ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements
and the related notes included elsewhere herein and in our consolidated financial statements, accompanying notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report (as defined below).
Forward-Looking Statements
The statements contained in this
Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Words such as
“expects,” “anticipates,” “intends,” “plans,” “planned
expenditures,” “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 Quarterly Report on Form 10-Q. Additionally,
statements concerning future matters are forward-looking statements. We remind readers that forward-looking statements are
merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks
that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be
materially different from any future results, performance, levels of activity, or our achievements, or industry results,
expressed or implied by such forward-looking statements. Such forward-looking statements include, among other statements,
statements regarding the following:
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the expected development and potential benefits from
our products in treating diabetes;
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the prospects of entering into additional license agreements,
or other partnerships or forms of cooperation with other companies or medical institutions;
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future milestones, conditions and royalties under the
license agreement with Hefei Tianhui Incubator of Technologies Co., Ltd., or HTIT;
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our research and development plans, including pre-clinical
and clinical trials plans and the timing of enrollment, obtaining results and conclusion of trials, including without limitation,
our expectation that we will initiate two six-month Phase III clinical trials, and our expectation to file a New Drug Application
thereafter;
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our belief that our technology has the potential to
deliver medications and vaccines orally that today can only be delivered via injection;
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the competitive ability of our technology based product
efficacy, safety, patient convenience, reliability, value and patent position;
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the potential market demand for our products;
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our expectation that in the upcoming year our research
and development expenses, net, will continue to be our major expenditure;
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our expectations regarding our short- and long-term
capital requirements;
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our outlook for the coming months and future periods,
including but not limited to our expectations regarding future revenue and expenses;
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information with respect to any other plans and strategies
for our business; and
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our expectation regarding the impact of COVID-19.
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Although forward-looking statements in this
Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based
on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties
and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those
specifically addressed under the heading “Item 1A - Risk Factors” in this Quarterly Report on Form 10-Q and those
under the same heading in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, or our Annual Report, as filed
with the Securities and Exchange Commission, or the SEC, on November 27, 2019, as well as those discussed elsewhere in our Annual
Report and expressed from time to time in our other filings with the SEC.
In addition, historic results of scientific
research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest
different conclusions. Also, historic results referred to in this Quarterly Report on Form 10-Q could be interpreted differently
in light of additional research, clinical and preclinical trials results. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as required
by law, we undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance
that may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various
disclosures made throughout the entirety of this Quarterly Report on Form 10-Q which attempt to advise interested parties
of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Overview of Operations
We are a pharmaceutical company currently
engaged in the research and development of innovative pharmaceutical solutions, including an oral insulin capsule to be used for
the treatment of individuals with diabetes, and the use of orally ingestible capsules for delivery of other polypeptides. We utilize
clinical research organizations, or CROs, to conduct our clinical studies.
Recent business developments
Product Candidates
Oral insulin: We are seeking
to transform the treatment of diabetes through our proprietary flagship product, an orally ingestible insulin capsule, or ORMD-0801.
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 the passage in a more physiological manner than current delivery methods of
insulin. Our technology is a platform that has the potential to deliver medications and vaccines orally that today can only be
delivered via injection.
FDA Guidance: In August 2017, during
a call with the U.S. Food and Drug Administration, or FDA, we were advised that the regulatory pathway for the submission of ORMD-0801
would be a Biologics License Application, or BLA. If approved the BLA pathway would grant us 12 years of marketing exclusivity
for ORMD-0801, from the approval date, and an additional six months of exclusivity may be granted to us if the product also receives
approval for use in pediatric patients.
Phase IIb Study: In May 2018, we
initiated a three-month dose-ranging Phase IIb clinical trial of ORMD-0801 (Cohort A). This placebo controlled, randomized, 90-day
treatment clinical trial was conducted on 269 type 2 diabetic patients in multiple centers throughout the United States pursuant
to an Investigational New Drug application, or IND, with the FDA. The primary endpoints of the trial were to assess the safety
and evaluate the effect of ORMD-0801 on HbA1c levels over a 90-day treatment period. Secondary endpoints of the trial included
measurements of fasting plasma glucose, or FPG, post-prandial glucose, or PPG levels, during a mixed-meal tolerance test, or MMTT,
and weight. In May 2019, we began an extension of this protocol for approximately 75 type 2 diabetic patients, who were dosed using
a lower dosage (Cohort B).
Cohort A:- In November 2019, we announced
positive results from the initial cohort of the Phase IIb trial. Patients randomized in the trial to once-daily ORMD-0801 achieved
a statistically significant (p-value 0.036) reduction from baseline in HbA1c of 0.60% (0.54% with placebo adjustment). This 0.54%
reduction in HbA1c is clinically meaningful. Treatment with ORMD-0801 demonstrated an excellent safety profile, with no serious
drug-related adverse events and with no increased frequency of hypoglycemic episodes when compared to placebo. In addition, during
this 90-day trial, no weight gain was observed. In the initial cohort, 269 U.S.-based patients were enrolled and treated with a
dose-increasing approach: 16 mg initial dose, titrated to 24 mg per dose, and then titrated to 32 mg per dose. Patients were randomized
into three groups to assess dosing frequency: once-daily (32 mg per day), twice-daily (64 mg per day), thrice daily (96 mg per
day). There was a corresponding placebo for each treatment arm. Two hundred nine (209) patients completed treatment to the 12-week
endpoint and were included in the data analysis (24 subjects did not complete the full 12 weeks of treatment). The twice-daily
arms achieved statistically significant (p-value 0.042) reductions from baseline in A1C of 0.59% (0.53% with placebo adjustment).
The thrice-daily arm did not meet statistical significance (p-value 0.093). In addition, due to evidence of treatment-by-center
interaction, two sites (36 patients (13.4% of enrolled subjects)) were excluded from the statistical analysis as they showed results
opposite from the rest of the statistically significant results. As our internal investigation did not find a cause for such discrepancy,
we have appointed an independent advisor to investigate this discrepancy.
We anticipate initiating Phase III clinical
trials on both type 1 and type 2 diabetic patients in the second half of calendar year 2020. Following these trials we expect to
file a BLA with potential FDA approval by the end of calendar year 2024.We also expect to have a meeting with the European Medicines
Agency, or the EMA, regarding our Phase III study design, as we intend to utilize clinical sites and file for marketing approval
in Europe.
Clamp Study: In June 2018, following
a request from the FDA, we initiated a glucose clamp study which should quantify insulin absorption in diabetic patients treated
with ORMD-0801. The glucose clamp is a method for quantifying insulin absorption in order to measure a patient’s insulin
sensitivity and how well a patient metabolizes glucose. This exploratory, randomized, double-blind glucose clamp study is evaluating
exposure-response profiles of type 1 diabetic patients treated with ORMD-0801. Six patients with A1C levels of 10% or below, aged
18-50, are enrolled in the study. We have received the results from the study which will
be used in future documentation for FDA submission.
Food Effect Study: In June 2018,
we initiated a food effect trial for ORMD-0801. This single-blind, five period, randomized, placebo-controlled crossover trial
is evaluating the pharmacokinetics, or PK, and pharmacodynamics, of ORMD-0801 taken at different times in relation to meals in
healthy volunteers and patients with type 1 diabetes. Forty-eight (48) patients were enrolled, including 24 healthy volunteers
and 24 patients with type 1 diabetes. We completed this study in April 2019 and received the study results in March 2020. According
to the study results, we believe that ORMD-0801 dosed 45-minutes prior to a meal would be a reasonable dosing schedule for the
future clinical studies.
NASH Study: In October 2018, we initiated
an exploratory clinical study of ORMD-0801 in type 2 patients with nonalcoholic steatohepatitis, or NASH. The three-month treatment
study, which was approved by Israel’s Ministry of Health, will assess the effectiveness of ORMD-0801 in reducing liver fat
content, inflammation and fibrosis in 30 patients with NASH. We expect to complete the study during first half of calendar year
2021.
Toxicology Study (6 Months): In March
2019, we completed a six-month dosing toxicology study of ORMD-0801, which was initiated in September 2018 following the FDA’s
request. We have received a draft report and we expect to receive the final report of this
study in the second quarter of calendar year 2020.
Type 1 Study: In November 2019 we
initiated a crossover study of type 1 diabetic patients to compare the effects of ORMD-0801 given once daily versus the effects
of ORMD-0801 given three times daily. We have received a draft report and we expect to receive
the final report of this study in the second quarter of calendar year 2020.
Oral Glucagon-Like Peptide-1:
Glucagon-like peptide-1, or GLP-1, is an incretin hormone, which stimulates the secretion of insulin from the pancreas. In addition,
GLP-1 was found to suppress glucagon release (a hormone involved in the 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 produce and release insulin) in the pancreas and, possibly,
protection of the heart. In addition to our flagship product, the ORMD-0801 insulin capsule, we are using our technology for an
orally ingestible GLP-1 capsule, or ORMD-0901.
In February 2019, we completed a
Phase I PK trial to evaluate the safety and the pharmacokinetics of ORMD-0901 compared to placebo. We have received a draft report
and we expect to receive the final report of this study in the second quarter of calendar year 2020. This study was conducted pursuant
to an IND, which we expect to be followed by further bioavailability studies (results expected in calendar year 2020) and
a Phase II trial on type 2 diabetic patients which will likely be conducted in the United States under an IND.
Other products
We are developing a new drug candidate,
a weight loss treatment in the form of an oral leptin capsule. We anticipate initiating a proof of concept single dose study for
our oral leptin drug candidate to evaluate its pharmacokinetic and pharmacodynamics (glucagon reduction) in 10 type 1 adult diabetic
patients. Due to government restrictions enacted as a result of COVID-19, we are facing delays in recruitment for this study and
expect to initiate the study as soon as these restrictions have been raised.
The table below gives an overview of our
primary product pipeline:
Out-Licensed Technology
On November 30, 2015, we, our Israeli subsidiary
and HTIT entered into a Technology License Agreement, and on December 21, 2015 these parties entered into an Amended and Restated
Technology License Agreement that was further amended by the parties on June 3, 2016 and July 24, 2016, or the License Agreement.
According to the License Agreement, we granted HTIT an exclusive commercialization license in the territory of the People’s Republic
of China, Macau and Hong Kong, or the Territory, related to our oral insulin capsule, ORMD-0801, or the Product. Pursuant to the
License Agreement, HTIT will conduct, at its own expense, certain pre-commercialization and regulatory activities with respect
to our subsidiary’s technology and ORMD-0801 capsule, and will pay (i) royalties of 10% on net sales of the related commercialized
products to be sold by HTIT in the Territory, or Royalties, and (ii) an aggregate of $37.5 million, of which $3 million was payable
immediately, $8 million will be paid subject to our entry into certain agreements with certain third parties, and $26.5 million
will be paid upon achievement of certain milestones and conditions. In the event that we will not meet certain conditions, the
Royalties rate may be reduced to a minimum of 8%. Following the final expiration of our patents covering the technology in the
Territory in 2033, the Royalties rate may be reduced, under certain circumstances, to 5%. The royalty payment obligation shall
apply during the period of time beginning upon the first commercial sale of the Product in the Territory, and ending upon the later
of (i) the expiration of the last-to-expire licensed patents in the Territory; and (ii) 15 years after the first commercial sale
of the Product in the Territory, or the Royalty Term. The License Agreement shall remain in effect until the expiration of the
Royalty Term. The License Agreement contains customary termination provisions. Through February 29, 2020, we received aggregate
milestone payments of $20.5 million out of the aggregate amount of $37.5 million.
On November 30, 2015, we also entered into
a separate Securities Purchase Agreement with HTIT, or the SPA, pursuant to which, in December 2015, we issued to HTIT 1,155,367
shares of our common stock for total consideration of $12 million. In connection with the License Agreement and the SPA, we received
a non-refundable payment of $500,000 as a no-shop fee.
Results of Operations
Comparison of six and three month
periods ended February 29, 2020 and February 28, 2019
The following table summarizes certain statements
of operations data of the Company for the six and three month periods ended February 29, 2020 and February 28, 2019 (in thousands
of dollars except share and per share data):
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Six
months ended
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Three
months ended
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February 29,
2020
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February 28,
2019
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February 29,
2020
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February 28,
2019
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Revenues
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$
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1,348
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$
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1,340
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$
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674
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$
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666
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Cost of revenues
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-
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90
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-
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55
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Research and development expenses
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5,342
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7,461
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3,320
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3,114
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General and administrative expenses
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2,472
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1,997
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1,391
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1,065
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Financial income, net
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235
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505
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349
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167
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Taxes on income
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-
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300
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-
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300
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Net loss for the period
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$
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6,231
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$
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8,003
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$
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3,688
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$
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3,701
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Loss per common share - basic and diluted
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$
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0.35
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$
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0.46
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$
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0.21
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$
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0.21
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Weighted average common shares outstanding
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17,645,372
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17,451,411
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17,818,429
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17,454,109
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Revenues
Revenues consist of proceeds related to
the License Agreement that are recognized on a cumulative basis when it is probable that a significant reversal in the amount of
cumulative revenue recognized will not occur, through the expected product submission date of June 2023 using the input method.
Revenues were $1,348,000 and $1,340,000
for the six month periods ended February 29, 2020 and February 28, 2019, respectively.
Revenues for the three month period ended
February 29, 2020 were $674,000 and the revenues for the three month period ended February 28, 2019 were $666,000.
Cost of revenues
Cost of revenues consists of royalties related
to the License Agreement that will be paid over the term of the License Agreement in accordance with revenue recognition accounting
and the Law for the Encouragement of Industrial Research, Development and Technological Innovation, 1984, as amended, including
any regulations or tracks promulgated thereunder.
Cost of revenues for the six month period
ended February 29, 2020 decreased to none compared to $90,000 for the six month period ended February 28, 2019. The decrease is
attributable to a milestone payment which was received during the six month period ended February 28, 2019.
There was no cost of revenues for the three
month period ended February 29, 2020 compared to $55,000 for the three month period ended February 29, 2020. The decrease is attributable
to a milestone payment which was received during the three month period ended February 28, 2019.
Research and development expenses
Research and development expenses include
costs directly attributable to the conduct of research and development programs, including the cost of salaries, employee benefits,
costs of materials, supplies, the cost of services provided by outside contractors, including services related to our clinical
trials, clinical trial expenses, the full cost of manufacturing drugs for use in research and preclinical development. All
costs associated with research and development are expensed as incurred.
Clinical trial costs are a significant component
of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion
of our clinical trial activities, utilizing external entities such as contract research organizations, or CROs, independent clinical
investigators and other third-party service providers to assist us with the execution of our clinical studies.
Clinical activities which relate principally
to clinical sites and other administrative functions to manage our clinical trials are performed primarily by CROs. CROs typically
perform most of the start-up activities for our trials, including document preparation, site identification, screening and preparation,
pre-study visits, training, and program management.
Clinical trial and pre-clinical trial expenses
include regulatory and scientific consultants’ compensation and fees, research expenses, purchase of materials, cost of capsule
manufacturing, payments for patient recruitment and treatment, as well as salaries and related expenses of research and development
staff.
Research and development expenses for the
six month period ended February 29, 2020 decreased by 30% to $5,342,000, from $7,641,000 for the six month period ended February
28, 2019. The decrease is primarily due to a decrease in expenses related to our Phase IIb three-month treatment clinical trial
as well as a decrease in expenses related to our toxicology studies and partially offset by an increase in expenses related to
materials for our future Phase III trial. Stock-based compensation costs for the six month period ended February 29, 2020 totaled
$218,000, as compared to $93,000 during the six month period ended February 28, 2019. The increase is mainly attributable to awards
granted to employees and a consultant during the six month period ended February 29, 2020 and during the Company’s 2019 fiscal
year.
Research and development expenses for the
three month period ended February 29, 2020 increased by 7% to $3,320,000, from $3,114,000 for the three month period ended February
28, 2019. The increase is primarily due to an increase in expenses related to the completion of our Phase IIb three-month treatment
clinical trial (including regulatory expenses) as well as an increase in expenses related to materials for our future Phase III
trial. Stock-based compensation costs for the three month period ended February 29, 2020 totaled $122,000, as compared to $54,000
during the three month period ended February 28, 2019. The increase is mainly attributable to awards granted to employees and a
consultant during the three month period ended February 29, 2020 and during the Company’s 2019 fiscal year.
Government grants
In the six month periods ended February
29, 2020 and February 28, 2019, we did not recognize any research and development grants. As of February 29, 2020, following repayment
of a portion of such grants, outstanding liabilities to pay royalties to the Israel Innovation Authority of the Israeli Ministry
of Economy & Industry are equal to $315,000.
General and administrative expenses
General and administrative expenses include
the salaries and related expenses of our management, consulting costs, legal and professional fees, travel expenses, business development
costs, insurance expenses and other general costs.
General and administrative expenses for
the six month period ended February 29, 2020 increased by 24% to $2,472,000 from $1,997,000 for the six month period ended February
28, 2019. The increase in costs related to general and administrative activities is primarily attributable to an increase in legal
expenses and costs related to directors and officers. Stock-based compensation costs for the six month period ended February 29,
2020 totaled $350, as compared to $329 during the six month period ended February 28, 2019. The increase is mainly attributable
to awards granted to employees and a consultant during the six month period ended February 29, 2020 and the Company’s 2019
fiscal year.
General and administrative expenses for
the three month period ended February 29, 2020 increased by 30% to $1,391,000 from $1,065,000 for the three month period ended
February 28, 2019. The increase in costs related to general and administrative activities is primarily attributable to an increase
in legal expenses, costs related to directors and officers and bonuses recorded in the first quarter in 2019 and in the second
quarter in 2020. Stock-based compensation costs for the three month period ended February 29, 2020 totaled $166,000, as compared
to $130,000 during the three month period ended February 28, 2019. The increase is mainly attributable to awards granted to employees
and a consultant during the three month period ended February 29, 2020 and the Company’s 2019 fiscal year.
Financial income, net
Net financial income decreased 53% from
net financial income of $505 for the six month period ended February 29, 2020 to net financial income of $235 for the six month
period ended February 28, 2019. The decrease is primarily attributable to less interest income as well as the decreases in fair
value of the ordinary shares of D.N.A Biomedical Solutions Ltd. and Entera Bio Ltd.
Net financial income increased by 208% from
net financial income of $167,000 for the three month period ended February 28, 2019 to net financial income of $349,000 for the
three month period ended February 29, 2020. The increase is primarily attributable to the increases in fair value of the ordinary
shares of D.N.A Biomedical Solutions Ltd. and Entera Bio Ltd.
Taxes on income
No taxes on income were recognized for the
six month period ended February 29, 2020 as compared to $300,000 for the six month period ended February 28, 2019. The decrease
is due to withholding taxes in connection with the receipt of a milestone payment pursuant to the License Agreement during 2019.
No taxes on income were recognized for the
three month period ended February 29, 2020 as compared to $300,000 for the three month period ended February 28, 2019. The decrease
is due to withholding taxes in connection with the receipt of a milestone payment pursuant to the License Agreement during 2019.
Liquidity and capital resources
From inception through February 29, 2020,
we have incurred losses in an aggregate amount of $87,334,000. During that period and through April 6, 2020, we have financed our
operations through several private placements of our common stock, as well as public offerings of our common stock, raising a total
of $99,344,000, net of transaction costs. During that period, we also received cash consideration of $5,901,000 from the exercise
of warrants and options. We will seek to obtain additional financing through similar sources in the future, as needed. As of February
29, 2020, we had $5,934,000 of available cash, $17,288,000 of short-term bank deposits and $5,704,000 of marketable
securities.
Management continues to evaluate various
financing alternatives for funding future research and development activities and general and administrative expenses through fundraising
in the public or private equity markets. Although there is no assurance that we will be successful with those initiatives, management
believes that it will be able to secure the necessary financing as a result of future third party investments. Based on our current
cash resources and commitments, we believe we will be able to maintain our current planned development activities and the corresponding
level of expenditures for at least the next 12 months.
On September 5, 2019, we entered into an
Equity Distribution Agreement, or the Sales Agreement, pursuant to which we may, from time to time and at our option, issue and
sell shares of our common stock having an aggregate offering price of up to $15,000,000 through a sales agent, subject to certain
terms and conditions. Any shares sold will be sold pursuant to our effective shelf registration statement on Form S-3 including
a prospectus and prospectus supplement, each dated February 10, 2020 (which superseded a prior registration statement, prospectus
and prospectus supplement that related to shares sold under the Sales Agreement). We will pay the sales agent a cash commission
of 3.0% of the gross proceeds of the sale of any shares sold through the sales agent under the Sales Agreement. As of February
29, 2020, 440,866 shares were issued under the Sales Agreement for aggregate net proceeds of $2,329,000. As of February 29, 2020
and April 6, 2020, 440,866 shares of common stock were sold under the Sales Agreement for aggregate net proceeds of $2,328,666.
On February 27, 2020, we entered into an
underwriting agreement with National Securities Corporation, or the Underwriter, in connection with a public offering, or the Offering,
of 5,250,000 shares of our common stock, at an offering price of $4.00 per share. We also granted the Underwriter a 45-day option
to purchase from us up to an additional 787,500 shares of common stock at the public offering price. In connection with the Offering,
we also agreed to issue to the Underwriter, or its designees, warrants, to purchase up to an aggregate of 7% of the shares of common
stock sold in the Offering (including any additional shares sold during the 45-day option period), at an exercise price of $4.80
per share. The closing of the sale of the Offering occurred on March 2, 2020. The net proceeds to us from the Offering, after deducting
the Underwriter’s fees and expenses and the Company’s Offering expenses were approximately $19,292.
As of February 29, 2020, our total current
assets were $29,489,000 and our total current liabilities were $5,155,000. On February 29, 2020, we had a working capital surplus
of $24,334,000 and an accumulated loss of $87,334,000. As of August 31, 2019, our total current assets were $33,324,000 and
our total current liabilities were $5,308,000. On August 31, 2019, we had a working capital surplus of $28,016,000 and an accumulated
loss of $81,103,000. The decrease in working capital from August 31, 2019 to February 29, 2020 was primarily due to the cash used
in operating activities.
During the six month period ended February
29, 2020, cash and cash equivalents increased to $5,934,000 from the $3,329,000 reported as of August 31, 2019, which is due to
the reasons described below.
Operating activities used cash of $6,624,000
in the six month period ended February 29, 2020, as compared to $6,015,000 used in the six month period ended February 28, 2019.
Cash used in operating activities primarily consisted of net loss resulting from research and development and general and administrative
expenses, as well as changes in contract liabilities due to the License Agreement and is partially offset by changes in accounts
payable and accrued expenses.
Investing activities provided cash of $6,900,000
in the six month period ended February 29, 2020, as compared to $4,445,000 provided in the six month period ended February 28,
2019. Cash provided by investing activities consisted primarily of the maturity of short-term deposits and held to maturity securities
and is partially offset by the purchase of short-term deposits.
Financing activities provided cash of $2,329,000
in the six month period ended February 29, 2020, as compared to no cash provided in the six month period ended February 28, 2019.
Financing activities in the six month period ended February 29, 2020 consisted of aggregate net proceeds of $2,316,000 from our
issuance of 440,866 shares of common stock under the Sales Agreement and proceeds from the exercise of warrants and options.
Off-balance sheet arrangements
As of February 29, 2020, we had no off-balance
sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.
Critical accounting policies and estimates
Our significant accounting policies are
described in the notes to the consolidated financial statements as of August 31, 2019 included in our Annual Report and in the
notes to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
Planned Expenditures
We invest
heavily in research and development, and we expect that in the upcoming years our research and development expenses will continue
to be our major operating expense.