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 expectations 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
Our technology is a platform that has the
potential to deliver medications and vaccines orally that today can only be delivered via injection.
Product Candidates
Oral insulin: Our proprietary
flagship product, an orally ingestible insulin capsule, or ORMD-0801, 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.
FDA Guidance: In August 2017, the
U.S. Food and Drug Administration, or FDA, instructed us 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 initiated an extension of this protocol for approximately 75 type 2 diabetic patients, who were dosed
using a lower dosage of insulin (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. Our internal investigation as well as an independent investigation
did not find a cause for such discrepancy.
Cohort B: In February 2020, we announced
positive topline data from the second and final cohort of the Phase IIb trial with a different regimen across three daily dose
ranges (8 mg, 16 mg, 32 mg). Patients randomized in the trial treated with 8 mg of ORMD-0801 once-daily achieved an observed mean
reduction of 1.29% from baseline and a least square mean reduction of 0.95% from baseline, or 0.81% adjusted for placebo (p value
= 0.028). Patients who had HbA1c readings above 9% at baseline and received 8 mg of oral insulin once-daily experienced a 1.26%
reduction in HbA1c by week 12. Treatment with ORMD-0801 at all doses demonstrated an excellent safety profile, with no serious
drug-related adverse events and with no increased frequency of hypoglycemic episodes or weight gain compared to placebo. The primary
efficacy endpoint was a reduction in HbA1c at week 12.
Pending FDA allowance, we anticipate initiating
Phase III clinical trials during the fourth quarter of calendar year 2020. 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.
NASH Study: In June 2020, we presented
preliminary data from our open-label study of the first 8 patients of a planned 40-patient multi-center (U.S., Europe and Israel)
pilot study, aimed to assess the safety, tolerability, and early effects of 16 mg ORMD-0801 (2x8 mg capsules) on liver fat in type
2 diabetes patients with nonalcoholic steatohepatitis, or NASH. The 12-week, once-daily treatment had no serious adverse events,
and induced an observed mean 6.9±6.8% reduction in liver fat content (sign test p value: 0.035), and the relative reduction
was 30%, as measured by MRI-derived proton density fat fraction. In parallel, concentrations of gamma-glutamyltransferase (GGT),
a key marker of chronic hepatitis, were significantly lower after 12 weeks of treatment as compared to baseline (-14.6±13.1
U/L; sign test p value: 0.008), as were fasting insulin levels (-96.5±206.0 pmol/L; sign test p value: 0.035).
Toxicology Study (6 Months): In March
2019, we completed a six-month toxicology study of ORMD-0801, which was initiated in September 2018 following the FDA’s request.
We have received a final report of this study which was submitted to the FDA.
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 half 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
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 third quarter of calendar year 2020. This study is expected to be
followed by further bioavailability studies (results expected in second half of calendar year 2020) on type 2 diabetic patients
which will 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
this 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, the initiation of the study was delayed and began only in June
2020.
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 May 31, 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 $500,000 as a no-shop fee.
Results of Operations
Comparison of nine and three month
periods ended May 31, 2020 and May 31, 2019
The following table summarizes certain statements
of operations data of the Company for the nine and three month periods ended May 31, 2020 and May 31, 2019 (in thousands of dollars
except share and per share data):
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Nine months ended
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Three months ended
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May 31,
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May 31,
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May 31,
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May 31,
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2020
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2019
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2020
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2019
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Revenues
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$
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2,029
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$
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2,022
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$
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681
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$
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682
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Cost of revenues
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-
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90
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-
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-
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Research and development expenses
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7,267
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11,322
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1,925
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3,861
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General and administrative expenses
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3,502
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2,896
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1,030
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899
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Financial income (expense), net
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225
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511
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(10
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6
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Taxes on income
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-
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300
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-
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Net loss for the period
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$
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8,515
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$
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12,075
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$
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2,284
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$
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4, 072
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Loss per common share - basic and diluted
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$
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0.44
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$
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0.69
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$
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0.10
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$
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0.23
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Weighted average common shares outstanding
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19,496,205
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17,453,185
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23,215,205
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17,456,683
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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 $2,029,000 and $2,022,000
for the nine month periods ended May 31, 2020 and May 31, 2019, respectively.
Revenues for the three month period ended
May 31, 2020 were $681,000 and the revenues for the three month period ended May 31, 2019 were $682,000.
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 nine month period
ended May 31, 2020 decreased to none compared to $90,000 for the nine month period ended May 31, 2019. The decrease is attributable
to a milestone payment which was received during the nine month period ended May 31, 2019.
There was no cost of revenues for the three
month periods ended May 31, 2020 or May 31, 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 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
nine month period ended May 31, 2020 decreased by 36% to $7,267,000, from $11,322,000 for the nine month period ended May 31, 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 the purchase
of raw materials for our current and future clinical trials. Stock-based compensation costs for the nine month period ended May
31, 2020 totaled $356,000, as compared to $161,000 during the nine month period ended May 31, 2019. The increase is mainly attributable
to awards granted to employees and a consultant during the nine month period ended May 31, 2020 and during the Company’s
2019 fiscal year.
Research and development expenses for the
three month period ended May 31, 2020 decreased by 50% to $1,925,000, from $3,861,000 for the three month period ended May 31,
2019. The decrease is primarily due to a decrease 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 raw materials for our current and
future clinical trials. Stock-based compensation costs for the three month period ended May 31, 2020 totaled $138,000, as compared
to $68,000 during the three month period ended May 31, 2019. The increase is mainly attributable to awards granted to employees
and a consultant during the three month period ended May 31, 2020 and during the Company’s 2019 fiscal year.
Government grants
In the nine month periods ended May 31,
2020 and May 31, 2019, we did not recognize any research and development grants. As of May 31, 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 $317,000.
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 nine month period ended May 31, 2020 increased by 21% to $3,502,000 from $2,896,000 for the nine month period ended May 31,
2019. The increase in costs related to general and administrative activities is primarily attributable to an increase in legal
expenses and costs related to the directors and officers insurance policy. Stock-based compensation costs for the nine month periods
ended May 31, 2020 and May 31, 2019 totaled $532,000.
General and administrative expenses for
the three month period ended May 31, 2020 increased by 15% to $1,030,000 from $899,000 for the three month period ended May 31,
2019. The increase in costs related to general and administrative activities is primarily attributable to an increase in legal
expenses and costs related to the directors and officers insurance policy. Stock-based compensation costs for the three month period
ended May 31, 2020 totaled $182,000, as compared to $203,000 during the three month period ended May 31, 2019.
Financial income, net
Net financial income decreased by 56%
from net financial income of $511 for the nine month period ended May 31, 2019 to net financial income of $225 for the nine
month period ended May 31, 2020. The decrease is primarily attributable to a decrease in fair value of the ordinary shares of
D.N.A Biomedical Solutions Ltd. and Entera Bio Ltd.
Net financial income decreased from net
financial income of $6,000 for the three month period ended May 31, 2019 to net financial expense of $10,000 for the three month
period ended May 31, 2020. The decrease is primarily attributable to the decrease 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
nine month period ended May 31, 2020 as compared to $300,000 for the nine month period ended May 31, 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 May 31, 2020 and May 31, 2019.
Liquidity and capital resources
From inception through May 31, 2020, we
have incurred losses in an aggregate amount of $89,618,000. During that period and through July 7, 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 $101,015,000,
net of transaction costs. During that period, we also received cash consideration of $5,891,000 from the exercise of warrants
and options. We expect to seek to obtain additional financing through similar sources in the future, as needed. As of May 31, 2020
we had $9,313,000 of available cash, $23,185,000 of short-term bank deposits and $13,057,000 of short term and long
term 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, the Company entered
into an Equity Distribution Agreement (the “Sales Agreement”), pursuant to which the Company may, from time to time
and at the Company’s option, issue and sell shares of Company common stock having an aggregate offering price of up to $15,000,
through a sales agent, subject to certain terms and conditions. Any shares sold will be sold pursuant to the Company’s 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).
The Company 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 May 31, 2020, 440,866 shares were issued under the Sales Agreement for aggregate net
proceeds of $2,329. As of July 7, 2020, 690,639 shares were issued under the Sales Agreement for aggregate net proceeds of $3,313.
On February 27, 2020, the Company entered
into an underwriting agreement (“Underwriting Agreement”) with National Securities Corporation (“Underwriter”),
in connection with a public offering (“Offering”) of 5,250,000 shares of the Company’s common stock, at an offering
price of $4.00 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriter a 45-day option to
purchase from the Company up to an additional 787,500 shares of common stock at the public offering price (“Over-Allotment
Option”). In connection with the Offering, the Company also agreed to issue to the Underwriter, or its designees, warrants
(“Underwriter’s 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 Underwriter’s
Warrants issued in the Offering will be exercisable at any time and from time to time, in whole or in part, commencing six months
from issuance for a period of three years from the date of issuance. The closing of the sale of the Offering occurred on March
2, 2020. On April 9, 2020, the Company issued 180,561 shares of Common Stock and 12,640 Underwriter’s Warrants pursuant to
a partial exercise by the Underwriter of the Over-Allotment Option (“Partial Over-Allotment Option Exercise. The net proceeds
to the Company from the Offering, including from the Partial Over-Allotment Option Exercise”), after deducting the underwriting
discount and the Company’s estimated Offering expenses were $19,979.
As of May 31, 2020, our total current assets
were $41,303,000 and our total current liabilities were $4,135,000. On May 31, 2020, we had a working capital surplus of $37,168,000
and an accumulated loss of $89,618,000. 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 May 31, 2020 was primarily due to the cash used in operating activities.
During the nine month period ended May 31,
2020, cash and cash equivalents increased to $9,012,000 from the $3,329,000 reported as of August 31, 2019, which is due to the
reasons described below.
Operating activities used cash of $9,982,000
in the nine month period ended May 31, 2020, as compared to $9,672,000 used in the nine month period ended May 31, 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 deferred revenues due to the License Agreement and is partially offset by stock-based compensation
expenses, while cash used in operating activities in the nine-month period ended May 31, 2019 primarily consisted of net loss resulting
from research and development and general and administrative expenses and is partially offset by changes in deferred revenues primarily
due to a milestone payment received during the period in the amount of $3,000,000 under the License Agreement.
Investing activities used cash of $6,337,000
in the nine month period ended May 31, 2020, as compared to $8,662,000 provided in the nine month period ended May 31, 2019. Cash
used in investing activities consisted primarily of the acquisition of short term and long term investments, as well as the acquisition
of mutual funds, and is partially offset by proceeds from the redemption of bonds and deposits, while cash provided by investing
activities in the nine-month period ended May 31, 2019 consisted primarily of the maturity of short term deposits and held to maturity
securities and is partially offset by the purchase of short-term and long-term deposits and held to maturity securities
Financing activities provided cash of $22,308,000
in the nine month period ended May 31, 2020, as compared to no cash provided in the nine month period ended May 31, 2019. Financing
activities in the nine month period ended May 31, 2020 consisted of aggregate net proceeds of $22,295,000 from our issuance of
5,871,427 shares of common stock under the Underwriting Agreement and the Sales Agreement and proceeds from the exercise of warrants
and options.
Off-balance sheet arrangements
As of May 31, 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.