 1,312,515 common shares to various
third party vendors for services rendered.  The aggregate value of those
shares was approximately $589,000.   Subsequent to our year-ended August
31, 2010, we issued an addition 253,714 shares of common stock valued at $88,880
to a third party for services rendered.  We also consummated a private
placement by selling 937,500 units at a purchase price of $0.32 per unit for a
total consideration of $300,000. Each unit
consisted of oneshareof common stockand 0.35share purchase warrant. Each share purchase
warrant entitles the holder to purchase one share of common stock for a period
of 5 years at an exercise price of $0.50.
 
 Employee's and Consultant’s Stock Options and
Warrants
  Employee
and consultant stock options grant and warrant issuance activities for the
fiscal year 2010 include the following:
  ·              On
November 23, 2009 we granted options under the 2008 Stock Incentive Plan to
purchase up to 100,000 shares of our common stock at an exercise price of $0.76
to a consultant.
  ·              On
November 23, 2009 we granted options under the 2008 Stock Incentive Plan to
purchase up to 36,000 shares of our common stock at an exercise price of $0.46
to an employee of our subsidiary.
  ·              On
March 16, 2010, 50,000 options were granted to a consultant of our subsidiary at
an exercise price of $0.50 per share. The options vest in three equal annual
installments commencing on March 16, 2011 and will expire on March 15,
2015.
  ·              On
March 16, 2010, 100,000 options were granted to a consultant of the Company at
an exercise price of $0.43 per share. The options vest in three equal monthly
installments commencing on March 30, 2010 and will expire on March 15,
2015.
  ·              On
March 16, 2010, 13,200 options were granted to a consultant of the Company at an
exercise price of $0.43 per share. The options vest in six monthly installments
commencing on March 30, 2010 and will expire on March 15, 2015.
  ·              On
March 25, 2010, 100,000 options were granted to a consultant of the Company at
an exercise price of $0.50 per share. The options vest in four equal quarterly
installments commencing on May 17, 2010 and will expire on March 24,
2015.
  ·              On
April 21, 2010, 864,000 options were granted to each of Nadav Kidron and Miriam
Kidron under the 2008 Stock Option Plan at an exercise price of $0.49 per share,
108,000 of such options vested immediately on the date of grant and the
remainder will vest in twenty equal monthly installments, commencing on May 31,
2010. The options have an expiration date of April 20, 2020.
  35
  ·              On
July 8, 2010, 300,000 options were granted to a director at an exercise price of
$0.48 per share. The options vest in three equal annual installments commencing
on July 8, 2011 and will expire on July 7, 2020.
 
 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, 2010 are as follows:
 
 Category
                    
                    AmountResearch
      & Development, net of OCS funds
                    
                    $
                    4,033,000General
      & Administrative expenses
                    
                    
                    1,204,000Finance
      income, net
                    
                    
                    2,000Total
                    
                    $
                    5,239,000
 
 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.
 
 ITEM
7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  As a
smaller reporting company, we are not required to provide the information
required by this Item.
  ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 See Item
15.
 
 ITEM
9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 None.
  36
  ITEM
9A – 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, 2010. 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.
  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,
2010 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 the Company's internal controls
over financial reporting were not effective as of August 31, 2010 at a
reasonable assurance level.
  37
  During
the year ended August 31, 2010, management started an extensive program of
documenting all processes related to the financial reporting, in order to
strengthen our internal controls over financial reporting in order to reasonably
ensure the 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,
2010 that have materially affected, or are reasonable likely to materially
affect our internal control over financial reporting.
 
 ITEM
9B – OTHER INFORMATION
 
 None.
  38
  PART
III
 
 ITEM
10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 Set forth below is certain information
with respect to the individuals who are our directors, executive officers and
significant employees.
 
 Name
                      
                      Age
                      
                      PositionNadav
      Kidron
                      
                      36
                      
                      President,
      Chief Executive Officer and DirectorMiriam
      Kidron
                      
                      69
                      
                      Chief
      Medical and Technology Officer and DirectorLeonard
      Sank
                      
                      45
                      
                      DirectorHarold
      Jacob
                      
                      56
                      
                      Director
      and member of the Scientific Advisory BoardMichael
      Berelowitz
                      
                      66
                      
                      DirectorYifat
      Zommer
                      
                      36
                      
                      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 holds an 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.
  39
  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 playing important
leadership roles 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.
 
 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.
 
 Dr. Michael
Berelowitzwas
appointed as a director on June 1, 2010. Since 2009, Dr. Berelowitz has served
as Senior Vice President and Head of Clinical Development and Medical Affairs in
the Specialty Care Business Unit at Pfizer, Inc. From 1996 to 2009 he served in
various roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes
Clinical Research team and then assuming positions of increasing responsibility
until being appointed to his present role. Prior to that, Dr. Berelowitz spent a
number of years in academia. Among his public activities, Dr. Berelowitz has
served on the board of directors of the American Diabetes Association, the
Clinical Initiatives Committee of the Endocrine Society, and has chaired the
Task Force on Research of the New York State Council on Diabetes. He has also
served on several editorial boards, including the Journal of Clinical
Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and
Metabolic Disorders and Clinical Diabetes. Dr. Berelowitz has authored and
co-authored more than 100 peer-reviewed journal articles and book chapters in
the areas of pituitary growth hormone regulation, diabetes and metabolic
disorders.
 
 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, Harold Jacob and Michael Berelowitz 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 2011.
  40
  Board
Meeting Attendance
 
 During
the year ended August 31, 2010, our board held six meetings and took actions by
written consent on 13 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.
 
 Committees
 
 As of
August 31, 2010 the Board has not established any committees. The Board intends
to establish an audit and compensation committee during the year ending August
31, 2011. The Board has not established a nominating committee because it
believes that the Board, of which three of its five members are independent
directors, is qualified to fulfill that function.
 
 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 2010, we believe that during fiscal year 2010, 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.
 
 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.
 
 ITEM
11 - EXECUTIVE COMPENSATION
 
 Summary
Compensation Table
 
 The following table sets forth the
compensation earned during the years ended August 31 2009 and 2010 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”):
  Year
                                      
                                      Salary
                                      
                                      
                                      Option Awards
                                      
                                      
                                      All Other
                                        Compensation
                                      
                                      
                                      TotalName and Principal
                                      
                                      
                                      
                                      ($)
                                      
                                      
                                      ($)
                                      
                                      
                                      ($)
                                      
                                      
                                      ($)Position
                                      
                                      (1)
                                      
                                      
                                      
                                      
                                      (2)
                                      
                                      
                                      (3)Nadav
      Kidron
                                        President
      and CEO and director (4)
                                      
                                      2010
                                      
                                      
                                      159,919
                                      
                                      
                                      
                                      236,344
                                      
                                      
                                      
                                      10,783
                                      
                                      
                                      
                                      407,0462009
                                      
                                      
                                      155,359
                                      
                                      
                                      
                                      153,855
                                      
                                      
                                      
                                      15,474
                                      
                                      
                                      
                                      324,688Miriam
      Kidron
                                        Chief
      Medical and Technology Officer and director (5)(6)
                                      
                                      2010
                                      
                                      
                                      160,092
                                      
                                      
                                      
                                      236,344
                                      
                                      
                                      
                                      7,727
                                      
                                      
                                      
                                      404,1632009
                                      
                                      
                                      154,983
                                      
                                      
                                      
                                      153,855
                                      
                                      
                                      
                                      11,539
                                      
                                      
                                      
                                      320,377Yifat
      Zommer
                                        CFO,
      Treasurer and Secretary (7)
                                      
                                      2010
                                      
                                      
                                      76,896
                                      
                                      
                                      
                                      81,803
                                      
                                      
                                      
                                      26,979
                                      
                                      
                                      
                                      185,6782009
                                      
                                      
                                      20,468
                                      
                                      
                                      
                                      19,946
                                      
                                      
                                      
                                      11,245
                                      
                                      
                                      
                                      51,659Chaime
      Orlev
                                        CFO
      and Secretary(8)
                                      
                                      2009
                                      
                                      
                                      59,300
                                      
                                      
                                      Nil
                                      
                                      
                                      
                                      25,544
                                      
                                      
                                      
                                      84,844
 
 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, 2010 and 2009 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, 2010. 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 receives 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 receives 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, Treasurer and Secretary on
      April 19, 2009.8
                Mr.
      Orlev served as our CFO and Secretary from May 1, 2008 through March 31,
      2009.
 
 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
                    
                    2010
                    
                    
                    10,783
                    
                    
                    Nil
                    
                    
                    Nil
                    
                    
                    
                    10,783Miriam
      Kidron
                    
                    2010
                    
                    
                    7,727
                    
                    
                    Nil
                    
                    
                    Nil
                    
                    
                    
                    7,727Yifat
      Zommer
                    
                    2010
                    
                    
                    9,814
                    
                    
                    
                    11,466
                    
                    
                    
                    5,699
                    
                    
                    
                    26,979
 *
                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.
  41


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, 2010.





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
                                    
                                    05/06/18864,000
                                    (5)
                                    
                                    
                                    612,000
                                    (2)
                                    
                                    
                                    0.49
                                    
                                    04/20/20Miriam
      Kidron
                                    
                                    
                                    3,361,360
                                    (3)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    0.001
                                    
                                    08/13/12850,000
                                    (1)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    0.45
                                    
                                    08/01/12720,000
                                    (2)
                                    
                                    
                                    144,000
                                    (2)
                                    
                                    
                                    0.54
                                    
                                    05/06/18864,000
                                    (5)
                                    
                                    
                                    612,000
                                    (2)
                                    
                                    
                                    0.49
                                    
                                    04/20/20Yifat
      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.




(5)
            On April 21, 2010, 864,000
      options were granted to each of Nadav Kidron and Miriam Kidron under the
      2008 Stock Option Plan at an exercise price of $0.49 per share, 108,000 of
      such options vested immediately on the date of grant and the remainder
      will vest in twenty one equal monthly installments, commencing on May 31,
      2010. The options have an expiration date of April 20,
      2020.




Stock
Option Plans





2006
Stock Option Plan




On October 15, 2006, our board of
directors adopted the 2006 Stock Option Plan (the “2006 Plan”) in order to
attract and retain quality personnel. Under the 2006 Plan, 3,000,000 shares have
been reserved for the grant of options by the board. In addition, under the
terms of the 2006 Plan, options that have expired or been terminated for any
reason prior to being exercised may be reissued.  As of August 31,
2010, options with respect to 1,700,000 shares were outstanding under
the 2006 Plan, which amount reflects the aggregate grant of options with
respect to 3,350,000 shares, of which 1,650,000 expired through August 31,
2010.


42


2008
Stock Incentive Plan




On May 5,
2008, our board of directors adopted the 2008 Stock Incentive Plan (the “2008
Plan”) in order to attract and retain quality personnel. 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 our employees or our
parent or subsidiary. 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, 2010,
options with respect to 6,739,200 shares have been granted under the 2008 Plan,
978,000 of which have been forfeited.




Other


On August
14, 2007 we granted Dr. Miriam Kidron options to purchase up to 3,361,360 shares
at an exercise price of $0.001; the options 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, 2010:





·      On
April 21, 2010, 864,000 options were granted to each of Nadav Kidron and Miriam
Kidron under the 2008 Stock Option Plan at an exercise price of $0.49 per share,
108,000 of such options vested immediately on the date of grant and the
remainder will vest in twenty equal monthly installments, commencing on May 31,
2010. The options have an expiration date of April 20, 2020.




·      On
July 8, 2010, 300,000 options were granted to a director at an exercise price of
$0.48 per share. The options vest in three equal annual installments commencing
on July 8, 2011 and will expire on July 7, 2020.





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.




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 NIS 50,400 per month and (ii) will be reimbursed for reasonable expenses
incurred in connection with performance of the Consulting
Agreements.


43




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 ($5,764). In accordance with
the employment agreement, as amended, as of October 19, 2009, Ms. Zommer’s gross
monthly salary was increased to NIS 24,200 ($6,340).





On April
19, 2009, Oramed and Ms. Zommer also entered into an indemnification agreement,
pursuant to which Oramed agrees to indemnify Ms. Zommer for any liability she
may incur by reason of the fact that she serves as Oramed’s CFO, to the maximum
extent permitted by law.





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 June 1, 2010, each independent director is entitled to
receive as remuneration for his or her service as a member of the board a sum
equal to $10,000 per annum, to be paid quarterly and shortly after the close of
each quarter (for the period from September 1, 2008 to May 31, 2010 -
$8,000 per annum). 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,
2010.





Name
      of Director
                  
                  Fees
      Earned or
                    Paid
      in Cash
                    ($)
                  
                  
                  Option
      Awards
                    (1)
                    ($)
                  
                  
                  Total
                    ($)Nadav
      Kidron (2)Miriam
      Kidron (2)Leonard
      Sank
                  
                  
                  8,500
                  
                  
                  
                  45,218
                  
                  
                  
                  53,718Harold
      Jacob
                  
                  
                  8,500
                  
                  
                  
                  45,218
                  
                  
                  
                  53,718Michael
      Berelowitz
                  
                  
                  2,500
                  
                  
                  
                  11,201
                  
                  
                  
                  13,701







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.


44


2
            Please
      refer to the summary compensation table for executive compensation with
      respect to the named individual.





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, 2010 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 (iii) by all our directors and executive
officers as a group. On such date, we had 57,565,321 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, 2010.





Name
      and Address of
                                                Beneficial Owner
                                              
                                              Number of Shares
                                              
                                              
                                              Percentage
      of Shares
                                                Beneficially OwnedNadav
      Kidron †‡10
      Itamar Ben Avi St.Jerusalem,
      Israel
                                              
                                              
                                              12,373,735
                                              (1)
                                              
                                              
                                              20.77
                                              %Zeev
      Bronfeld6
      Uri St.Tel-Aviv,
      Israel
                                              
                                              
                                              6,158,517
                                              
                                              
                                              
                                              10.70
                                              %Miriam
      Kidron †‡2
      Elza St.Jerusalem,
      Israel
                                              
                                              
                                              5,363,360
                                              (2)
                                              
                                              
                                              8.52
                                              %Apollo
      Nominees IncOne
      Financial Place Suite 100 Lower Collymore RockSt.
      Michael, Barbados
                                              
                                              
                                              3,577,501
                                              (3)
                                              
                                              
                                              6.09
                                              %Hadasit
      Medical Research Services & Development Ltd.P.O.
      Box 12000Jerusalem,
      Israel
                                              
                                              
                                              4,141,532
                                              
                                              
                                              
                                              7.19
                                              %Leonard
      Sank †3
      Blair Rd Camps BayCape
      Town, South Africa
                                              
                                              
                                              2,582,650
                                              (4)
                                              
                                              
                                              4.47
                                              %Harold
      Jacob †Haadmur
      Mebuyon 26Jerusalem,
      Israel
                                              
                                              
                                              100,000
                                              (5)
                                              
                                              
                                              *Michael
      Berelowitz †415
      East 37th
      StreetNew
      York, NY, USA
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —Yifat
      Zommer ‡P.O.
      Box 39098,Jerusalem,
      Israel
                                              
                                              
                                              133,333
                                              (6)
                                              
                                              
                                              *All
      current executive officers anddirectors,
      as a group (six persons)
                                              
                                              
                                              20,553,078
                                              (7)
                                              
                                              
                                              34.17
                                              %


45





*
            Less
      than 1%


†
            Indicates
      Director


‡
            Indicates
      Officer


(1)
            Includes
      2,002,000 shares of common stock issuable upon the exercise of outstanding
      stock options.


(2)
            Includes
      5,363,360 shares of common stock issuable upon the exercise of outstanding
      stock options.


(3)
            Includes
      1,145,834 shares of common stock issuable upon the exercise of warrants
      beneficially owned by the referenced
entity.


(4)
            Includes
      225,000 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)
            Consists
      of 133,333 shares of common stock issuable upon the exercise of
      outstanding stock options.


(7)
            Includes
      7,863,693 shares of common stock issuable upon the exercise of outstanding
      stock options.


46


ITEM
13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE





Except as
otherwise indicated below, during the fiscal year 2010 we have not been a party
to any transaction, proposed transaction, or series of transactions in which the
amount involved exceeds the lesser of $120,000 or
one percent of the average of our total assets at year-end for the last two
completed fiscal years, 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. All related parties transactions are approved by our board of
directors.




On June
1, 2010, our subsidiary Oramed Ltd., entered into an agreement with D.N.A
Biomedical Solutions Ltd(formerly,
Laser Detect Systems Ltd) ("D.N.A"), for the establishment of a new company to
be called Entera Bio Ltd. ("Entera"). Under the terms of a license agreement
that was entered into between Oramed and Entera, Oramed will out-license
technology to Entera, on an exclusive basis, for the development of oral
delivery drugs for certain indications to be agreed upon between the
parties.  The out-licensed technology differs from our main delivery
technology that is used for oral insulin and GLP-1 Analog and is subject to a
different patent application. Entera's initial development effort will be an
oral formulation for the treatment of osteoporosis. Mr. Zeev Bronfeld, who
is one of D.N.A's controlling shareholders, holds approximately 10.71% of our
outstanding common stock (see "Securities Ownership of Certain Beneficial Owners
and Management"). See "Item 1 – Business – Description of Business –
Out-Licensed Technology" for further information.




The board
of directors has determined that Leonard Sank, Harold Jacob and Michael
Berelowitz are independent as defined under the rules promulgated by the NASDAQ
Stock Market.




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, 2010 and
2009:





Summary:
                      
                      2010
                      
                      
                      2009Audit
      fees(1)
                      
                      $
                      65,880
                      
                      
                      $
                      60,000Tax
      fees(2)
                      
                      
                      
                      
                      
                      $
                      15,000





(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.


47





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.


48




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-1REPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM - Report of Malone & Bailey, PC
                    
                    F-2CONSOLIDATED
      FINANCIAL STATEMENTS:Balance
      sheets
                    
                    F-3Statements
      of operations
                    
                    F-4Statements
      of changes in stockholders’ equity
                    
                    F-5Statements
      of cash flows
                    
                    F-6Notes
      to financial statements
                    
                    F-7-F-29




49


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,
2010 and 2009, 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, 2010 (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, 2010 and 2009, 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, 2010 (not separately presented herein), in
conformity with accounting principles generally accepted in the United States of
America.
  As
discussed in Note 1a to the financial statements, the Company has suffered
recurring losses for the period from inception (April 12, 2002) through August
31, 2010 and presently the Company does not have sufficient cash and other
resources to meet its requirements in the following twelve months. These factors
raise substantial doubts as to the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1a. The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern and do not include any adjustments
that might result from the outcome of this uncertainty
 
 Kesselman
      & KesselmanTel
      Aviv, IsraelNovember
      29, 2010
 
 F-1
  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 Company is 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 of the 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-2
  ORAMED
PHARMACEUTICALS, INC.
 
 (A
Development Stage Company)
  CONSOLIDATED
BALANCE SHEETS
  U.S.
dollars
 
 August
      312010
                  
                  
                  2009AssetsCURRENT
      ASSETS:Cash and cash
      equivalents
                  
                  $
                  1,199,638
                  
                  
                  $
                  1,716,866Short term
      investments (note 2)
                  
                  
                  100,000
                  
                  
                  
                  1,000,000Restricted
      cash (note 1n)
                  
                  
                  16,008
                  
                  
                  
                  16,000Accounts
      receivable - other
                  
                  
                  59,175
                  
                  
                  
                  36,939Prepaid
      expenses
                  
                  
                  1,859
                  
                  
                  
                  4,119Related
      parties (note 13)
                  
                  
                  7,689Grants receivable
      from the Chief Scientist
                  
                  
                  12,438
                  
                  
                  
                  400,405Total current
      assets
                  
                  
                  1,396,807
                  
                  
                  
                  3,174,329LONG
      TERM DEPOSITS(note 6b)
                  
                  
                  10,582
                  
                  
                  
                  12,161PROPERTY
      AND EQUIPMENT, NET(note 5)
                  
                  
                  43,499
                  
                  
                  
                  75,361Total
      assets
                  
                  $
                  1,450,888
                  
                  
                  $
                  3,261,851Liabilities
      and stockholders' equityCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses (note 9)
                  
                  $
                  411,330
                  
                  
                  $
                  321,344Account
      payable with former shareholder
                  
                  
                  47,252
                  
                  
                  
                  47,252Total current
      liabilities
                  
                  
                  458,582
                  
                  
                  
                  368,596PROVISION
      FOR UNCERTAIN TAX POSITION(note 12f)
                  
                  
                  162,034
                  
                  
                  
                  147,063COMMITMENTS(note 6)STOCKHOLDERS’
      EQUITY:Common
      stock, $ 0.001 par value (200,000,000 authorized shares; 57,565,321 and
      56,456,710  shares issued and outstanding as of August 31, 2010
      and 2009, respectively)
                  
                  
                  57,565
                  
                  
                  
                  56,456Additional
      paid-in capital
                  
                  
                  13,758,761
                  
                  
                  
                  12,698,414Deficit
      accumulated during the development stage
                  
                  
                  (12,986,054
                  )
                  
                  
                  (10,008,678
                  )Total stockholders'
      equity
                  
                  
                  830,272
                  
                  
                  
                  2,746,192Total liabilities
      and stockholders’ equity
                  
                  $
                  1,450,888
                  
                  
                  $
                  3,261,851
 
 The
accompanying notes are an integral part of the financial
statements.
  F-3
  ORAMED
PHARMACEUTICALS, INC.
 
 (A
Development Stage Company)
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 U.S.
dollars
  Periodfrom
      April12,
      2002(inception)Year
      ended
                              
                              
                              throughAugust
      31
                              
                              
                              August
      31,2010
                              
                              
                              2009
                              
                              
                              2010RESEARCH
      AND DEVELOPMENT EXPENSES, NET(note
      10)
                              
                              $
                              1,463,886
                              
                              
                              $
                              1,574,074
                              
                              
                              $
                              6,692,540IMPAIRMENT
      OF INVESTMENT
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              434,876GENERAL
      AND ADMINISTRATIVE EXPENSES(note
      11)
                              
                              
                              1,508,667
                              
                              
                              
                              1,210,044
                              
                              
                              
                              5,682,423OPERATING
      LOSS
                              
                              
                              2,972,553
                              
                              
                              
                              2,784,118
                              
                              
                              
                              12,809,839FINANCIAL
      INCOME
                              
                              
                              (24,692
                              )
                              
                              
                              (38,602
                              )
                              
                              
                              (160,800
                              )FINANCIAL
      EXPENSE
                              
                              
                              14,544
                              
                              
                              
                              17,555
                              
                              
                              
                              162,477LOSS
      BEFORE TAXES ON INCOME
                              
                              
                              2,962,405
                              
                              
                              
                              2,763,071
                              
                              
                              
                              12,811,516TAXES
      ON INCOME(note
      12)
                              
                              
                              14,971
                              
                              
                              
                              (2,597
                              )
                              
                              
                              174,538NET
      LOSS FOR THE PERIOD
                              
                              $
                              2,977,376
                              
                              
                              $
                              2,760,474
                              
                              
                              $
                              12,986,054BASIC
      AND DILUTED LOSS PER COMMON SHARE
                              
                              $
                              (0.05
                              )
                              
                              $
                              (0.05
                              )WEIGHTED
      AVERAGE NUMBER OF COMMON STOCK USED IN COMPUTING BASIC
      AND  DILUTED LOSS PER COMMON STOCK
                              
                              
                              57,389,991
                              
                              
                              
                              56,645,820
 
 The
accompanying notes are an integral part of the financial
statements.
  F-4
  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, 2008: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- NET OF ISSUANCE EXPENSES
                      
                      
                      37,359,230
                      
                      
                      
                      37,359
                      
                      
                      
                      7,870,422
                      
                      
                      
                      
                      
                      
                      7,907,781SHARES
      ISSUED FOR  SERVICES
                      
                      
                      418,025
                      
                      
                      
                      418
                      
                      
                      
                      214,442
                      
                      
                      
                      
                      
                      
                      214,860CONTRIBUTIONS
      TO PAID IN CAPITAL
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      18,991
                      
                      
                      
                      
                      
                      
                      18,991RECEIPTS
      ON ACCOUNT OF SHARESAND
      WARRANTS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      6,061
                      
                      
                      
                      
                      
                      
                      6,061SHARES
      ISSUED FOR CONVERSION OF CONVERTIBLE NOTE
                      
                      
                      550,000
                      
                      
                      
                      550
                      
                      
                      
                      274,450
                      
                      
                      
                      
                      
                      
                      275,000STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
      DIRECTORS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      2,428,014
                      
                      
                      
                      
                      
                      
                      2,428,014STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
    CONSULTANTS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      381,764
                      
                      
                      
                      
                      
                      
                      381,764DISCOUNT
      ON CONVERTIBLE NOTE RELATED TO BENEFICIAL CONVERSION
    FEATURE
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      108,000
                      
                      
                      
                      
                      
                      
                      108,000COMPREHENSIVE
      LOSS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (16
                      )
                      
                      
                      (16
                      )IMPUTED
      INTEREST
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      12,217
                      
                      
                      
                      
                      
                      
                      
                      12,217NET
      LOSS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (7,248,188
                      )
                      
                      
                      (7,248,188
                      )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
                      )
                      
                      
                      2,746,192SHARES
      ISSUED FOR  SERVICES RENDERED
                      
                      
                      1,108,611
                      
                      
                      
                      1,109
                      
                      
                      
                      248,741
                      
                      
                      
                      
                      
                      
                      
                      249,850STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO EMPLOYEES AND
      DIRECTORS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      690,882
                      
                      
                      
                      
                      
                      
                      
                      690,882STOCK
      BASED COMPENSATION RELATED TO OPTIONS GRANTED TO
    CONSULTANTS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      116,944
                      
                      
                      
                      
                      
                      
                      
                      116,944IMPUTED
      INTEREST
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      3,780
                      
                      
                      
                      
                      
                      
                      
                      3,780NET
      LOSS
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (2,
      977, 376
                      )
                      
                      
                      (2,977,376
                      )BALANCE
      AS OF AUGUST 31, 2010
                      
                      
                      57,565,321
                      
                      
                      $
                      57,565
                      
                      
                      $
                      13,758,761
                      
                      
                      $
                      (12,986,054
                      )
                      
                      $
                      830,272
  The
accompanying notes are an integral part of the consolidated financial
statements.
  F-5
  ORAMED
PHARMACEUTICALS, INC.
  (A
Development Stage Company)
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
  Period
      from April
                          12,
      2002
                          (inception
      date)
                          throughYear
      ended August 31
                        
                        
                        August
      31,2010
                        
                        
                        2009
                        
                        
                        2010CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                        
                        $
                        (2,977,376
                        )
                        
                        $
                        (2,760,474
                        )
                        
                        $
                        (12,986,054
                        )Adjustments
      required to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                        
                        
                        31,862
                        
                        
                        
                        30,488
                        
                        
                        
                        77,804Amortization
      of debt discount
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        108,000Exchange
      differences on long term deposits
                        
                        
                        335
                        
                        
                        
                        641
                        
                        
                        
                        (666
                        )Stock
      based compensation
                        
                        
                        807,826
                        
                        
                        
                        553,199
                        
                        
                        
                        4,170,803Common
      stock issued for services
                        
                        
                        249,850
                        
                        
                        
                        152,928
                        
                        
                        
                        617,638Common
      stock to be issued for services
                        
                        
                        
                        
                        
                        
                        203,699
                        
                        
                        
                        203,699Impairment
      of investment
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        434,876Imputed
      interest
                        
                        
                        3,780
                        
                        
                        
                        3,780
                        
                        
                        
                        19,777Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
                        
                        
                        360,302
                        
                        
                        
                        (38,889
                        )
                        
                        
                        (81,161
                        )Restricted
      cash
                        
                        
                        (8
                        )
                        
                        
                        (16,000
                        )
                        
                        
                        (16,008
                        )Accounts
      payable and accrued expenses
                        
                        
                        89,986
                        
                        
                        
                        (414,708
                        )
                        
                        
                        411,330Provision
      for uncertain tax position
                        
                        
                        14,971
                        
                        
                        
                        16,413
                        
                        
                        
                        162,034Total net cash used
      in operating activities
                        
                        
                        (1,418,472
                        )
                        
                        
                        (2,268,923
                        )
                        
                        
                        (6,877,928
                        )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
                        
                        
                        
                        
                        
                        
                        (7,553
                        )
                        
                        
                        (121,303
                        )Purchase
      of  short term investments
                        
                        
                        
                        
                        
                        
                        (1,000,000
                        )
                        
                        
                        (3,728,000
                        )Proceeds
      from sale of  short term investments
                        
                        
                        900,000
                        
                        
                        
                        2,728,000
                        
                        
                        
                        3,628,000Lease
      deposits, net
                        
                        
                        1,244
                        
                        
                        
                        (1,978
                        )
                        
                        
                        (9,916
                        )Total
      net cash provided by (used in) investing activities
                        
                        
                        901,244
                        
                        
                        
                        1,718,469
                        
                        
                        
                        (231,219
                        )CASH
      FLOWS FROM
      FINANCING ACTIVITIES:Proceeds
      from sales of common stocks andwarrants
      - net of issuance expenses
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        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
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        8,308,785INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                        
                        
                        (517,228
                        )
                        
                        
                        (550,454
                        )
                        
                        
                        1,199,638CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                        
                        
                        1,716,866
                        
                        
                        
                        2,267,320CASH
      AND CASH EQUIVALENTS AT END
      OF PERIOD
                        
                        $
                        1,199,638
                        
                        
                        $
                        1,716,866
                        
                        
                        $
                        1,199,638Non
      cash investing and financing activities:Discount
      on convertible note related to beneficialconversion
      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-6
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 -  SIGNIFICANT ACCOUNTING POLICIES:
   a.
                General:
  Oramed
Pharmaceuticals Inc. (the “Company”) was incorporated on April 12, 2002, under
the laws of the State of Nevada. 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 to be 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”), (together with the Company,
"the Group").
  The Group
is engaged in research and development in the biotechnology field and is
considered a development stage company in accordance with the
guidance.
  The
Company has sufferd recurring losses for the period from inception
(April 12, 2002) through August 31, 2010 amounting to $12,986,054, as well
as negative cash flow from operating activities. Presently, the Company does not
have sufficient cash and other resources to meet its requirements in the twelve
months following September 1, 2010. These factors raise substantial doubts as to
the Company's ability to continue as a going concern. The accompanying
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern and do not include any adjustments that might
result from the outcome of this uncertainty. Management is in the process of
evaluating various financing alternatives through fund raisingin
the public or private equity markets, as the Company will need to finance future
research and development activities and general and administrative expenses.
Although there is no assurance that the Company will be successful with those
initiatives, management believes that it will be able 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-7
  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”).In June 2009,
      the Financial Accounting Standards Board ("FASB") issued the FASB
      Accounting Standards Codification ("Codification" or "ASC"). The
      Codification became the single authoritative source for U.S. GAAP and
      changed the way in which the accounting literature is organized. The
      Codification does not change U.S. GAAP and accordingly its adoption did
      not have a material impact on the Company's consolidated financial
      statements
 
 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.
  For the
year ended August 31, 2010, the group recorded $10,650 as financial income
derived from exchange rate differences.
  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-8
   ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 f.
                Property
      and equipment
  Property
and equipment are recorded at cost and depreciated by the straight-line method
over the estimated useful lives of the assets.
  Annual
rates of depreciation are as follows:
 %Computers
      and peripheral equipment
                      
                      
                      33Office
      furniture and equipment
                      
                      
                      15-33
 
 Leasehold
improvements are amortized over the term of the lease which is shorter than the
estimated useful life of the improvements.
 
 g.
                Income
      taxes
 
 1.
                  Deferred
      taxes
 Deferred
taxes are determined utilizing the asset and liability method based on the
estimated future tax effects of differences between 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, the recognition is prohibited for a 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
 The
Company follows a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely
than not that the position will be sustained on audit. The second step is to
measure the tax benefit as the largest amount that is more than 50% likely of
being realized upon ultimate settlement. Such liabilities are classified as
long-term, unless the liability is expected to be resolved within twelve months
from the balance sheet date. The Company's policy is to include interest and
penalties related to unrecognized tax benefits within income tax
expenses.
  F-9
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 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.
  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 2009 and 2010.
 
 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 and warrants excluded from
the calculation of diluted net loss was 15,584,897 for the year ended August 31,
2010 (18,017,697 for the year ended August 31, 2009).
  F-10
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
 
 l.
                Impairment
      in value of long-lived assets
  The
Company reviews long-lived assets, to be held and used, for impairment whenever
events or changes in circumstances indicate 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.
  m.
                Stock
      based compensation
  Equity
awards granted to employees are accounted for using the grant-date fair value
method. The fair value of share-based 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. 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-11
  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
the authoritative guidance issued by the FASB, 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 the guidance, fair value is based on the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. In
order to increase consistency and comparability in fair value measurements, the
guidance establishes a fair value hierarchy that prioritizes observable and
unobservable inputs used to measure fair value into three broad levels, which
are described as follows:
  Level
      1:
                Quoted
      prices (unadjusted) in active markets that are accessible at the
      measurement date for assets or liabilities. The fair value hierarchy gives
      the highest priority to Level 1
inputs.
  Level
      2:
                Observable
      prices that are based on inputs 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 restricted deposit with the bank in an
amount of $16,000.
  o.
                Concentration
      of credit risks
  Financial
instruments that subject the Company to credit risk consist primarily of cash
and cash equivalents, deposit and short term investments, which are deposited in
major financial institutions. The company is in the opinion the credit risk in
respect of these balances is remote.
  p.
                Newly
      issued  and recently adopted accounting
      pronouncements:
  In June
2009, the FASB updated accounting guidance relating to variable interest
entities. As applicable to the Company, this will become effective as of the
first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period, and for interim and
annual reporting periods thereafter. As applicable to the Company, the adoption
of the new guidance is not expected to have a material impact on the
consolidated financial statements.
  F-12
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES(continued):
  q.
                Reclassifications
  Certain
figures in respect of prior year 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
0.4% and 1.4% per annum as of August 31, 2010 and 2009,
respectively.
  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 - INVESTMENT IN A JOINT VENTURE
 
 a.
                  On
      June 1, 2010, the subsidiary of the Company entered into an agreement with
      D.N.A Biomedical Solutions Ltd (formerly, Laser Detect Systems Ltd)
      ("D.N.A"), an Israeli company, for the establishment of a new company,
      Entera Bio Ltd. ("Entera"), ("the JV
  Agreement").
 According
to the JV Agreement, D.N.A will invest $600,000 in Entera, and Entera will be
owned in equal parts by the subsidiary and D.N.A. In consideration for 50% of
Entera's shares, the Subsidiary of the Company will enter into a Patent License
Agreement with Entera, according to which, the subsidiary of the Company will
out-license to Entera a technology for the development of oral delivery drugs
for certain actions.  The out-licensed technology differs from
Oramed’s main delivery technology that is used for oral insulin and is subject
to a different patent application. Entera's initial development effort will be
an oral formulation for the treatment of osteoporosis.
 Entera's
Chief Executive Officer will be granted options to purchase ordinary shares of
Entera, reflecting 9.9% of Entera's share capital.
 In the
event that Entera has not obtained third-party financing by June 1, 2011, or
such other date mutually agreed upon by the parties, each of the subsidiary and
D.N.A will be required to make a capital contribution to Entera in the amount of
$150,000. The agreement also contains customary provisions with respect to
preemptive rights, rights of first refusal, drag-along rights, veto rights and
information rights.
 Mr. Zeev
Bronfeld, who is one of D.N.A 's controlling shareholders, is also an affiliated
shareholder of the Company.
 On August
19, 2010, the closing of the transaction took place and the subsidiary of the
Company and Entera entered into the Patent License Agreement. On August 31,
2010, D.N.A. invested $400,000 in Entera.
  As of
August 31, 2010, the Group holds 50% of the issued and outstanding share capital
of Entera (45% - on fully diluted basis). As the Group did not obtain control in
Entera, these consolidated financial statements do not include Entera's
financial statement.
  F-13
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 4 - INVESTMENT IN A JOINT
VENTURE(continued)
 
 The Group
recognized deferred income at the amount of $200,000 (50% of $400,000) that is
presented as a provision and deducted from investment account at the same
amount. As of August 31, 2010, Entera's losses from operations are at the amount
of $134,049.
  Entera
continued activities as a going concern are subject to additional financing
until the completion of the development activities and the commencement of
profit generating sales.
  The
Company has concluded Entera is a variable interest entity according to of the
terms of the JV Agreement.  The Company reviewed several factors to
determine whether the Company is the primary beneficiary of Entera, including
the nature of Entera's financing, its management structure, the nature of
day-to-day operations and certain other factors.  Based on those
factors, the Company determined that it is not the primary beneficiary of
Entera.  The Company recognized its share of losses from this entity
under the equity method, offset with a corresponding amount of revenue
recognition on the out-license agreement.
  b.
                The
      investment in Entera is composed at
follows:
  August
      312010Share
      in Entera's shareholders
                      
                      $
                      200,000Currency
      translation adjustment
                      
                      
                      (176
                      )Less
      - equity losses
                      
                      
                      (67,025
                      )132,799Less
      - deferred income
                      
                      
                      (132,799
                      )Net
      investment
                      
                      
                      -,-
  NOTE
5 - PROPERTY AND EQUIPMENT, Net:
  a.
                Composition
      of property and equipment, grouped by major classifications, is as
      follows:
  August
      312010
                    
                    
                    2009Cost:Leasehold
      improvements
                    
                    $
                    76,029
                    
                    
                    $
                    76,029Office
      furniture and equipment
                    
                    
                    19,941
                    
                    
                    
                    19,941Computers
      and peripheral equipment
                    
                    
                    25,333
                    
                    
                    
                    25,333121,303
                    
                    
                    
                    121,303Less
      - accumulated depreciation and amortization
                    
                    
                    77,804
                    
                    
                    
                    45,942$
                    43,499
                    
                    
                    $
                    75,361
  b.
                Depreciation
      expenses totaled $31,862 and $30,488  in the years ended August
      31, 2010 and 2009, respectively.
  F-14
  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, 2010 was $359,255.
 
 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, 2010 and 2009 were $37,583 and $44,092,
respectively. The future lease payments under the lease agreement are $39,292,
$22,945 and $13,047 for the years ending August 31, 2011, 2012 and 2013,
respectively.
  As
security for its obligation under the lease agreements the Subsidiary deposited
$9,010, 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 on 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, 2010 the monthly payment in the Company's
      functional currency is $628, the future annual lease payments under the
      agreement for the years ending August 31, 2011 and 2012 are $7,532 and
      $2,512, respectively).
  As
security for its obligation under this lease agreement the Company provided a
bank guarantee in an amount equal to three monthly lease payments.
 
 d.
              As
      to a Clinical Trial Manufacturing Agreement with Swiss Caps AG, see note
      8a.
  F-15
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 6 - COMMITMENTS(continued):
 
 e.
              On
      April 21, 2009, the subsidiary entered into a consulting service agreement
      withADRES Advanced Regulatory Services
      Ltd. (“ADRES”)pursuant to which
      ADRES will provideconsulting services
      relating to quality assurance and regulatory processes and procedures in
      order to assist thesubsidiary 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. $160,000 of the total amount was
      paid though August 31, 2010, of that $30,000 were paid for completing the
      three first milestones.
 
 f.
              On
      February 10, 2010, the subsidiary entered into an agreement with
      Vetgenerics Research G. Ziv Ltd, a clinical research organization (CRO),
      to conduct a toxicology trial on its oral insulin capsules. The total cost
      estimated for the studies is €107,100 ($133,040) of which €12,195
      ($16,806) was paid through August 31, 2010 and additional $38,147 are
      presented as accounts payables.
 
 g.
              On
      May 2, 2010, the subsidiary entered into an agreement with SAFC Pharma, a
      division of the Sigma-Aldrich Corporation, to develop a process to produce
      one of its oral capsule ingredients, for a total estimated consideration
      of $269,600, of which $35,589 are presented as accounts
      payables.
 
 h.
              On
      July 5, 2010, the subsidiary of the Company entered into a Manufacturing
      Supply Agreement (MSA) with Sanofi-Aventis Deutschland GMBH
      ("sanofi-aventis"). According to the MSA, sanofi-aventis will supply the
      subsidiary with specified quantities of recombinant human insulin to be
      used for clinical trials in the
USA.
 
 i.
              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.
 
 On August
31, 2010, the subsidiary has not yet realized any revenues from the said project
and did not incur any royalty liability.
 For the
years ended August 31, 2010, and 2009, and for the period from inception on
April 12, 2002 through August 31, 2010, the research and development expenses
are presented net of OCS Grants, in the total amount of $350,198 and $400,405
and $750,603,respectively.
  F-16
  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, 2010 and 2009:
  a.
              As to shares issued as part of
      stock based compensation plan see Note
8.
 
 b.
              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-17
  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, 2009 and 2010:
  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 is issued. During the
      years ended on August 31 2010 and 2009, the Company issued 388,724 and
      203,904 shares of its common stock, respectively, to Swiss as remuneration
      for the services provided in the amount of $198,850 and $113,210,
      respectively.
  b.
              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 withthe 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.
  c.
              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.
  d.
              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 the
      employee ended his
      serviceswiththe Company and the options were
      forfeited before they had vested. During the year ended August 31,
      2009, the Company recognized an expense of $4,354 related to the options
      granted to the employee and reversed that expense during the same
      year.
  e.
              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.
  f.
              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.
  g.
              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-18
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 8 - STOCK BASED COMPENSATION(continued):
 
 h.
              On
      November 23, 2009, 100,000 options were granted to a consultant, at an
      exercise price of $0.76 per share (higher than the traded market price on
      the date of grant), the options vest in three equal annual installments
      commencing November 23, 2010 and expire on November 23, 2014.  The
      engagement with the consultant has ended during the nine months period
      ended May 31, 2010. The fair value of these options on the date of grant,
      was $36,662, using the Black Scholes option-pricing model and was based on
      the following assumptions: dividend yield of 0% for all years; expected
      volatility of 123.30%; risk-free interest rates of 2.20%; and the
      remaining contractual life of 5 years. The Company recorded all expenses
      in respect of these options during that
period.
  i.
              On
      November 23, 2009, 36,000 options were granted to an employee of the
      Subsidiary, at an exercise price of $0.46 per share (equivalent to the
      traded market price on the date of grant), the options vest in three equal
      annual installments commencing November 23, 2010, and expire on November
      23, 2019. The fair value of these options on the date of grant was
      $14,565, using the Black Scholes option-pricing model and was based on the
      following assumptions: dividend yield of 0% for all years; expected
      volatility of 123.55%; risk-free interest rates of 2.55%; and the
      remaining contractual life of 6
years.
  j.
              On
      December 29, 2009, the Company issued 100,000 shares of its common stock
      to a third party as remuneration for services rendered and to be rendered
      during the six month period commencing December 15, 2009. The fair value
      of these shares on the date of issuance was
  $37,000.
  k.
              On
      March 16, 2010, 13,200 options were granted to a consultant, at an
      exercise price of $0.43 per share (equivalent to the traded market price
      on the date of grant), the options vest in six monthly installments
      commencing March 30, 2010 and expire on March 15, 2015.  The fair
      value of these options on the date of grant, was $4,747, using the Black
      Scholes option-pricing model and was based on the following assumptions:
      dividend yield of 0% for all years; expected volatility of 121.61%;
      risk-free interest rates of 2.37%; and the remaining contractual life of 5
      years.
  l.
              On
      March 16, 2010, 100,000 options were granted to a consultant, at an
      exercise price of $0.43 per share (equivalent to the traded market price
      on the date of grant), the options vest in three equal monthly
      installments commencing March 30, 2010 and expire on March 15, 2015. 
      The fair value of these options on the date of grant, was $35,960, using
      the Black Scholes option-pricing model and was based on the following
      assumptions: dividend yield of 0% for all years; expected volatility of
      121.61%; risk-free interest rates of 2.37%; and the remaining contractual
      life of 5 years.
  m.
              On
      March 16, 2010, 50,000 options were granted to a consultant, at an
      exercise price of $0.50 per share (higher than the traded market price on
      the date of grant), the options vest in three equal annual installments
      commencing March 16, 2011 and expire on March 15, 2015.  The fair
      value of these options on the date of grant, was $17,702, using the Black
      Scholes option-pricing model and was based on the following assumptions:
      dividend yield of 0% for all years; expected volatility of 121.61%;
      risk-free interest rates of 2.37%; and the remaining contractual life of 5
      years.
  n.
              On
      March 25, 2010, 100,000 options were granted to a consultant, at an
      exercise price of $0.50 per share (higher than the traded market price on
      the date of grant), the options vest in four equal quarterly installments
      commencing May 17, 2010 and expire on March 24, 2015.  The fair value
      of these options on the date of grant, was $39,051, using the Black
      Scholes option-pricing model and was based on the following assumptions:
      dividend yield of 0% for all years; expected volatility of 121.21%;
      risk-free interest rates of 2.65%; and the remaining contractual life of 5
      years.
  F-19
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 8 - STOCK BASED COMPENSATION(continued):
  o.
              On
      April 21, 2010, 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, at an exercise price of $0.49 per
      share (equivalent to the traded market price on the date of grant),
      216,000 of the options vested immediately on the date of grant and the
      remainder will vest in twenty one equal monthly installments. These
      options expire on April 20, 2020.  The fair value of these options on
      the date of grant was $807,392, using the Black Scholes option-pricing
      model and was based on the following assumptions: dividend yield of 0% for
      all years; expected volatility of 120.69%; risk-free interest rates of
      3.77%; and expected lives of 10
years.
  p.
              On
      July 8, 2010, 300,000 options were granted to a director at an exercise
      price of $0.48 per share (equivalent to the traded market price on the
      date of grant). The options vest in three equal annual installments
      commencing on July 8, 2011 and will expire on July 7, 2020. The fair value
      of these options on the date of grant, was $123,890, using the Black
      Scholes option-pricing model and was based on the following assumptions:
      dividend yield of 0% for all years; expected volatility of 117.82%;
      risk-free interest rates of 2.14%; and the remaining contractual life of 6
      years.
  q.
              On
      August 2, 2010, the Company issued 50,000 shares of its common stock to a
      third party as remuneration for services to be rendered during the six
      month period commencing July 14, 2010. The fair value of these shares on
      the date of issuance was $21,000.
 
 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 inthe
      year ended August 312010
                      
                      
                      2009Expected
      option life (years)
                      
                      
                      4.5-10.0
                      
                      
                      
                      1.0-9.8Expected
      stock price volatility (%)
                      
                      
                      113.1-130.5
                      
                      
                      
                      113.1-130.5Risk
      free interest rate (%)
                      
                      
                      1.3-3.9
                      
                      
                      
                      0.7-3.6Expected
      dividend yield (%)
                      
                      
                      0.0
                      
                      
                      
                      0.0
  F-20
  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 employees and directors as of
August 31, 2010 and 2009, and changes during the years ended on those dates, is
presented below:
  Year
      ended August 31,2010
                          
                          
                          2009Weighted
                          
                          
                          
                          
                          
                          WeightedNumber
                          
                          
                          average
                          
                          
                          Number
                          
                          
                          averageof
                          
                          
                          exercise
                          
                          
                          of
                          
                          
                          exerciseoptions
                          
                          
                          price
                          
                          
                          options
                          
                          
                          price$
                          
                          
                          
                          
                          
                          $Options
      outstanding at beginning of year
                          
                          
                          8,445,360
                          
                          
                          
                          0.31
                          
                          
                          
                          7,289,360
                          
                          
                          
                          0.29Changes
      during the year:Granted
      - at market price
                          
                          
                          2,064,000
                          
                          
                          
                          0.49
                          
                          
                          
                          2,134,000
                          
                          
                          
                          0.45Expired
                          
                          
                          (500,000
                          )
                          
                          
                          0.76Forfeited
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (978,000
                          )
                          
                          
                          0.46Options
      outstanding at end of year
                          
                          
                          10,009,360
                          
                          
                          
                          0.32
                          
                          
                          
                          8,445,360
                          
                          
                          
                          0.31Options
      exercisable at end of year
                          
                          
                          7,549,360
                          
                          
                          
                          
                          
                          
                          
                          7,001,360Weighted
      average fair value of options granted during the year
                          
                          $
                          0.46
                          
                          
                          
                          
                          
                          
                          $
                          0.45
 
 Costs
incurred in respect of stock based compensation for employees and directors, for
the years ended August 31, 2010 and 2009 were $690,882 and $436,025,
respectively.
 
 The
following table presents summary information concerning the options outstanding
as of August 31, 2010:
 
 WeightedAverage
                      
                      
                      WeightedRange of
                      
                      
                      
                      
                      Remaining
                      
                      
                      averageexercise
                      
                      Number
                      
                      
                      Contractual
                      
                      
                      exercise
                      
                      
                      Aggregateprices
                      
                      outstanding
                      
                      
                      Life
                      
                      
                      price
                      
                      
                      intrinsic value$
                      
                      
                      
                      
                      Years
                      
                      
                      $
                      
                      
                      $0.001
                      
                      
                      3,361,360
                      
                      
                      
                      1.95
                      
                      
                      
                      0.001
                      
                      
                      
                      1,307,5690.40
      to 0.62
                      
                      
                      6,648,000
                      
                      
                      
                      5.31
                      
                      
                      
                      0.32
                      
                      
                      
                      -10,009,360
                      
                      
                      
                      4.18
                      
                      
                      
                      0.21
                      
                      
                      
                      1,307,569
  F-21
  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, 2010:
 
 WeightedAverage
                      
                      
                      WeightedRange of
                      
                      
                      
                      
                      Remaining
                      
                      
                      averageexercise
                      
                      Number
                      
                      
                      Contractual
                      
                      
                      exercise
                      
                      
                      Aggregateprices
                      
                      exercisable
                      
                      
                      Life
                      
                      
                      price
                      
                      
                      intrinsic value$
                      
                      
                      
                      
                      Years
                      
                      
                      $
                      
                      
                      $0.001
                      
                      
                      3,361,360
                      
                      
                      
                      1.95
                      
                      
                      
                      0.001
                      
                      
                      
                      1,307,5690.40
      to 0.62
                      
                      
                      4,188,000
                      
                      
                      
                      3.99
                      
                      
                      
                      0.49
                      
                      
                      
                      -7,549,360
                      
                      
                      
                      3.
      08
                      
                      
                      
                      0.27
                      
                      
                      
                      1,307,569
 
 As of
August 31, 2010, there were $601,523 unrecognized compensation costs related to
non-vested employees and directors ,to be recorded over the next 35
months.
  A summary
of the status of the stock options granted to non-employees as of August 31,
2010, and changes during the years ended on this date, is presented
below:
  Year
      ended August 312010
                    
                    
                    2009Weighted
                    
                    
                    
                    
                    
                    WeightedNumber
                    
                    
                    average
                    
                    
                    Number
                    
                    
                    averageof
                    
                    
                    exercise
                    
                    
                    of
                    
                    
                    exerciseoptions
                    
                    
                    price
                    
                    
                    options
                    
                    
                    price$
                    
                    
                    
                    
                    
                    
                    $Options outstanding at beginning of
      year
                    
                    
                    1,200,000
                    
                    
                    
                    0.68
                    
                    
                    
                    900,000
                    
                    
                    
                    0.65Changes
      during the year:Granted
      - at market price
                    
                    
                    113,200
                    
                    
                    
                    0.43Granted
      - at an exercise price above marketprice
                    
                    
                    250,000
                    
                    
                    
                    0.60
                    
                    
                    
                    300,000
                    
                    
                    
                    0.76Expired
                    
                    
                    (750,000
                    )
                    
                    
                    (0.64
                    )Options
      outstanding at end of year
                    
                    
                    813,200
                    
                    
                    
                    0.63
                    
                    
                    
                    1,200,000
                    
                    
                    
                    0.68Options
      exercisable at end of year
                    
                    
                    313,200
                    
                    
                    
                    
                    
                    
                    
                    900,000
 
 The
Company recorded stock compensation of $116,944 and $117,174 during the years
ended August 31, 2010 and 2009 respectively, related to consulting
services.
  F-22
  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 granted to
non-employees outstanding as of August 31, 2010:
 
 WeightedAverage
                      
                      
                      WeightedRange of
                      
                      
                      
                      
                      Remaining
                      
                      
                      averageexercise
                      
                      Number
                      
                      
                      Contractual
                      
                      
                      exercise
                      
                      
                      Aggregateprices
                      
                      outstanding
                      
                      
                      Life
                      
                      
                      price
                      
                      
                      intrinsic value$
                      
                      
                      
                      
                      Years
                      
                      
                      $
                      
                      
                      $0.40
      to 0.62
                      
                      
                      363,200
                      
                      
                      
                      3.54
                      
                      
                      
                      0.78
                      
                      
                      
                      -0.76
      to 0.90
                      
                      
                      450,000
                      
                      
                      
                      6.18
                      
                      
                      
                      0.51
                      
                      
                      
                      -813,200
                      
                      
                      
                      5.00
                      
                      
                      
                      0.63
                      
                      
                      
                      -
  The
following table presents summary information concerning the options exercisable
as of August 31, 2010:
  WeightedAverage
                      
                      
                      WeightedRange of
                      
                      
                      
                      
                      Remaining
                      
                      
                      averageexercise
                      
                      Number
                      
                      
                      Contractual
                      
                      
                      exercise
                      
                      
                      Aggregateprices
                      
                      exercisable
                      
                      
                      Life
                      
                      
                      price
                      
                      
                      intrinsic value$
                      
                      
                      
                      
                      Years
                      
                      
                      $
                      
                      
                      $0.40
      to 0.62
                      
                      
                      263,200
                      
                      
                      
                      3.15
                      
                      
                      
                      0.52
                      
                      
                      
                      -0.76
      to 0.90
                      
                      
                      50,000
                      
                      
                      
                      0.92
                      
                      
                      
                      0.90
                      
                      
                      
                      -313,200
                      
                      
                      
                      2.80
                      
                      
                      
                      0.58
                      
                      
                      
                      -
 
 As of
August 31, 2010 there were $29,884 unrecognized compensation costs related to
non-vested non-employees, to be recorded over the next 31 months.
 
 NOTE
9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
 Year
      endedAugust
      31,2010
                      
                      
                      2009Service
      providers
                      
                      $
                      381,522
                      
                      
                      $
                      274,291Tax
      provisions
                      
                      
                      
                      
                      
                      
                      12,504Payroll
      and related expenses
                      
                      
                      29,808
                      
                      
                      
                      34,549$
                      411,
      330
                      
                      
                      $
                      321,344
  F-23
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE
10 - RESEARCH AND DEVELOPMENT EXPENSES:
  Period
                from April12, 2002(inception)Year ended
              
              
              throughAugust 31,
              
              
              August 31,2010
              
              
              2009
              
              
              2010Clinical
      trials
              
              $
              905,206
              
              
              $
              1,304,779
              
              
              $
              3,273,311Payroll
      and consulting fees
              
              
              402,145
              
              
              
              286,315
              
              
              
              1,122,696Costs
      for registration of patents
              
              
              32,992
              
              
              
              17,775
              
              
              
              151,457Compensation
      costs in respect of warrants granted to employees, directors and
      consultants
              
              
              341,203
              
              
              
              264,861
              
              
              
              2,557,866Other
              
              
              132,538
              
              
              
              100,749
              
              
              
              337,814Less
      - grants from the OCS
              
              
              (350,198
              )
              
              
              (400,405
              )
              
              
              (750,603
              )$
              1,463,886
              
              
              $
              1,574,074
              
              
              $
              6,692,540
  NOTE
11 - GENERAL AND ADMINISTRATIVE EXPENSES
  Period
                from April12, 2002(inception)Year ended
              
              
              throughAugust 31
              
              
              August 31,2010
              
              
              2009
              
              
              2010Compensation
      costs in respect of warrants granted to employees, directors and
      consultants
              
              $
              466,623
              
              
              $
              288,338
              
              
              $
              1,612,937Professional
      services
              
              
              322,447
              
              
              
              240,523
              
              
              
              1,334,249Consulting
      fees
              
              
              159,919
              
              
              
              155,359
              
              
              
              640,597Travel
      costs
              
              
              67,543
              
              
              
              94,844
              
              
              
              419,425Write
      off of debt
              
              
              
              
              
              
              
              
              
              
              275,000Business
      development
              
              
              151,517
              
              
              
              73,286
              
              
              
              379,160Payroll
      and related expenses
              
              
              159,485
              
              
              
              190,923
              
              
              
              434,878Insurance
              
              
              23,958
              
              
              
              25,068
              
              
              
              72,656Other
              
              
              157,175
              
              
              
              141,703
              
              
              
              513,521$
              1,508,667
              
              
              $
              1,210,044
              
              
              $
              5,682,423
  F-24
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 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, 2010, the Company has an accumulated tax loss carryforward of
approximately $3,979,276 (August 31, 2009 approximately $3,606,510). 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 2010 is 25%.
 
 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, 2010, the Subsidiary has an accumulated tax loss carryforward of
approximately $2,664,091(August 31, 2009 approximately
$1,115,041).
  F-25
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE 12 - TAXES ON INCOME(continued):
 
 c.
                      Deferred
      income taxes:
  August
      312010
                      
                      
                      2009In
      respect of:Net
      operating loss carryforward
                      
                      $
                      1,978,850
                      
                      
                      $
                      1,507,587Less
      - Valuation allowance
                      
                      
                      (1,978,850
                      )
                      
                      
                      (1,507,587
                      )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:
 Period
                            from April12, 2002(inception)Year ended
                          
                          
                          throughAugust 31
                          
                          
                          August 31,2010
                          
                          
                          2009
                          
                          
                          2010Loss
      before taxes on income:U.S.
                          
                          $
                          453,676
                          
                          
                          $
                          248,890
                          
                          
                          $
                          7,587,802Outside
      U.S.
                          
                          
                          2,508,729
                          
                          
                          
                          2,514,181
                          
                          
                          
                          5,385,8762,962,405
                          
                          
                          
                          2,763,071
                          
                          
                          
                          12,973,678Taxes
      on income:Current:U.S.
                          
                          
                          13,107
                          
                          
                          
                          16,664
                          
                          
                          
                          69,570Outside
      U.S.
                          
                          
                          1,864
                          
                          
                          
                          (19,261
                          )
                          
                          
                          104,968$
                          14,971
                          
                          
                          $
                          (2,597
                          )
                          
                          $
                          174,538
  F-26
  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
                          from April12, 2002(inception)Year ended
                        
                        
                        throughAugust 31
                        
                        
                        August 31,2010
                        
                        
                        2009
                        
                        
                        2010Loss
      before income taxes as reported in the consolidated statement of
      operations
                        
                        $
                        (2,962,405
                        )
                        
                        $
                        (2,763,071
                        )
                        
                        $
                        (12,811,516
                        )Computed
      “expected” tax benefit
                        
                        
                        (1,036,842
                        )
                        
                        
                        (967,075
                        )
                        
                        
                        (4,484,031
                        )Increase
      (decrease) in income taxes resulting from:Change
      in the balance of the valuation  allowance for deferred tax
      losses
                        
                        
                        576,939
                        
                        
                        
                        528,143
                        
                        
                        
                        2,229,483Disallowable
      deductions
                        
                        
                        211,304
                        
                        
                        
                        149,043
                        
                        
                        
                        1,642,813Increase
      in taxes resulting from  different tax rates applicable to non
      U.S. subsidiary
                        
                        
                        248,599
                        
                        
                        
                        270,879
                        
                        
                        
                        554,239Uncertain
      tax position
                        
                        
                        14,971
                        
                        
                        
                        16,413
                        
                        
                        
                        162,034Taxes
      on income for the reported year
                        
                        $
                        14,971
                        
                        
                        $
                        (2,597
                        )
                        
                        $
                        174,538
 
 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, 2010 and 2009, the Company
recorded $65,151 and $47,881, respectively, of penalties related to tax
contingencies.
 
 The
following table summarizes the activity of the Company unrecognized tax
benefits:
  Year
      endedAugust
      312010
                      
                      
                      2009Balance
      at Beginning of Year
                      
                      $
                      147,063
                      
                      
                      $
                      130,650Increase
      (decrease) in tax positions for prior years
                      
                      
                      14,971
                      
                      
                      
                      8,844Increase
      in tax positions for current year
                      
                      
                      
                      
                      
                      
                      7,569Balance
      at End of Year
                      
                      $
                      162,034
                      
                      
                      $
                      147,063
  F-27
  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 2010 and 2009 the Company paid to directors $19,500
      and $16,000, respectively, for managerial
  services.
  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, provided 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 per
      month (as of August 31, 2010 the monthly payment in the Company's
      functional currency is $13,204) and (ii) will be reimbursed for reasonable
      expenses incurred in connection with performance of the Consulting
      Agreements.
  d.
              As
      to options granted to related parties, see note
  8o.
  e.
              As
      to the establishment of the Joint Venture Entera, see note
    4.
  f.
              According
      to the JV agreement (note 4), Entera will rent office space and services
      from the subsidiary of the Company for a period of up to 24 months
      commencing August 19, 2010, for a non-refundable, up-front fee in the
      amount of $36,000. It was acknowledged that the rental period may be less
      than 24 months if Oramed vacates such premises before the end of such
      24-month period.
  g.
              According
      to the JV agreement (note 4), the subsidiary of the Company shall provide
      accounting services to Entera at a monthly fee in the amount of NIS 3,500
      ($917).
  h.
              Balances
      with related parties:
  August
      312010
                  
                  
                  2009Current
      assets - related parties - Entera
                  
                  
                  7,689
                  
                  
                  
                  -Accounts
      payable and accrued expenses - KNRY
                  
                  
                  22,773
                  
                  
                  
                  26,450
  F-28
  ORAMED
PHARMACEUTICALS INC.
 (A
Development Stage Company)
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 NOTE
14 - SUBSEQUENT EVENTS
 
 a.
              On November 9, 2010, the Company
      issued 253,714 shares of its common stock to Swiss as remuneration for the
      services provided, in the amount of
  $88,880.
 
 b.
              On
      November 16, 2010, the Company entered into a Securities Purchase
      Agreement with an accredited investor for the sale of 937,500 units at a
      purchase price of $0.32 per unit for total consideration of $300,000. 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 0.35
      a share of common stock exercisable for five years at an exercise price of
      $0.50 per share.
  F-29




(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 us 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).


50




10.3
            Consulting
      Agreement between us and Dr. Miriam Kidron (incorporated by reference from
      our current report on Form 8-K filed February 17,
  2006).




10.4
            Agreement
      between us and Swiss Caps Ag dated October 30, 2006 (incorporated by
      reference from our current report on Form 8-K filed October 26,
      2006).




10.5
            Stock
      Option Plan dated October 15, 2006 (incorporated by reference from our
      current report on Form 8-K filed on November 28,
  2006).




10.6
            Stock
      Option Agreement dated November 23, 2006 (incorporated by reference from
      our current report on Form 8-K filed on November 28,
  2006).




10.7
            Form
      of Subscription Agreement and Warrant Certificate (incorporated by
      reference from our current report on Form 8-K filed on June 18,
      2007).




10.8
            Form
      of Shares for Services Agreement (incorporated by reference from our
      current report on Form 8-K filed on August 3,
  2007).




10.12
            Master
      Services Agreement dated January 29, 2008 between us 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).




10.23
            Agreement
      dated June 1, 2010, between Oramed Ltd. and Laser Detect Systems Ltd.
      (incorporated by reference from our quarterly report on Form 10-Q filed
      July 14, 2010).




10.22
            Manufacturing
      Supply Agreement dated July 5, 2010, between Oramed Ltd. and
      Sanofi-Aventis Deutschland GMBH (incorporated by reference from our
      current report on Form 8-K filed July 14,
2010).




23.1*
            Consent
      of Kesselman & Kesselman


51




23.2*
            Consent
      of Malone & Bailey




31.1*
            Certification
      Statement of the Principal Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.




31.2*
            Certification
      Statement of the Principal Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.




32.1*
            Certification
      Statement of the Principal Executive Officer and Principal Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act Of
2002.




*
            Filed
      herewith


52


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 26, 2010





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 and in
the capacities indicated on November 26, 2010.





/s/ NADAV KIDRONNadav
      Kidron,President
      and Chief Executive Officer and Director/s/ MIRIAM KIDRONMiriam
      Kidron,Chief
      Medical and Technology Officer and Director/s/ LEONARD SANKLeonard
      Sank,Director/s/ HAROLD JACOBHarold
      Jacob,Director/s/ MICHAEL BERELOWITZMichael
      Berelowitz,Director


53