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We are offering up to 30,000,000 shares of our common stock and warrants to purchase up to 22,500,000 shares of our common stock. For each share of our common stock purchased by an investor in this offering, the investor will receive a warrant to purchase 0.75 shares of our common stock with an exercise price of $[___] per share and a term of exercise of 30 months. We are not required to sell any specific dollar amount or number of shares of common stock or warrants, but will use our best efforts to sell all of the shares of common stock and warrants being offered.

 

Our common stock is traded on the OTCQB Bulletin Board under the symbol “BCLI”. On July 9, 2012, the last reported sales price for our common stock was $0.29 per share.

 

(1)

For the purpose of estimating the placement agent’s fees, we have assumed that the placement agent will receive its maximum commission on all sales made in the offering. Does not include a corporate finance fee in the amount of 1.0%, or $___ per share, of the gross proceeds of the offering payable to the placement agent. We have also agreed to issue warrants to the placement agent and to reimburse the placement agent for expenses incurred by them up to an aggregate of the lesser of (i) $100,000 or (ii) 3% of the gross proceeds of the offering.

 

(2)

We estimate the total expenses of this offering will be approximately $[ ]. See “Plan of Distribution” beginning on page 18 of this prospectus for more information on this offering.

 

	·	The FDA or similar foreign regulatory authorities may find that our product candidates are not sufficiently safe or effective or may find our processes or facilities unsatisfactory;
	·	Officials at the MOH, the FDA or similar foreign regulatory authorities may interpret data from preclinical studies and clinical trials differently than we do;
	·	Our clinical trials may produce negative or inconclusive results or may not meet the level of statistical significance required by the MOH, the FDA or other regulatory authorities, and we may decide, or regulators may require us, to conduct additional preclinical studies and/or clinical trials or to abandon one or more of our development programs;
	·	The MOH, the FDA or similar foreign regulatory authorities may change their approval policies or adopt new regulations;
	·	There may be delays or failure in obtaining approval of our clinical trial protocols from the MOH, the FDA or other regulatory authorities or obtaining institutional review board approvals or government approvals to conduct clinical trials at prospective sites;
	·	We, or regulators, may suspend or terminate our clinical trials because the participating patients are being exposed to unacceptable health risks or undesirable side effects;
	·	We may experience difficulties in managing multiple clinical sites;
	·	Enrollment in our clinical trials for our product candidates may occur more slowly than we anticipate, or we may experience high drop-out rates of subjects in our clinical trials, resulting in significant delays; and
	·	We may be unable to manufacture or obtain from third party manufacturers sufficient quantities of our product candidates for use in clinical trials.

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our Common Stock may be materially and adversely affected.

 

As a public company in the United States, we are subject to the reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of management on the effectiveness of such company’s internal control over financial reporting in its annual report.  Our consolidated financial statements for the year ended December 31, 2011 and for the quarter ended March 31, 2012, provided that our management has performed an evaluation of the effectiveness of our disclosure controls and internal control over financial reporting for the periods covered by Forms 10-K  and 10-Q, and concluded that our disclosure controls and procedures were not effective as of March 31, 2012 as a result of the material weaknesses in our internal control over financial reporting. The material weaknesses identified in our internal control over financial reporting are related to both the inadequate supervisory review structure and insufficient personnel with appropriate levels of accounting knowledge and experience to address the high volume of U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP.  In response to the material weaknesses described above, we plan to develop and take several measures designed to remediate the material weaknesses in our internal control over financial reporting. The measures we intend to take in the future may not be sufficient to remediate the material weaknesses noted by our management and our independent registered public accounting firm and to avoid potential future material weaknesses.  We may require more resources and incur more costs than currently expected to remediate our identified material weaknesses or any additional significant deficiencies or material weaknesses that may be identified, which may adversely affect our results of operations. If either of the material weaknesses is not remedied or recurs, or if we identify additional weaknesses or fail to timely and successfully implement new or improved controls, our ability to assure timely and accurate financial reporting may be adversely affected, and we could suffer a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our shares of common stock, result in lawsuits being filed against us by our shareholders, or otherwise harm our reputation. In addition, our auditor is not required to attest to the effectiveness of our internal controls over financial reporting due to our status of qualifying as a small reporting company. As a result, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our share price.

		Year ended December 31,																Quarter ended March 31,				Quarter ended June 30,
		2008				2009				2010				2011				2012				2012
Low			3.230				3.690				3.549				3.363				3.700			3.715
High			4.022				4.256				3.894				3.821				3.854			3.947
Period End			3.802				3.775				3.549				3.821				3.715			3.923
Average			3.588				3.933				3.733				3.578				3.771			3.8928

Maxim Group LLC, which we refer to herein as the Placement Agent, has agreed to act as placement agent in connection with this offering subject to the terms and conditions of the placement agent agreement dated July [____], 2012. The Placement Agent is not purchasing or selling any securities offered by this prospectus, nor is it required to arrange the purchase or sale of any specific number or dollar amount of securities, but has agreed to use its best efforts to arrange for the sale of all of the securities offered hereby. The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the offering. Therefore, we will enter into a purchase agreement directly with investors in connection with this offering and we may not sell the entire amount of securities offered pursuant to this prospectus.

 

We have agreed to pay the Placement Agent a placement agent’s fee equal to six percent (6%) and a corporate finance fee equal to one percent (1%) of the aggregate purchase price of the shares sold in this offering.

 

In addition, we have agreed to issue to the Placement Agent, or its designees, warrants exercisable for a number of shares of common stock equal to 3% of the aggregate number of shares of common stock sold in this offering (excluding any shares of common stock issuable upon exercise of the warrants). The placement agent warrants will have the substantially same terms as the warrants offered hereunder, except that the placement agent warrants will have an exercise price of 120% of the public offering price per share, or $__ per share, and the expiration date shall be two years from the closing of this offering. Pursuant to FINRA Rule 5110(g)(1), neither the placement agent warrants nor any shares of common stock issued upon exercise of the placement agent warrants may be sold, transferred, assigned, pledged, or hypothecated, or be subject to any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of the public offering, except the transfer of any security:

 

§

by operation of law or by reason of our reorganization;

§

to any FINRA member firm participating in the offering and the officers and partners thereof, if all securities so transferred remain subject to the lock-up restriction described above for the remainder of the time period;

§

if the aggregate amount of our securities held by the Placement Agent or related person does not exceed 1% of the securities being offered;

§

that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund; or

§

the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction set forth above for the remainder of the time period.

 

Subject to compliance with FINRA Rule 5110(f)(2)(D), we have also agreed to pay the Placement Agent a non-accountable expense reimbursement equal to the lesser of (i) $100,000 and (ii) 3% of the gross proceeds raised in the offering. We have also agreed to reimburse the Placement Agent for its actual “roadshow” expenses; provided, however, that such expenses shall not exceed $2,000. In addition, subject to FINRA Rule 5110(f)(2)(D), we have granted to the Placement Agent a right of first refusal with respect to additional raises of funds by means of a public offering or a private placement of equity or debt securities using an underwriter or placement agent during the 12 months following this offering.

 

The following table shows the per share and total placement agent’s fees that we will pay to the Placement Agent in connection with the sale of the shares and warrants offered pursuant to this prospectus assuming the purchase of all of the shares offered hereby.

 

Per share placement agent’s fees (1)		$
Maximum offering total		$

 

(1) Does not include a corporate finance fee in the amount of 1%, or $__ per share, of the gross proceeds of the offering payable to the placement agent.

 

Because there is no minimum amount required as a condition to the closing in this offering, the actual total offering commissions, if any, are not presently determinable and may be substantially less than the maximum amount set forth above.

 

Our obligations to issue and sell securities to the purchasers is subject to the conditions set forth in the securities purchase agreement, which may be waived by us at our discretion. A purchaser’s obligation to purchase securities is subject to the conditions set forth in the securities purchase agreement as well, which may also be waived.

 

We estimate the total offering expenses in this offering that will be payable by us, excluding the placement agent’s fees, will be approximately $[_________] which include legal, accounting and printing costs, various other fees and reimbursement of the placement agent’s expenses.

 

The foregoing does not purport to be a complete statement of the terms and conditions of the placement agent agreement and the securities purchase agreement. A copy of the placement agent agreement and the form of securities purchase agreement with investors are included as exhibits to the Registration Statement of which this prospectus forms a part.

 

We have agreed to indemnify the Placement Agent against certain liabilities under the Securities Act of 1933, as amended. The Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act.

 

As an underwriter, the Placement Agent would be required to comply with the Securities Act and the Securities Exchange Act of 1934, as amended, including without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares of common stock and warrants by the Placement Agent acting as principal. Under these rules and regulations, the Placement Agent:

 

•

may not engage in any stabilization activity in connection with our securities; and

 

•

may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.

 

The securities registered under this registration statement may be offered and sold to investors in Israel. The offering of securities in Israel, if any, will be pursuant to an exemption from the registration requirements in Israel and will be considered a private placement in Israel under Israeli Law.

 

Leader Underwriters (1993) Ltd, an underwriter registered under the laws of Israel, may act as a sub-agent of the Placement Agent for the sole purpose of arranging for the sale of securities registered under this registration statement to investors in Israel. The offering of securities in Israel will be pursuant to an exemption from the registration requirements in Israel and will be considered a private placement in Israel under Israeli law.

 

Furthermore, all of our directors, executive officers, key consultants and affiliates, including ACCBT, have entered into lock-up agreements with Maxim Group LLC. Under those lock-up agreements, subject to certain exceptions, those holders of such stock may not, directly or indirectly, offer, sell, contract to sell (including short-selling), pledge or otherwise dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock, without the prior written consent of Maxim Group LLC, for a period of 180 days from the closing date of this offering. In addition, we have agreed not to issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or securities exchangeable, convertible or exercisable into common stock for a period of [   ] days following the closing date of this offering, subject to certain exceptions.

 

The Warrants offered in this offering will be issued in a form filed as an exhibit to the registration statement of which this prospectus is a part. You should review a copy of the form of warrant for a complete description of the terms and conditions applicable to the Warrants. The following is a brief summary of the Warrants and is subject in all respects to the provisions contained in the form of warrant.

On March 12, 2012, we announced plans to initiate a preclinical study assessing the efficiency of our NurOwn™ stem cell technology in patients with MS. Positive proof-of-concept results for MS have been confirmed in a set of in-vitro and in-vivo experiments, and we are working to advance MS into preclinical development in our second quarter in 2012.

 

 

Patents:

 

We have filed for patents in (1) the United States; (2) Europe; (3) Israel; and (4) Hong Kong, resulting in the following:

 

In the United States, we co-own, with Ramot at Tel-Aviv University Ltd., pending patent application no. 12/994,761, filed on November 25, 2010, entitled “Mesenchymal Stem Cells for the Treatment of CNS Diseases.”

 

In Europe, we co-own, with Ramot at Tel-Aviv University Ltd., pending patent application no. 09754337.5, filed on May 26, 2009, entitled “Mesenchymal Stem Cells for the Treatment of CNS Diseases.”

 

In Israel, we co-own, with Ramot at Tel-Aviv University Ltd., pending patent application no. 209604, filed on May 26, 2009, entitled “Mesenchymal Stem Cells for the Treatment of CNS Diseases.”

 

In Hong Kong, we co-own, with Ramot at Tel-Aviv University Ltd., pending patent application no. 11107062.5, filed on May 26, 2009, entitled “Mesenchymal Stem Cells for the Treatment of CNS Diseases.”

 

We have also taken a license to several patents and patent applications from Ramot at Tel-Aviv University Ltd., resulting in the following:

 

We are a licensee of United States patent application no. 11/130,197, filed May 17, 2005, entitled “Methods, nucleic acid constructs and cells for treating neurodegenerative disorders.”

 

We are a licensee of European patent application no. 06766101.7, filed on June 18, 2006, entitled “Isolated Cells and Populations Comprising Same for the Treatment of CNS Diseases.”

 

We are a licensee of European patent application no. 11000994.1, filed on June 18, 2006, entitled “Isolated Cells and Populations Comprising Same for the Treatment of CNS Diseases.”

 

We are a licensee of United States patent application no. 11/727,583, filed on March 27, 2007, entitled “Isolated Cells and Populations Comprising Same for the Treatment of CNS Diseases.”

 

Trademarks:

 

We own a pending United States application to register the trademark NUROWN (application no. 85154891, filed October 18, 2010) for use in connection with “compositions of cells derived from stem cells for medical purposes; stem cells for medical purposes.” The application was filed based on an intent-to-use the mark, but has not matured to registration yet.

Research and Development, net:

 

Research and development expenses, net for the year ended December 31, 2011 and 2010 were $1,689,000 and $1,045,000, respectively. In addition, our grant from The Office of the Chief Scientist increased by $48,000 to $388,000 for the year ended December 31, 2011 from $340,000 for the year ended December 31, 2010.

 

The increase in research and development expenses, net for the year ended December 31, 2011 is primarily due to: (i) in June 2011, the Company began clinical trials in ALS patients, in Hadassah, under which the Company paid $350,000 in 2011; (ii) development and clinical trials conducted in GMP in Hadassah in the amount of $370,000 in the year ended December 31, 2011 compared to $250,000 in the year ended December 31, 2010; and (iii) an increase of $190,000 in payroll costs due to recruitment of four additional employees to conduct the clinical trials.

 

General and Administrative

 

General and administrative expenses for the years ended December 31, 2011 and 2010 were $2,205,000 and $1,544,000, respectively. The increase in General and administrative expenses, for the year ended December 31, 2011, is mainly due to: (i) an increase of $515,000 in stock-based compensation expenses, to $1,076,000 in the year ended December 31, 2011; and (ii) an increase of $140,000 in legal and audit expenses from $230,000 in the year ended December 31, 2010 to $370,000 in the year ended December 31, 2011; this increase was partially offset by a reduction of $60,000 in public and investor relations expenses from $120,000 in the year ended December 31, 2010 to $60,000 in the year ended December 31, 2011.

 

Financial Expenses

 

Financial expense for the year ended December 31, 2011 was $151,000 compared to financial income of $189,000 for the year ended December 31, 2010.

 

The increase in financial expense for the year ended December 31, 2011 is primarily due to $192,000 financial expense from conversion of debt to a subcontractor to our common stock.  The issuance of stock to the subcontractor was in an amount that was lower than the amount owed to the supplier. The value of the amount issued was based on the per share price on the date of the grant. The above was balanced by financial income of $41,000 due to the conversion exchange rate.

 

Net Loss

 

Net loss for the year ended December 31, 2011 was $3,918,000, as compared to a net loss of $2,419,000 for the year ended December 31, 2010. Net loss per share for the year ended December 31, 2011 was $0.03, as it was for the year ended December 31, 2010.

 

The increase in the net loss for the year ended December 31, 2011 is due to (i) the beginning of clinical trials, (ii) development in GMP in Hadassah facilities, and (iii) stock-based compensation expenses.

 

The weighted average number of shares of common stock used in computing basic and diluted net loss per share for the year ended December 31, 2011 was 120,117,724, compared to 89,094,403 for the year ended December 31, 2010.

 

The increase in the weighted average number of shares of common stock used in computing basic and diluted net loss per share for the year ended December 31, 2011 was due to (i) the issuance of shares in a private placement, (ii) the exercise of warrants and (iii) the issuance of shares to service providers.

 

Research and Development, net:

 

Research and development expenses, net for the three months ended March 31, 2012 and 2011 were $369,000 and $270,000, respectively. In addition, our grant from The Office of the Chief Scientist increased by $140,000 to $240,000 for the three months ended March 31, 2012 from $100,000 for the three months ended March 31, 2011.

 

The increase in research and development expenses for the three months ended March 31, 2012 is primarily due to: (i) in June 2011, the Company began clinical trials in ALS patients, in Hadassah, under which the Company paid $340,000 in the three months ended March 31, 2012; (ii) an increase of $65,000 in payroll costs due to recruitment of four additional employees to conduct the clinical trials.

 

General and Administrative:

 

General and administrative expenses for the three months ended March 31, 2012 and 2011 were $510,000 and $258,000, respectively.

 

The increase in general and administrative expenses for the three month period ended March 31, 2012 from the three month period ended March 31, 2011 is primarily due to: (i) an increase of $170,000 in compensation expenses for stock granted to directors and employees; (ii) an increase of $70,000 in legal, audit and public relations activity.

 

Financial Expenses:

 

Financial income for the three months ended March 31, 2012 was $11,000, compared to a financial expense of $177,000 for the three months ended March 31, 2011.

 

The financial income for the three months ended March 31, 2012 is mainly from conversion exchange rate and income on deposits in banks. The financial expense for the three months ended March 31, 2011 is primarily attributable to $192,000 financial expense from conversion of debt to a subcontractor to our common stock, balanced by financial income of $15,000 due to the conversion exchange rate.

 

Net Loss:

 

Net loss for the three months ended on March 31, 2012 was $872,000, as compared to a net loss of $705,000 for the three months ended March 31, 2011. Net loss per share for the three months ended March 31, 2012 was $0.01, as it also was for the three months ended March 31, 2011.

 

The weighted average number of shares of common stock used in computing basic and diluted net loss per share for the three months ended March 31, 2012 was 126,591,262, compared to 108,895,199 for the three months ended March 31, 2011.

 

The increase in the weighted average number of shares of common stock used in computing basic and diluted net loss per share for the three months ended March 31, 2012 was due to (i) the issuance of shares in a private placement, (ii) the exercise of options and warrants and (iii) the issuance of shares to service providers.

The Company has financed its operations since inception primarily through private sales of its common stock and warrants and the issuance of convertible promissory notes. At March 31, 2012, we had $1,775,000 in total current assets and $1,290,000 in total current liabilities.

 

Net cash used in operating activities was $746,000 for the three months ended March 31, 2012. Cash used for operating activities in the three months ended March 31, 2012 was primarily attributed to clinical trial costs, payroll costs, rent, outside legal and audit fee expenses and public relations expenses.

 

Net cash used in investing activities was $52,000 for the three months ended March 31, 2012.

 

Net cash provided by financing activities was $20,000 for the three months ended March 31, 2012 is primarily attributable to exercise of options to common stock.

 

Our material cash needs for the next 12 months include the payments due under an agreement with Hadassah to conduct clinical trials in ALS patients, under which we must pay to Hadassah an amount of (i) up to $32,225 per patient (up to $773,400 in the aggregate) and (ii) $65,000 per month for rent and operation of the GMP facilities in anticipation of Hadassah's clinical trials.

 

Our other material cash needs for the next 12 months will include payments of (i) employee salaries, (ii) patents, (iii) construction fees for facilities to be used in our research and development and (iv) fees to our consultants and legal advisors.

 

We will need to raise substantial additional capital in order to meet our anticipated expenses. If we are not able to raise substantial additional capital, we may not be able to continue to function as a going concern and we may have to cease operations. Even if we obtain funding sufficient to continue functioning as a going concern, we will be required to raise a substantial amount of capital in the future in order to reach profitability and to complete the commercialization of our products. Our ability to fund these future capital requirements will depend on many factors, including the following:

 

·

our ability to obtain funding from third parties, including any future collaborative partners;

 

·

the scope, rate of progress and cost of our clinical trials and other research and development programs;

 

·

the time and costs required to gain regulatory approvals;

 

·

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

 

·

the costs of filing, prosecuting, defending and enforcing patents, patent applications, patent claims, trademarks and other intellectual property rights;

 

·

the effect of competition and market developments; and

 

·

future pre-clinical and clinical trial results.

 

Adrian Harel. Pursuant to his employment agreement dated January 23, 2011, Dr. Harel is entitled to a monthly salary of 39,000 NIS (approximately $10,000) (including benefits for monthly totals of approximately 60,300 NIS (approximately $15,900)).  Dr. Harel also receives other benefits that are generally made available to our employees.  Dr. Harel is provided with a company car and a gross-up payment for any taxes relating thereto.  

 

Liat Sossover. Pursuant to her employment agreement dated June 23, 2011, Ms. Sossover is entitled to a salary of 32,000 NIS (approximately $8,290) per month.  Ms. Sossover is also entitled to contributions on her behalf by the Company into a manager’s insurance fund, disability insurance and an education fund.

On June 27, 2011, Dr. Harel was granted, pursuant to our Global Plan, an option to purchase 450,000 shares of our common stock at a price per share of $0.20 each. One-third of such option vested and became exercisable on January 23, 2012 and the remainder of the shares subject to the option will vest and become exercisable over the following 24 months in equal installments. The option shall expire on the tenth anniversary of the grant date.

 

On August 10, 2011, Dr. Harel was granted, pursuant to our Global Plan, an option to purchase 70,000 shares of our common stock at a price per share of $0.20 each. Such option became fully vested and exercisable upon our receipt of clean room approval in connection with the Hadassah trial. The option shall expire on the tenth anniversary of the grant date.

 

On June 23, 2010, Ms. Sossover was granted, pursuant to our Global Plan, an option to purchase 400,000 shares of our common stock at a price per share of $0.18 each. One-third of such option vested and became exercisable on June 23, 2011 and the remainder of the shares subject to the option vest and become exercisable over the following 24 months in equal installments. The option shall expire on the tenth anniversary of the grant date.

On May 6, 2012, the Board approved another amendment and restatement of the Plans to increase the number of shares available for issuance under the Plans by an additional 9,000,000 shares, subject to the approval of the Company’s stockholders. Our stockholders approved the amendment and restatement of the Plans on June 12, 2012.

Name		Stock Awards ($) (1)				Option Awards ($) (1)				Total ($)
Dr. Irit Arbel			—				130,365	(2)			130,365
Mr. Mordechai Friedman			—				75,355	(3)			75,355
Dr. Abraham Israeli			—				48,326	(4)			48,326
Mr. Alon Pinkas			—				81,384	(5)			81,384
Mr. Chen Schor			443,220	(6)			—				443,220
Dr. Robert Shorr			114,400	(7)			—				114,400
Mr. Malcolm Taub			114,400	(8)			—				114,400

(7) At December 31, 2011, Dr. Shorr had 230,000 shares of restricted common stock.

(8) At December 31, 2011, Mr. Taub had vested options to purchase 100,000 shares of common stock and 238,333 shares of restricted common stock.

		Shares Beneficially Owned
Name of Beneficial Owner		Number of Shares				Percentage of  Class
Directors and Named Executive Officers
Adrian Harel			295,000	(1)			*
Liat Sossover			277,777	(1)			*
Abraham Efrati			483,333	(2)			*
Irit Arbel			3,255,000	(3)			2.5	%
Mordechai Friedman			166,667	(1)			*
Abraham Israeli			588,888	(1)			*
Alon Pinkas			180,000	(1)			*
Chen Schor			923,374	(4)			*
Robert Shorr			230,000	(5)			*
Malcolm Taub			538,333	(6)			*
All current directors and officers as a group (10 persons)			66,011,963	(7)			41.0	%
5% Shareholders
ACCBT Corp. Morgan & Morgan Building Pasea Estate, Road Town Tortola British Virgin Islands			59,556,924 (8)				37.5	%

Pursuant to the terms of the Subscription Agreement, as amended, and a related registration rights agreement, ACCBT has the following rights for so long as ACCBT or its affiliates hold at least 5% of our issued and outstanding share capital:

 

·

Board Appointment Right: ACCBT has the right to appoint 50.1% (any fractions to be rounded up to the nearest whole number) of the members of our Board of Directors and any of our committees and the Board of Directors of our subsidiary.

 

·

Preemptive Right: ACCBT has the right to receive thirty day notice of, and to purchase a pro rata portion (or greater under certain circumstances where offered shares are not purchased by other subscribers) of, securities issued by us, including options and rights to purchase shares.  This preemptive right does not include issuances under our equity incentive plans.

 

·

Consent Right: ACCBT’s written consent is required for certain corporate actions, including issuance of shares (other than existing warrants and issuances under our incentive plans), amendment of our charter or bylaws, repurchase of shares, declaration or payment of dividends or distributions, related party transactions, non-ordinary course transactions involving $25,000 or more, liquidation or dissolution, the creation, acquisition or disposition of a subsidiary or entry into a joint venture or strategic alliance, a material change to our business, merger, change of control, sale of the company, any acquisition, and any payment of cash compensation over $60,000 per year.

 

In addition ACCBT is entitled to demand and piggyback registration rights, whereby ACCBT may request, upon ten days written notice, that we file, or include within a registration statement to be filed, with the Securities and Exchange Commission for ACCBT’s resale of the Subscription Shares, as adjusted, and the shares of our common stock issuable upon exercise of the Warrants.

 

On May 10, 2012, we entered into a Warrant Amendment Agreement with ACCBT pursuant to which we agreed, upon the effectiveness of a six month lock-up agreement entered into by ACCBT in connection with this proposed offering, the then current expiration date of each Warrant shall be automatically extended by an additional 18 months.

 

  

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2011

 

U.S. DOLLARS IN THOUSANDS

(Except share data)

 

INDEX

 

	Page
Reports of Independent Registered Public Accounting Firms	F-2 - F-3
Consolidated Financial Statements
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Statements of Changes in Stockholders' Equity (Deficiency)	F-6
Consolidated Statements of Cash Flows	F-15
Notes to Consolidated Financial Statements	F-16 - F-47
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	F-48
Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011	F-49
Statements of Changes in Stockholders’ Equity (Deficiency)	F-50
Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	F-59
Notes to Consolidated Financial Statements (Unaudited)	F-60 - F-78

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

BRAINSTORM CELL THERAPEUTICS Inc. (A Development Stage Company)

 

We have audited the accompanying consolidated balance sheet of BRAINSTORM CELL THERAPEUTICS Inc. and subsidiary (a development stage company) (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statement of income, stockholders' deficiency, and cash flows for each of the two years in the period ended December 31, 2011 and for the period from April 1, 2004 to December 31, 2011. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.

 

The financial statements for the period from April 1, 2004 through December 31, 2007, were audited by other auditors. The consolidated financial statements for the period from April 1, 2004 through December 31, 2007 included a net loss of $32,325,000. Our opinion on the consolidated statements of operations, changes in stockholders' deficiency and cash flows for the period from April 1, 2004 through December 31, 2011, insofar as it relates to amounts for prior periods through December 31, 2007, is based solely on the report of other auditors. The other auditors report dated April 13, 2008 expressed an unqualified opinion, and included an explanatory paragraph concerning an uncertainty about the Company's ability to continue as a going concern, and regarding the status of the Company research and development license agreement with Ramot.

 

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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 on our audits and the report of other auditor, such consolidated financial statements present fairly, in all material respects, the financial position of BRAINSTORM CELL THERAPEUTICS Inc. and subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011 and for the period from April 1, 2004 to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development stage enterprise engaged in development innovative stem cell therapeutic products based on technologies enabling the in-vitro differentiation of bone marrow stem cells into neural-like cells, based on the acquired technology and research to be conducted and funded by the Company as discussed in Note 1 to the financial statements. The Company's working capital deficiency and operating losses since inception through December 31, 2011 raise substantial doubts about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of' these uncertainties.

 

/s/ Brightman Almagor Zohar & Co.

Brightman Almagor Zohar & Co.

Certified Public Accountants

A Member Firm of Deloitte Touche Tohmatsu

 

Tel Aviv, Israel

March 13, 2012

 

Audit.Tax.Consulting.Financial Advisory.

Member of Deloitte Touche Tohmatsu

  

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors of

 

BRAINSTORM CELL THERAPEUTICS INC.

(A development stage company)

 

We have audited the accompanying consolidated balance sheet of Brainstorm Cell Therapeutics Inc. (a development stage company) ("the Company") and its subsidiary as of December 31, 2007, and the related consolidated statements of operations, statements of changes in stockholders' equity (deficiency) and the consolidated statements of cash flows for the year ended December 31, 2007, for the nine months ended December 31, 2006 and 2005 and for the period from March 31, 2004 through December 31, 2007. 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 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. We were not engaged to perform an audit of the Company's 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

 

In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiary as of December 31, 2007, and the consolidated results of their operations and cash flows for the year ended December 31, 2007, for the nine months ended December 31, 2006 and 2005 and for the period from March 31, 2004 through December 31, 2007, in conformity with U.S generally accepted accounting principles.

 

As discussed in Note 2 to the consolidated financial statements, in 2007, the Company adopted Financial Accounting Standard Board Statement No. 123(R), "Share-Based Payment".

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1h, the Company has incurred operating losses and has a negative cash flow from operating activities and has a working capital deficiency. As for the Company research and development license agreement with Ramot, see Note 3. These conditions raise substantial doubt about the Company's ability to continue to operate as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

	/s/ Kost Forer Gabbay & Kasierer
Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
April 13, 2008	A Member of Ernst & Young Global

 

  

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

 

		December 31,
		2011				2010
		U.S. $ in thousands
ASSETS
Current Assets:
Cash and cash equivalents			1,923				93
Account receivable (Note 5)			312				427
Prepaid expenses			69				59
Total current assets			2,304				579
Long-Term Investments:
Prepaid expenses			17				1
Severance payment fund			109				90
Total long-term investments			126				91
Property and Equipment, Net (Note 6)			314				419
Total assets			2,744				1,089
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Trade payables			244				307
Accrued expenses			750				448
Other accounts payable (Note 7)			141				531
Short-term convertible note (Note 8)			-				137
Total current liabilities			1,135				1,423
Accrued Severance Pay			121				125
Total liabilities			1,256				1,548
Stockholders' Equity (deficiency):
Stock capital: (Note 11)			6				5
Common stock  $0.00005 par value - Authorized: 800,000,000 shares at December 31, 2011 and December 31, 2010; Issued and outstanding: 126,444,309 and 95,832,978 shares
Additional paid-in-capital			45,560				39,696
Deficit accumulated during the development stage			(44,078	)			(40,160	)
Total stockholders' deficiency			1,488				(459	)
Total liabilities and stockholders' Equity (deficiency)			2,744				1,089

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands

(Except share data)

 

		Year ended  December 31,								Period from September 22, 2000 (inception date) through December 31,
		2011				2010				2011(*)
		U.S. $ in thousands
Operating costs and expenses:
Research and development, net (Note 12)			1,689				1,045				24,419
General and administrative			2,205				1,544				17,003
Total operating costs and expenses			3,894				2,589				41,422
Financial expense (income), net			151				(189	)			2,547
Other income			(132	)			-				(132	)
Operating loss			3,913				2,400				43,837
Taxes on income (Note 13)			5				19				77
Loss from continuing operations			3,918				2,419				43,914
Net loss from discontinued operations			-				-				164
Net loss			3,918				2,419				44,078
Basic and diluted net loss per share from continuing operations			0.03				0.03
Weighted average number of shares outstanding used in computing basic and diluted net loss per share			120,117,724				89,094,403

 

(*) Out of which, $163, relating to the period from inception to March 31, 2004, is unaudited.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of September 22, 2000 (date of inception) (unaudited)			-				-				-				-				-				-
Stock issued on September 22, 2000 for cash at $0.00188 per share			8,500,000				1				16				-				-				17
Stock issued on June 30, 2001 for cash at $0.0375 per share			1,600,000					*			60				-				-				60
Contribution of capital			-				-				8				-				-				8
Net loss			-				-				-				-				(17	)			(17	)
Balance as of March 31, 2001 (unaudited)			10,100,000				1				84				-				(17	)			68
Contribution of capital			-				-				11				-				-				11
Net loss			-				-				-				-				(26	)			(26	)
Balance as of March 31, 2002 (unaudited)			10,100,000				1				95				-				(43	)			53
Contribution of capital			-				-				15				-				-				15
Net loss			-				-				-				-				(47	)			(47	)
Balance as of March 31, 2003 (unaudited)			10,100,000				1				110				-				(90	)			21
2-for-1 stock split			10,100,000					*			-				-				-				-
Stock issued on August 31, 2003 to purchase mineral option at $0.065 per share			100,000					*			6				-				-				6
Cancellation of shares granted to Company's President			(10,062,000	)				*				*			-				-				-
Contribution of capital			-					*			15				-				-				15
Net loss			-				-				-				-				(73	)			(73	)
Balance as of March 31, 2004 (unaudited)			10,238,000				1				131				-				(163	)			(31	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of March 31, 2004			10,238,000				1				131				-				(163	)			(31	)
Stock issued on June 24, 2004 for private placement at $0.01 per share, net of $25,000 issuance expenses			8,510,000					*			60				-				-				60
Contribution capital			-				-				7				-				-				7
Stock issued in 2004 for private placement at $0.75 per unit			1,894,808					*			1,418				-				-				1,418
Cancellation of shares granted to service providers			(1,800,000	)				*							-				-				-
Deferred stock-based compensation related to options granted to employees			-				-				5,979				(5,979	)			-				-
Amortization of deferred stock-based compensation related to shares and options granted to employees			-				-				-				584				-				584
Compensation related to shares and options granted to service providers			2,025,000					*			17,506				-				-				17,506
Net loss			-				-				-				-				(18,840	)			(18,840	)
Balance as of March 31, 2005			20,867,808				1				25,101				(5,395	)			(19,003	)			704

 

* Represents an amount less than $1. 

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of March 31, 2005			20,867,808				1				25,101				(5,395	)			(19,003	)			704
Stock issued on May 12, 2005 for private placement at $0.80 per share			186,875				-	*			149				-				-				149
Stock issued on July 27, 2005 for private placement at $0.60 per share			165,000				-	*			99				-				-				99
Stock issued on September 30, 2005 for private placement at $0.80 per share			312,500				-	*			225				-				-				225
Stock issued on December 7, 2005 for private placement at $0.80 per share			187,500				-	*			135				-				-				135
Forfeiture of options granted to employees			-				-				(3,363	)			3,363				-				-
Deferred stock-based compensation related to shares and options granted to directors and employees			200,000				-	*			486				(486	)			-				-
Amortization of deferred stock-based compensation related to options and shares granted to employees and directors			-				-				51				1,123				-				1,174
Stock-based compensation related to options and shares granted to service providers			934,904				-	*			662				-				-				662
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)			-				-				(7,906	)											(7,906	)
Beneficial conversion feature related to a convertible bridge loan			-				-				164				-				-				164
Net loss			-				-				-				-				(3,317	)			(3,317	)
Balance as of March 31, 2006			22,854,587				1				15,803				(1,395	)			(22,320	)			(7,911	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of March 31, 2006			22,854,587				1				15,803				(1,395	)			(22,320	)			(7,911	)
Elimination of deferred stock compensation due to implementation of ASC 718-10 (formerly SFAS 123(R))			-				-				(1,395	)			1,395				-				-
Stock-based compensation related to shares and options granted to directors and employees			200,000				-	*			1,168				-				-				1,168
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)			-				-				7,191				-				-				7,191
Stock-based compensation related to options and shares granted to service providers			1,147,225				-				453				-				-				453
Warrants issued to convertible note holder			-				-				11				-				-				11
Warrants issued to loan holder			-				-				110				-				-				110
Beneficial conversion feature related to convertible bridge loans			-				-				1,086				-				-				1,086
Net loss			-				-				-				-				(3,924	)			(3,924	)
Balance as of December 31, 2006			24,201,812				1				24,427				-				(26,244	)			(1,816	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2006			24,201,812				1				24,427				-				(26,244	)			(1,816	)
Stock-based compensation related to options and shares granted to service providers			544,095								1,446				-				-				1,446
Warrants issued to convertible note holder			-				-				109				-				-				109
Stock-based compensation related to shares and options granted to directors and employees			200,000					*			1,232				-				-				1,232
Beneficial conversion feature related to convertible loans			-				-				407				-				-				407
Conversion of convertible loans			725,881					*			224				-				-				224
Exercise of warrants			3,832,621					*			214				-				-				214
Stock issued for private placement at $0.1818 per unit, net of finder's fee			11,500,000				1				1,999				-				-				2,000
Net loss			-				-				-				-				(6,244	)			(6,244	)
Balance as of December 31, 2007			41,004,409				2				30,058				-				(32,488	)			(2,428	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2007			41,004,409				2				30,058				-				(32,488	)			(2,428	)
Stock-based compensation related to options and stock granted to service providers			90,000				-				33				-				-				33
Stock-based compensation related to stock and options granted to directors and employees			-				-				731				-				-				731
Conversion of convertible loans			3,644,610					*			1,276				-				-				1,276
Exercise of warrants			1,860,000					*			-				-				-				-
Exercise of options			17,399					*			3				-				-				3
Stock issued for private placement at $0.1818 per unit, net of finder's fee			8,625,000				1				1,499				-				-				1,500
Subscription of shares for  private placement at $0.1818 per unit			-				-				281				-				-				281
Net loss			-				-				-				-				(3,472	)			(3,472	)
Balance as of December 31, 2008			55,241,418				3				33,881				-				(35,960	)			(2,076	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2008			55,241,418				3				33,881				-				(35,960	)			(2,076	)
Stock-based compensation related to options and stock granted to service providers			5,284,284					*			775				-								775
Stock-based compensation related to stock and options granted to directors and employees			-				-				409				-								409
Conversion of convertible loans			2,500,000					*			200				-								200
Exercise of warrants			3,366,783					*			-				-								-
Stock issued for amendment of private placement			9,916,667				1				-				-								1
Subscription of shares			-				-				729				-								729
Net loss			-				-				-				-				(1,781	)			(1,781	)
Balance as of December 31, 2009			76,309,152				4				35,994				-				(37,741	)			(1,743	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2009			76,309,152				4				35,994								(37,741	)			(1,743	)
Stock-based compensation related to options and stock granted to service providers			443,333				-	*			96				-				-				96
Stock-based compensation related to stock and options granted to directors and employees			466,667				-	*			388				-				-				388
Stock issued for amendment of private placement			7,250,000				1				1,750				-				-				1,751
Conversion of convertible note			402,385				-	*			135				-				-				135
Conversion of convertible loans			1,016,109				-	*			189				-				-				189
Issuance of shares			2,475,000								400												400
Exercise of options			1,540,885				-	*			77				-				-				77
Exercise of warrants			3,929,446				-	*			11				-				-				11
Subscription of shares for  private placement at $0.12 per unit											455				-				-				455
Conversion of trade payable to stock											201												201
Issuance of shares on account of previously subscribed shares (See also Note 11B.1.f)			2,000,001				-	*			-				-				-				-
Net loss																			(2,419	)			(2,419	)
Balance as of December 31, 2010			95,832,978				5				39,696				-				(40,160	)			(459	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred  Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2010			95,832,978			$	5			$	39,696			$	-			$	(40,160	)		$	(459	)
Stock-based compensation related to options and stock granted to service providers			474,203				-				449				-				-				449
Stock-based compensation related to stock and options granted to directors and employees			2,025,040				-				1,135				-				-				1,135
Conversion of convertible note			755,594				-				140				-				-				140
Exercise of options			1,648,728				-				243				-				-				243
Exercise of warrants			1,046,834				-				272				-				-				272
Issuance of shares for private placement			14,160,933				1				3,601				-				-				3,602
Issuance of shares on account of previously subscribed shares (See also Note 11B.1.f)			10,499,999				-				24				-				-				24
Net loss			-				-				-				-				(3,918	)			(3,918	)
Balance as of December 31, 2011			126,444,309			$	6			$	45,560			$	-			$	(44,078	)		$	1,488

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(Except share data)

 

		Year ended December 31,								Period from September 22, 2000 (inception date) through December 31,
		2 0 1 1				2 0 1 0				2 0 1 1(*)
		U.S. $ in thousands
Cash flows from operating activities:
Net loss		$	(3,918	)		$	(2,419	)		$	(44,078	)
Less - loss for the period from discontinued operations			-				-				164
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of deferred charges			153				162				1,001
Severance pay, net			(23	)			11				12
Accrued interest on loans			3				-				451
Amortization of discount on short-term loans			-				-				1,864
Change in fair value of options and warrants			-				-				(795	)
Expenses related to shares and options granted to service providers			449				96				21,486
Stock-based compensation related to options granted to employees			1,135				388				6,821
Decrease (increase) in accounts receivable and prepaid expenses			105				(400	)			(381	)
Increase (decrease) in trade payables and convertible note			(63	)			45				717
Increase (decrease) in other accounts payable and accrued expenses			(64	)			48				1,397
Erosion of restricted cash			-				-				(6	)
Net cash used in continuing operating activities			(2,223	)			(2,069	)			(11,347	)
Net cash used in discontinued operating activities			-				-				(23	)
Total net cash used in operating activities			(2,223	)			(2,069	)			(11,370	)
Cash flows from investing activities:
Purchase of property and equipment			(48	)			(5)				(1,133	)
Restricted cash			-				-				6
Investment in lease deposit			(16	)			6				(17	)
Net cash used in continuing investing activities			(64	)			1				(1,144	)
Net cash used in discontinued investing activities			-				-				(16	)
Total net cash provided by (used in) investing activities			(64	)			1				(1,160	)
Cash flows from financing activities:
Proceeds from issuance of Common stock, net			3,602				2,118				12,319
Proceeds from loans, notes and issuance of warrants, net			-				-				2,061
Credit from bank			-				(46	)			-
Proceeds from exercise of warrants and options			515				88				631
Repayment of short-term loans			-				-				(601	)
Net cash provided by continuing financing activities			4,117				2,160				14,410
Net cash provided by discontinued financing activities			-				-				43
Total net cash provided by financing activities			4,117				2,160				14,453
Increase  in cash and cash equivalents			1,830				92				1,923
Cash and cash equivalents at the beginning of the period			93				1				-
Cash and cash equivalents at end of the period		$	1,923			$	93			$	1,923
Non-cash financing activities:
Conversion of convertible loan and convertible note to shares		$	140			$	324
Conversion of other accounts payable to Common Stock		$	24			$	487
Conversion of a trade payable to Common Stock		$	-			$	200

 

(*) Out of the which, cash flows used in discontinued operating activities of $36, cash flows used in discontinued investing activities of $16 and cash flows provided in discontinued financing activities of $57, relating to the period from inception to March 31, 2004, is unaudited.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 U.S. dollars in thousands

 

NOTE 1 -

GENERAL:

 

A.

Brainstorm Cell Therapeutics Inc. (formerly: Golden Hand Resources Inc.) (the "Company") was incorporated in the State of Washington on September 22, 2000.

 

B.

On May 21, 2004, the former major stockholders of the Company entered into a purchase agreement with a group of private investors, who purchased from the former major stockholders 6,880,000 shares of the then issued and outstanding 10,238,000 shares of Common Stock.

 

C.

On July 8, 2004, the Company entered into a licensing agreement with Ramot of Tel Aviv University Ltd. ("Ramot"), to acquire certain stem cell technology (see Note 3). Subsequent to this agreement, the Company decided to focus on the development of novel cell therapies for neurodegenerative diseases based on the acquired technology and research to be conducted and funded by the Company.

 

Following the licensing agreement dated July 8, 2004, the management of the Company decided to abandon all old activities related to the sale of the digital data recorder product. The discontinuation of this activity was accounted for under the provision of Statement of Financial Accounting Standard ASC 360-10 (formerly "SFAS" 144), "Accounting for the Impairment or Disposal of Long-Lived Assets".

 

D.

On October 25, 2004, the Company formed a wholly-owned subsidiary in Israel, Brainstorm Cell Therapeutics Ltd. ("BCT").

 

E.

On November 22, 2004, the Company changed its name from Golden Hand Resources Inc. to Brainstorm Cell Therapeutics Inc. to better reflect its new line of business in the development of novel cell therapies for neurodegenerative diseases. BCT, as defined below, owns all operational property and equipment.

 

F.

On September 17, 2006, the Company changed the Company's fiscal year-end from March 31 to December 31.

 

G.

In December 2006, the Company changed its state of incorporation from Washington to Delaware.

 

H.

Since its inception, the Company has devoted substantially all of its efforts to research and development, recruiting management and technical staff, acquiring assets and raising capital. In addition, the Company has not generated revenues. Accordingly, the Company is considered to be in the development stage, as defined in Statement of Financial Accounting Standards No. 7, "Accounting and reporting by development Stage Enterprises" ASC 915-10 (formerly "SFAS No. 7").

 

I.

In October 2010, the Israeli Ministry of Health (“MOH”) granted clearance for a Phase I/II clinical trial using the Company’s autologous NurOwn™ stem cell therapy in patients with amyotrophic lateral sclerosis (“ALS”), subject to some additional process specifications as well as completion of the sterility validation study for tests performed.

  

On February 23, 2011, the Company submitted, to the MOH, all the required documents. Following approval of the MOH, a Phase I/II clinical study for ALS patients using the Company’s autologous NurOwn™ stem cell therapy (the “Clinical Trial”) was initiated in June 2011.

 

After the balance sheet date, in January 2012, the Company reported on an interim safety follow-up of the first 4 patients enrolled in its Clinical Trial indicating that no significant treatment-related adverse events were reported. The NurOwn™ treatment has thus so far proven to be safe, and has shown some initial indications of beneficial clinical effects.

  

J.

In February 2011, the U.S. Food and Drug Administration (“FDA”) granted orphan drug designation to the Company’s NurOwn™ autologous adult stem cell product candidate for the treatment of ALS.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 1 -

GENERAL (Cont.)

 

GOING CONCERN:

 

As reflected in the accompanying financial statements, the Company’s operations for the year ended December 31, 2011, resulted in a net loss of $3,918. The Company’s balance sheet reflects an accumulated deficit of $44,078. These conditions, together with the fact that the Company is a development stage Company and has no revenues nor are revenues expected in the near future, raise substantial doubt about the Company's ability to continue to operate as a going concern. The Company’s ability to continue operating as a “going concern” is dependent on several factors, among them is its ability to raise sufficient additional working capital.

 

In 2009, the Company decided to focus only on the effort to commence clinical trials for ALS and such trials did commence in 2011.

 

In February 2011, the Company raised approximately $3.8 million from institutional and private investors. However, there can be no assurance that additional funds will be available on terms acceptable to the Company, or at all.

 

These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

  

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES

 

A.

Basis of presentation:

 

The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) applied on a consistent basis.

 

B.

Use of estimates:

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

C.

Financial statement in U.S. dollars:

 

The functional currency of the Company is the U.S dollar ("dollar") since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. Part of the transactions of BCT are recorded in new Israeli shekels ("NIS"); however, a substantial portion of BCT’s costs are incurred in dollars or linked to the dollar. Accordingly, management has designated the dollar as the currency of BCT’s primary economic environment and thus it is their functional and reporting currency.

 

Transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been re-measured to dollars in accordance with the provisions of ASC 830-10 (formerly Statement of Financial Accounting Standard 52), "Foreign Currency Translation". All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

 

D.

Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, BCT. Intercompany balances and transactions have been eliminated upon consolidation.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

E.

Cash equivalents:

 

Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired.

 

F.

Property and equipment:

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets.

 

The annual depreciation rates are as follows:

 

	%
Office furniture and equipment	7
Computer software and electronic equipment	33
Laboratory equipment	15
Leasehold improvements	Over the shorter of the lease term (including the option) or useful life

  

G.

Impairment of long-lived assets:

 

The Company’s and BCT’s long-lived assets are reviewed for impairment in accordance with ASC 360-10 (formerly Statement of Financial Accounting Standard 144), "Accounting for the Impairment or Disposal of Long-Lived Assets," whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. During 2010 and 2011, no impairment losses were identified.

 

H.

Research and development expenses, net:

 

Research and development expenses, are charged to the statement of operations as incurred.

 

Royalty-bearing grants from the Government of Israel for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research and development expenses. Such grants are included as a deduction of research and development costs since at the time received it is not probable the Company will generate sales from these projects and pay the royalties resulting from such sales.

 

I.

Severance pay:

 

The liability of BCT for severance pay is calculated pursuant to the Severance Pay Law in Israel, based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date and is presented on an undiscounted basis.

 

BCT’s employees are entitled to one month's salary for each year of employment or a portion thereof. BCT’s liability for all of its employees is fully provided by monthly deposits with insurance policies and by an accrual. The value of these policies is recorded as an asset in the Company's balance sheet.

 

The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Severance Pay Law in Israel or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies.

 

Severance expenses for the year ended December 31, 2011 were $20.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

J.

Accounting for stock-based compensation:

 

Effective April 1, 2006, the Company adopted ASC 718-10 (formerly Statement of Financial Accounting Standards 123 (Revised 2004)), "Share-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options under the Company's stock plans based on estimated fair values. ASC 718-10 supersedes the Company's previous accounting under Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25"). In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin 107 ("SAB 107") relating to ASC 718-10. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10.

 

ASC 718-10 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.

 

The Company recognizes compensation expense for the value of non-employee awards, which have graded vesting, based on the accelerated attribution method over the requisite service period of each award, net of estimated forfeitures.

 

The Company recognizes compensation expense for the value of employee awards that have graded vesting, based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures.

 

The Company estimates the fair value of restricted shares based on the market price of the shares at the grant date and estimates the fair value of stock options granted using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility was calculated based upon actual historical stock price movements over the period, equal to the expected option term. The expected option term was calculated for options granted to employees and directors in accordance with SAB 107 and SAB 110, using the "simplified" method. Grants to non-employees are based on the contractual term. The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.

 

K.

Basic and diluted net loss per share:

 

Basic net loss per share is computed based on the weighted average number of shares outstanding during each year. Diluted net loss per share is computed based on the weighted average number of shares outstanding during each year, plus the dilutive potential of the Common Stock considered outstanding during the year, in accordance with ASC 260-10 (formerly Statement of Financial Accounting Standard 128), "Earnings per Share".

 

All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the year ended December 31, 2011 and December 31, 2010, since all such securities have an anti-dilutive effect.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

L.

Income taxes:

 

The Company and BCT account for income taxes in accordance with ASC 740-10 (formerly Statement of Financial Accounting Standard 109), "Accounting for Income Taxes." This Statement requires the use of the liability method of accounting for income taxes, whereby deferred tax asset and liability account balances are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and BCT provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

 

In September 2006, the Financial Accounting Standards Board ("FASB") issued ASC 740-10 (formerly FASB interpretation ("FIN") 48), "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109". ASC 740-10 establishes a single model to address accounting for uncertain tax positions. ASC 740-10 clarified the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740-10 also provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of the provisions of ASC 740-10 did not have an impact on the Company's consolidated financial position and results of operations.

 

M.

Fair value of financial instruments:

 

The carrying values of cash and cash equivalents, accounts receivable and prepaid expenses, trade payables and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 3 -

RESEARCH AND LICENSE AGREEMENT

 

On July 8, 2004, the Company entered into a research and license agreement (the "Original Agreement") with Ramot. The license agreement grants the Company an exclusive, worldwide, royalty-bearing license to develop, use and sell certain stem cell technology. In consideration of the license, the Company was required to remit an upfront license fee payment of $100; royalties at a rate of 5% of all net sales of products and 30% of all sublicense receipts. In addition, the Company granted Ramot and certain of its designees fully vested warrants to purchase 10,606,415 shares of Common Stock at an exercise price of $0.01 per share. The Company also agreed to fund, through Ramot, further research in consideration of $570 per year for an initial two-year period (“initial research period”). The Company also agreed to fund research for a further two-year period if certain research milestones are met for an additional $1,140 (“extended research period”).

 

The warrants issued pursuant to the agreement were issued to Ramot and its designees effective as of November 4, 2004. Each of the warrants is exercisable for a seven-year period beginning on November 4, 2005.

 

On March 30, 2006, the Company entered into an Amended Research and License Agreement with Ramot, for the purpose of amending and restating the Original Agreement. According to the agreement, the initial period was amended to an initial research period of three years. The Amended Research and License Agreement also extends the additional two-year research period in the Original Agreement to an additional three-year research period if certain research milestones are met. The Amended Research and License Agreement retroactively amended the consideration to $380 per year, instead of $570 per year. As a consequence, an amount of $300 was charged to the statement of operations as research and development expenses in the year ended in March 31, 2006. In addition, the Amended Research and License Agreement reduced royalties that the Company may have to pay Ramot, in certain cases, from 5% to 3% of net sales and also reduces the sublicenses receipt from 30% to 20%-25% of sublicense receipts.

 

On July 26, 2007, the Company entered into a Second Amended and Restated Research and License Agreement with Ramot. On August 1, 2007, the Company obtained a waiver and release from Ramot pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations under the Amended Research and License Agreement, dated March 30, 2006, and waived all claims against the Company resulting from the Company's previous defaults and non-payment under the Original Agreement and the Amended Research and License Agreement. The payments described in the waiver and release covered all payment obligations that were past due and not yet due pursuant to the Original Agreement. The waiver and release amended and restated the remaining unpaid balance of $240 of the original payment schedule for the initial research period.

 

As of December 24, 2009, the Company had not made the payments totaling $240.

 

On December 24, 2009, the Company and Ramot entered into a settlement under which, among other things, the following matters were agreed upon:

 

a)

Ramot released the Company from the Company’s obligation to fund the extended research period in the total amount of $1,140.Therefore, the Company removed an amount of $760 from its research and development expenses that had accumulated in the past.

 

b)

Past due amounts of $240 for the initial research period plus interest of $32 owed by the Company to Ramot was converted into 1,120,000 restricted shares of common stock on December 30, 2009. Ramot deposited the shares with a broker and may sell the shares in the free market after 185 days from the issuance date.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 3 -

RESEARCH AND LICENSE AGREEMENT (Cont.)

  

In the event that the total proceeds generated by sales of the shares are less than $120 on or prior to September 30, 2010 ("September Payment"), then on such date the Company had to pay to Ramot the difference between the aggregate proceeds that had been received by Ramot up to such date, and $120. In the event that the total proceeds generated by sales of the shares, together with the September 30, 2010 payment, are less than $240 on or prior to December 31, 2010, then the Company had to pay to Ramot the difference between the proceeds that Ramot had received from sales of the shares up to such date together with the September Payment (if any) that had been transferred to Ramot up to such date, and $240. Related compensation in the amount of $51 was recorded as research and development expenses.

 

As of December 31, 2011, Ramot had sold all 1,120,000 shares of Common Stock of the Company issued under the settlement agreement for $235. The Company paid the remaining balance of $5 and finalized the balance due to Ramot according to the settlement agreement between the parties dated December 24, 2009.

 

In December 2011, the Company signed an agreement with BCT and Ramot, in which the Company assigned to BCT its rights under the License Agreement with Ramot, as well as its ownership rights in the joint patent application with Ramot. The Company guarantees all BCT obligations under the License Agreement towards Ramot.

 

NOTE 4 -

CONSULTING AGREEMENTS

 

A.

On July 8, 2004, the Company entered into two consulting agreements with Prof. Eldad Melamed and Prof. Daniel Offen (together, the "Consultants"), upon which the Consultants shall provide the Company scientific and medical consulting services in consideration for a monthly payment of $6 each. In addition, the Company granted each of the Consultants, a fully vested warrant to purchase 1,097,215 shares of Common Stock at an exercise price of $0.01 per share. The warrants issued pursuant to the agreement were issued to the Consultants effective as of November 4, 2004. Each of the warrants is exercisable for a seven-year period beginning on November 4, 2005. As of December 31, 2010, the two Consultants exercised the above warrants to Common Stock of the Company.

 

B.

On December 16, 2010, the Company approved a grant of 1,100,000 shares of the Company's Common Stock to the two Consultants, for services rendered through December 31, 2010. Related compensation in the amount of $220 was recorded as research and development expense. A sum of $487 was cancelled concurrently with the issuance of the 1,100,000 shares of Common Stock of the Company.

 

C.

On June 27, 2011, the Company approved an additional grant of 400,000 shares of the Company's Common Stock to Prof. Daniel Offen, for services rendered through December 31, 2009. Related compensation in the amount of $192 is recorded as research and development expense.

 

NOTE 5 -

ACCOUNTS RECEIVABLE

  

		December 31,
		2011				2010
		U.S. $ in thousands
Government authorities			76				36
Grants receivable from the CSO			236				391
			312				427

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 6 -

PROPERTY AND EQUIPMENT

 

		December 31,
		2011				2010
		U.S. $ in thousands
Cost:
Office furniture and equipment			9				9
Computer software and electronic equipment			106				105
Laboratory equipment			361				349
Leasehold improvements			690				655
			1,166				1,118
Accumulated depreciation:
Office furniture and equipment			4				3
Computer software and electronic equipment			103				100
Laboratory equipment			252				200
Leasehold improvements			493				396
			852				699
Depreciated cost			314				419

 

Depreciation expenses for the year ended December 31, 2011 and December 31, 2010 were $153, and $162, respectively.

 

NOTE 7 -

OTHER ACCOUNTS PAYABLE

  

		December 31,
		2011				2010
		U.S. $ in thousands
Employee and payroll accruals			141				471
Ramot accrued expenses			-				60
			141				531

 

NOTE 8 -

SHORT-TERM CONVERTIBLE NOTE

 

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to its legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the Note accrued at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

 

The gap between the amount the Company owed to the legal advisor and the principal of the Convertible Promissory Note in the amount of $82 was deducted from general and administrative expenses.

 

  

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 8 -

SHORT-TERM CONVERTIBLE NOTE (Cont.)

  

On February 19, 2010, the Company's legal advisor converted the entire accrued principal and interest of $135 Convertible Promissory Note into 402,385 shares of Common Stock.

 

On September 15, 2010, the Company issued a $135 Convertible Promissory Note to its legal advisor for legal fees accrued through December 31, 2010. Interest on the Note was at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

 

On February 18, 2011, the legal advisor converted the entire accrued principal and interest into 445,617 shares of Common Stock.

 

NOTE 9 -

SHORT-TERM CONVERTIBLE LOANS

 

On March 5, 2007, the Company issued a $150 Convertible Promissory Note to a third party. Interest on the note accrues at the rate of 8% per annum for the first year and 10% per annum afterward. The note will become immediately due and payable upon the occurrence of certain events of default, as defined in the note. The third party has the right at any time prior to the close of business on the maturity date to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock. The conversion price, as defined in the note, will be 75% (60% upon the occurrence of an event of default) of the average of the last bid and ask price of the Common Stock as quoted on the Over-the-Counter Bulletin Board for the five trading days prior to the Company's receipt of the third party written notice of election to convert, but in no event shall the conversion price be greater than $0.35 or more than 3,000,000 shares of Common Stock be issued. The conversion price will be adjusted in the event of a stock dividend, subdivision, combination or stock split of the outstanding shares.  

In addition, the Company granted to the third party warrants to purchase 150,000 shares of Common Stock at an exercise price of $0.45 per share. The warrants are fully vested and are exercisable at any time after March 5, 2007 until the second anniversary of the issue date. The fair value of the warrants is $43. 

In accordance with ASC 470-20, the Company allocated the proceeds of the convertible note issued with detachable warrants based on the relative fair values of the two securities at the time of issuance. As a result, the Company recorded in its statement of changes in stockholders' equity for 2007 an amount of $22 with respect to the warrants and the convertible note was recorded in the amount of $128. 

The Company agreed to pay a finder's fee of $15; $13 was allocated to deferred charges and is amortized as financial expense over the note period and $2 was allocated to stockholder's equity. 

The Beneficial Conversion Feature in the amount of $122, embedded in the note was calculated based on a conversion rate of 60%, as defined upon the occurrence of an event of default and according to the notes’ effective conversion price. The amount was recorded as discount on the note against additional paid-in capital and is amortized to financial expense over the note period.

 

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 9 -

SHORT-TERM CONVERTIBLE LOANS (Cont.)

 

On January 27, 2010, the third party converted the entire accrued principal and interest of the note, into 1,016,109 shares of Common Stock. 

In July 2011, the Company issued to the lender an additional 309,977 shares of Common Stock of the Company with regard to the above conversion. 

  

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

 

NOTE 10 -

COMMITMENTS AND CONTINGENCIES

 

A.

On December 1, 2004, BCT entered into a lease agreement for the lease of its facilities. The term of the lease was 36 months, with two options to extend. Rent is paid on a quarterly basis in the amount of NIS 28,373 (approximately $8) per month.

 

The facilities and vehicles of the Company and BCT are rented under operating leases that expire on various dates. Aggregate minimum rental commitments under non-cancelable leases as of December 31, 2011 are as follows:

 

Period ending December 31,		Facilities				Vehicles				Total
2012			99				43				142
2013			-				43				43
2014			-				22				22
			99				109				207

 

Total facilities rent expenses for the year ended December 31, 2011 and 2010 were $111 and $135 respectively.

  

B.

On March 20, 2006, the Company entered into a Termination Agreement and General Release (the "Termination Agreement") with Dr. Yaffa Beck, the Company's former President and Chief Executive Officer who resigned her position as an officer and director of the Company on November 10, 2005.

 

As of December 31, 2011, there was still an unpaid balance of $17 to Dr. Beck under this Termination Agreement.

 

C.

Commitments to pay royalties to the Chief Scientist:

 

BCT obtained from the Chief Scientist of the State of Israel grants for participation in research and development for the years 2007 through 2011, and, in return, BCT is obligated to pay royalties amounting to 3% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of the dollar and bears interest of Libor per annum.

Through December 31, 2011, total grants obtained amounted to $1,472.

 

D.

On February 17, 2010, BCT entered into an agreement with Hadasit Medical Research Services and Development Ltd ("Hadasit") to conduct clinical trials in ALS patients. The agreement was revised in June 2011 according to which, in connection with the trials BCT will pay Hadasit $32,225 per patient totaling up to $773,400, as well as $64,915 per month for rental and operation of two clean rooms. The Company has the right to cease the rental of the clean rooms at any time upon 30 days prior notice.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 10 -

COMMITMENTS AND CONTINGENCIES (Cont.)

 

E.

On April 17, 2008, Chapman, Spira & Carson, LLC (“CSC”) filed a breach of contract complaint in the Supreme Court of the State of New York (the “Court”) against the Company. The complaint alleges that CSC performed its obligations to the Company under a consulting agreement entered into between the parties and that the Company failed to provide CSC with the compensation outlined in the consulting agreement. The complaint seeks compensatory damages in an amount up to approximately $897, as well as costs and attorneys’ fees. On June 5, 2008, the Company filed an answer with the Court. The Company believes CSC’s claims are without merit and cannot predict what impact, if any, this matter may have on the business, its financial condition and results of operations and cash flow. Provision is included in the financial statements that Management believes is sufficient to address the risk.

 

NOTE 11 -

STOCK CAPITAL

 

A.

The rights of Common Stock are as follows:

 

Holders of Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the right to a share in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.

 

The Common Stock is registered and publicly traded on the OTC Markets Group service of the National Association of Securities Dealers, Inc. under the symbol BCLI.

 

B.

Issuance of shares, warrants and options:

 

1.

Private Placements:

 

a)

On June 24, 2004, the Company issued to investors 8,510,000 shares of Common Stock for total proceeds of $60 (net of $25 issuance expenses).

 

b)

On February 23, 2005, the Company completed a private placement for sale of 1,894,808 units for total proceeds of $1,418. Each unit consisted of one share of Common Stock and a three-year warrant to purchase one share of Common Stock

at $2.50 per share. This private placement was consummated in three tranches which closed in October 2004, November 2004 and February 2005.

 

c)

On May 12, 2005, the Company issued to an investor 186,875 shares of Common Stock for total proceeds of $149 at a price of $0.80 per share.

 

d)

On July 27, 2005, the Company issued to investors 165,000 shares of Common Stock for total proceeds of $99 at a price of $0.60 per share.

 

e)

On August 11, 2005, the Company signed a private placement agreement with investors for the sale of up to 1,250,000 units at a price of $0.80 per unit. Each unit consisted of one share of Common Stock and one warrant to purchase one share of Common Stock at $1.00 per share. The warrants were exercisable for a period of three years from issuance. On September 30, 2005, the Company sold 312,500 units for total net proceeds of $225. On December 7, 2005, the Company sold 187,500 units for total net proceeds of $135.

 

f)

On July 2, 2007, the Company entered into an investment agreement, pursuant to which the Company agreed to sell up to 27,500,000 shares of Common Stock, for an aggregate subscription price of up to $5 million and warrants to purchase up to 30,250,000 shares of Common Stock.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options (Cont.):

 

1.

Private placements (Cont.):

 

At each closing date, the Company would deliver to the investor the number of shares and warrants, subject to customary closing conditions and the delivery of funds, described above. The warrants had the following exercise prices: (i) the first 10,083,333 warrants had an exercise price of $0.20 per share; (ii) the next 10,083,333 warrants had an exercise price of $0.29 per share; and (iii) the final 10,083,334 warrants issued had an exercise price of $0.36 per share. All warrants expired on November 5, 2011.

 

On August 18, 2009, the Company entered into an amendment to the investment agreement with the investor as follows:

 

(a)

The investor shall invest the remaining amount of the original investment agreement at a price per share of $0.12 in monthly installments of not less than $50 starting August 1, 2009.

 

(b)

The exercise price of the last 10,083,334 warrants will decrease from an exercise price of $0.36 per share to $0.29 per share.

 

(c)

All warrants will expire on November 5, 2013 instead of November 5, 2011.

 

(d)

The price per share of the investment agreement decreased from $0.1818 to $0.12, therefore the Company adjusted the number of Shares of Common Stock issuable pursuant to the investment agreement retroactively and issued to the investor on October 28, 2009 an additional 9,916,667 shares of Common Stock for past investment.

 

(e)

The investor has the right to cease payments in the event that the price per share as of the closing on five consecutive trading days shall decrease to $0.05.

 

On January 18, 2011, the Company and the investor signed an agreement to offset amounts due to the investor, totaling $22, against the remaining balance of the investment. The Company issued to the investor 10,499,999 shares of Common Stock and a warrant to purchase 4,537,500 shares of the Company's Common Stock at an exercise price of $0.29 per share

 

As of December 31, 2011, the Company issued to the investor and its designees an aggregate of 41,666,667 shares of Common Stock, a warrant to purchase 10,083,333 shares of the Company's Common Stock at an exercise price of $0.20 per share, and a warrant to purchase 20,166,667 shares of Common Stock at an exercise price of $0.29 per share. The warrants may be exercised at any time and expire on November 5, 2013.

 

In addition, the Company issued an aggregate of 1,250,000 shares of Common Stock to a related party as an introduction fee for the investment.

 

As of December 31, 2011, the introduction fee was paid in full.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

1.

Private placements: (Cont.)

 

(f)

In January 2010, the Company issued 1,250,000 units to a private investor for total proceeds of $250. Each unit consisted of one share of Common Stock and a two-year warrant to purchase one share of Common Stock at $0.50 per share.

 

(g)

In February 2010, the Company issued 6,000,000 shares of Common Stock to three investors (2,000,000 to each investor) and warrants to purchase an aggregate of 3,000,000 shares of Common Stock (1,000,000 to each investor) with an exercise price of $0.50 for aggregate proceeds of $1,500 ($500 each). The warrants are exercisable through February 17, 2012.

 

(h)

In February 2011, the Company issued 833,333 shares of Common Stock, at a price of $0.30 per share, and a warrant to purchase 641,026 shares of the Company's Common Stock at an exercise price of $0.39 per share exercisable for one year for total proceeds of $250.

 

(i)

In February 2011, the Company entered into an investment agreement, pursuant to which the Company sold 12,815,000 shares of Common Stock, for an aggregate subscription price of $3.6 million and warrants to purchase up to 19,222,500 shares of Common Stock as follows: warrants to purchase 12,815,000 shares of Common Stock at $0.50 for two years, and warrants to purchase 6,407,500 shares of Common Stock at $0.28 for one year.

 

In July 2011, an investor exercised a warrant to purchase 946,834 shares of Common Stock of the Company at $0.28 per share, for $265.

 

In addition, the Company paid 10% of the funds received for the distribution services received. Out of this amount, 4% was paid in stock and the remaining 6% in cash. Accordingly, in March 2011, the Company issued 512,600 shares of Common Stock and paid $231 for the investment banking related to the investment.

 

2.

Share-based compensation to employees and to directors:

 

a)

Options to employees and directors:

 

On November 25, 2004, the Company's stockholders approved the 2004 Global Stock Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) and on March 28, 2005, the Company's stockholders approved the 2005 U.S. Stock Option and Incentive Plan, and the reservation of 9,143,462 shares of Common Stock for issuance in the aggregate under these stock option plans.

 

Each option granted under the plans is exercisable until the earlier of ten years from the date of grant of the option or the expiration dates of the respective option plans. The 2004 and 2005 options plans will expire on November 25, 2014 and March 28, 2015, respectively. The exercise price of the options granted under the plans may not be less than the nominal value of the shares into which such options are exercised. The options vest primarily over three years. Any options that are canceled or forfeited before expiration become available for future grants.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors (Cont.):

 

a)

Options to employees and directors: (Cont.)

 

On June 5, 2008, the Company's stockholders approved an amendment and restatement of the Company’s 2004 Global Share Option Plan and 2005 U.S. Stock Option and Incentive Plan to increase the number of shares of common stock available for issuance under these stock option plans in the aggregate by 5,000,000 shares.

 

On May 27, 2005, the Company granted one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.75 per share. The options are fully vested and expire after 10 years.

 

On February 6, 2006, the Company entered into an amendment to the Company's option agreement with the Company's Chief Financial Officer. The amendment changes the exercise price of the 400,000 options granted to him on February 13, 2005 from $0.75 to $0.15 per share.

 

On May 2, 2006, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The options are fully vested and expire after 10 years. The compensation related to the options, in the amount of $48, was recorded as general and administrative expense.

 

On June 22, 2006, the Company entered into an amendment to the Company's option agreement with two of its employees. The amendment changed the exercise price of 270,000 options granted to them from $0.75 to $0.15 per share. The excess of the fair value resulting from the modification, in the amount of $2, was recorded as general and administration expense over the remaining vesting period of the option.

 

On September 17, 2006, the Company entered into an amendment to the Company's option agreement with one of its directors. The amendment changes the exercise price of 100,000 options granted to the director from $0.75 to $0.15 per share.

 

On March 21, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $43, was recorded as general and administrative expense.

 

On July 1, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $38, was recorded as general and administrative expense. On October 22, 2007, the Company and the director agreed to cancel and relinquish all the options which were granted on July 1, 2007.

 

On July 16, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $75, was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands 

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options (Cont.)

 

2.

Share-based compensation to employees and to directors (Cont.):

 

a)

Options to employees and directors: (Cont.)

 

On August 27, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $84, was recorded as general and administrative expense.

 

On October 23, 2007, the Company granted to its former Chief Executive Officer and director an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.87 per share. The option vests with respect to 1/6 of the option on each six month anniversary and expires after 10 years. The total compensation related to the option is $733, which is amortized over the vesting period as general and administrative expense.

 

On November 5, 2008, the Company entered into an amendment to the Company's option to purchase 1,000,000 shares of common stock agreement with the Company's CEO. The amendment changed the exercise price of the option from $0.87 to $0.15 per share. The compensation related to the modification of the purchase price in the amount of $4 was recorded as general and administrative expense. In February 2011, the former CEO resigned. As of December 31, 2011, 300,727 out of the above options were exercised. After the balance sheet date, the former CEO exercised his option to purchase an additional 132,038 shares of common stock (see Note 15 C).

 

On June 29, 2009, the Company granted to its former Chief Executive Officer and director an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.067 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $68, which is amortized over the vesting period as general and administrative expense. In February 2011, the former CEO resigned. On July 25, 2011, the Company signed a settlement agreement with the former CEO under which 483,333 shares out of the above grant became fully vested exercisable through April 30, 2012. An additional $30 was recorded as compensation in general and administrative expense.

 

On June 29, 2009, the Company granted to its former Chief Financial Officer an option to purchase 200,000 shares of Common Stock at an exercise price of $0.067 per share. The option vested with respect to 1/3 of the shares subject to the option. Out of the above options, 2/3 were cancelled and the remaining 66,667 were exercised.

 

On August 31, 2009, the Company granted to two of its directors an option to purchase 100,000 shares of Common Stock for each of them at an exercise price of $0.15 per share. The option vests with respect to 1/3 of the option on each anniversary and expires after 10 years. The total compensation related to the option is $32, which is amortized over the vesting period as general and administrative expense.

 

On December 13, 2009, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $21, was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options (Cont.)

 

2.

Share-based compensation to employees and to directors (Cont.):

 

a)

Options to employees and directors: (Cont.)

 

On February 10, 2010, the Company granted to an employee an option to purchase 30,000 shares of Common Stock at an exercise price of $0.32 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $9, which is amortized over the vesting period as research and development expense.

 

On April 13, 2010, the Company, Prof. Abraham Israeli and Hadasit Medical Research Services and Development Ltd. (“Hadasit”) entered into an Agreement (the “Agreement”) pursuant to which Mr. Israeli agreed, during the term of the Agreement, to serve as (i) the Company’s Clinical Trials Advisor and (ii) a member of the Company’s Board of Directors.  In consideration of the services to be provided by Mr. Israeli to the Company under the Agreement, the Company agreed to grant options annually during the term of the Agreement for the purchase of its Common Stock, as follows:

 

*

An option for the purchase of 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share to Mr. Israeli; and

 

*

An option for the purchase of 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share to Hadasit.

 

*

Such options will vest and become exercisable in twelve (12) consecutive equal monthly amounts.

 

In April 2010, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option is $50, which is amortized over the vesting period as general and administrative expense.

 

On June 27, 2011, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option is $48, which is amortized over the vesting period as general and administrative expense.

 

In April 2010, the Company granted Hadasit an option to purchase 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option is $7, which is amortized over the vesting period as general and administrative expense.

 

In April 2011, the Company granted Hadasit an option to purchase 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option is $11, which is amortized over the vesting period as general and administrative expense.

 

On December 16, 2010, the Company granted to two of its directors an option to purchase 400,000 shares of Common Stock at an exercise price of $0.15 per share. The options are fully vested and are exercisable for a period of 10 years. The compensation related to the option, in the amount of $78, was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

On December 16, 2010, the Company approved the grant to two Board members an option to purchase 400,000 shares of Common Stock of the Company (200,000 shares each). The compensation related to the option, in the amount of $80, was recorded as general and administrative expense.

 

On December 16, 2010, the Company approved the grant to its three Scientific Board members 300,000 shares of Common Stock of the Company. The compensation related to the option, in the amount of $60, was recorded as research and development expense.

 

On December 16, 2010, the Company granted to its employees options to purchase 670,000 shares of Common Stock at an exercise price of $0.18 per share. The options are vested over three years and are exercisable for a period of 10 years. The compensation related to the option, in the amount of $32, was recorded as general and administrative expense.

 

On June 27, 2011, the Company granted to its CEO, an option to purchase 450,000 shares of Common Stock of the Company at $0.20. The total compensation related to the option is $177, which is amortized over the vesting period as general and administrative expense.

 

On June 27, 2011, the Company granted to four of its directors an option to purchase 634,999 shares of Common Stock of the Company at $0.15. The total compensation related to the option is $287, which is amortized over the vesting period as general and administrative expense.

 

On August 10, 2011, the Company granted to its CEO, an option to purchase 70,000 shares of Common Stock of the Company at $0.20. The total compensation related to the option is $26, which was amortized as general and administrative expense.

 

On November 10, 2011, the Company approved the grant to its four Advisory Board members an option to purchase 500,000 shares of Common Stock of the Company (125,000 shares each). The total compensation related to the option is $140, which is amortized over the vesting period as general and administrative expense.

 

On November 10, 2011, the Company approved the grant to a former director of the Company 250,000 shares of Common Stock of the Company. The compensation related to the option, in the amount of $70, was recorded as general and administrative expense.

 

As of December 31, 2011, 1,825,103 options are available for future grants.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options

 

2.

Share-based compensation to employees and to directors:

 

a)

Options to employees and directors: (Cont.)

 

A summary of the Company's option activity related to options to employees and directors, and related information is as follows:

  

		Year ended December 31, 2011
		Amount of options				Weighted average exercise price				Aggregate intrinsic value
						$				$
Outstanding at beginning of period			6,893,024				0.183
Granted			1,321,665				0.151
Exercised			(1,286,600	)			0.148
Cancelled			(1,989,268	)			0.188
Outstanding at end of period			4,938,821				0.168				831,684
Vested and expected-to-vest at end of period			3,663,138				0.138				507,028

 

*)

During 2008, the Company extended the exercise period for some of its employees that were terminated. The extension was accounted for as modification in accordance with ASC 718-10. According to ASC 718-10, modifications are treated as an exchange of the original award, resulting in additional compensation expense based on the difference between the fair value of the new award and the original award immediately before modification. Applying modification accounting resulted in additional compensation expense for the year ended December 31, 2008, amounted to $6.

 

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s shares on December 31, 2011 and 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2011 and 2010.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options (Cont.)

 

2.

Share-based compensation to employees and to directors (Cont.):

 

a)

Options to employees and directors: (Cont.)

 

The options outstanding as of December 31, 2011, have been separated into exercise prices, as follows:

		Options outstanding as of				Weighted average remaining				Options exercisable as of
		December 31,				contractual				December 31,
Exercise price		2 0 1 1				Life				2 0 1 1
$						Years
0.00005			333,332				8.29				277,777
0.067			586,217				1.59				551,922
0.15			2,384,272				5.55				2,033,439
0.18			670,000				8.48				305,000
0.2			520,000				9.51				70,000
0.32			30,000				8.12				10,000
0.39			115,000				5.50				115,000
0.4			110,000				4.48				110,000
0.47			110,000				5.22				110,000
0.75			80,000				3.18				80,000
			4,938,821				6.03				3,663,138

 

Compensation expense recorded by the Company in respect of its stock-based employee compensation award in accordance with ASC 718-10 for the year ended December 31, 2011 and 2010 amounted to $1,135 and $388, respectively.

 

The fair value of the options is estimated at the date of grant using a Black-Scholes options pricing model with the following assumptions used in the calculation:

 

		Year ended December 31,
		2011				2010
Expected volatility			134%-141%				134%-141%
Risk-free interest			1.14%-2.93%				2.26%-3.47%
Dividend yield			0	%			0	%
Expected life of up to (years)			5-6				6-10
Forfeiture rate			0				0

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

b)

Restricted shares to directors:

 

On May 2, 2006, the Company issued to two of its directors 200,000 restricted shares of Common Stock (100,000 each). The restricted shares are subject to the Company's right to repurchase them at a purchase price of par value ($0.00005). The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date. The compensation related to the stock issued amounted to $104, which was amortized over the vesting period as general and administrative expenses.

 

On April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to a director 100,000 restricted shares of Common Stock. The restricted shares are subject to the Company's right to repurchase them at a purchase price of par value ($0.00005). The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date. The compensation related to the shares issued amounted to $47, which was amortized over the vesting period as general and administrative expenses.

 

In addition, on April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to another director 100,000 restricted shares of Common Stock. The restricted shares are not subject to any right to repurchase, and the compensation related to the shares issued amounted to $47 was recorded as prepaid general and administrative expenses in the three months ended March 31, 2007.

 

On August 27, 2008, the Company issued to its director 960,000 shares of Common Stock upon a cashless exercise by a shareholder of a warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $.01 per share that was acquired by the shareholder from Ramot. The shares were allocated to the director by the shareholder.

 

In May 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its directors 300,000 (total) restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

In May and in June 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its Scientific Advisory Board members and two of its Advisory Board members 500,000 (total) restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

On December 16, 2010, the Company granted to two of its directors 400,000 (total) shares of Common Stock. Related compensation in the amount of $80 was recorded as general and administrative costs in 2010. These shares were actually granted in June 2011, and an additional related compensation in the amount of $112 was recorded as general and administrative expense.

 

On June 27, 2011, the Company granted to two of its directors 476,666 (total) shares of Common Stock, out of which 216,666 shares are fully vested and 260,000 shares will vest in 12 equal monthly installments through June 2012. Related compensation in the amount of $229 will be recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

On August 22, 2011, the Company entered into an agreement with Chen Schor (the “Executive Director Agreement”) pursuant to which the Company granted to Mr. Schor 923,374 shares of restricted Common Stock of the Company.  The shares will vest over a three-year period. If the Company raises $10,000,000 of proceeds through the issuance of equity securities in a private or public offering after the Grant Date, or enters into a deal with a strategic partner that brings in at least $10,000,000 of gross proceeds, then 1/3 of the shares will vest upon such event, 1/3 will vest on the anniversary of the Grant Date and the remaining 1/3 will vest on the second anniversary of the Grant Date.  If such capital is not raised as mentioned above, then the shares will vest over 3 years – 1/3 upon each anniversary of the Grant Date. In addition, the Company will pay $15,000 per quarter to Mr. Schor for his services as an Executive Board Member.

 

In August 2011, the Company issued to three of its Scientific Advisory Board members and three of its Advisory Board members a total of 300,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in equal monthly portions over the service period.

 

In November 2011, the Company issued to four of its Advisory Board members a total of 500,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in equal monthly portions over the service period.

 

In addition, in November 2011, the Company issued to a former director 250,000 shares of Common Stock. Related compensation in the amount of $70 was recorded as general and administrative expense.

 

3.

Shares and warrants to service providers:

 

The Company accounts for shares and warrant grants issued to non-employees using the guidance of ASC 505-50, "Equity-Based Payments to Non-Employees" (formerly 718-10, "Accounting for Stock-Based Compensation") and EITTF 96-18, "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," whereby the fair value of such option and warrant grants is determined using a Black-Scholes options pricing model at the earlier of the date at which the non-employee's performance is completed or a performance commitment is reached.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers and investors: (Cont.)

 

a)     Warrants: 

 

Issuance date		Number of warrants issued				Exercised				Forfeited				Outstanding				Exercise Price $				Warrants exercisable				Exercisable through
November 2004			12,800,845				11,747,497				151,803				901,545				0.01				901,545				November 2012
December 2004			1,800,000				1,800,000								-				0.00005				—				-
February 2005			1,894,808								1,894,808				-				2.5				-				-
May 2005			47,500								47,500				-				1.62				-				-
June 2005			30,000												30,000				0.75				30,000				June 2015
August 2005			70,000								70,000				-				0.15				-				-
September 2005			3,000				3,000								-				0.15				-				-
September 2005			36,000								36,000				-				0.75				-				-
September-December2005			500,000								500,000				-				1				-				-
December 2005			20,000				20,000								-				0.15				-				-
December 2005			457,163				150,000								307,163				0.15				307,163				December 2015
February 2006			230,000												230,000				0.65				230,000				February 2016
February 2006			40,000								40,000				-				1.5				-
February 2006			8,000								8,000				-				0.15				-
February 2006			189,000				97,696				91,304				-				0. 5				-				-
May 2006			50,000												50,000				0.00005				50,000				May 2016
May -December 2006			48,000								48,000				-				0.35				-
May -December 2006			48,000								48,000				-				0.75				-
May 2006			200,000												200,000				1				200,000				May 2016
June 2006			24,000								24,000				-				0.15				-
May 2006			19,355								19,355				-				0.15				-
October 2006			630,000				630,000								-				0.3				-				-
December 2006			200,000								200,000				-				0.45				-				-
March 2007			200,000												200,000				0.47				200,000				March 2012
March 2007			500,000												500,000				0.47				500,000				March 2017
March 2007			50,000								50,000				-				0.15				-				-
March 2007			15,000												15,000				0.15				15,000				February 2012
February 2007			50,000								50,000				-				0.45				-				-
March 2007			225,000								225,000				-				0.45				-				-
March 2007			50,000								50,000				-				0.45				-
April 2007			33,300								33,300				-				0.45				-				-
May 2007			250,000								250,000				-				0.45				-				-
July 2007			500,000												500,000				0.39				500,000				July 2017
September 2007			500,000												500,000				0.15				500,000				August 2017
August 2007			7,562,500												7,562,500				0.2				7,562,500				November 2013
July 2007			30,000								30,000				-				0.45				-				-
July 2007			100,000								100,000				-				0.45				-				-
October 2007			200,000												200,000				0.15				200,000				August-October2017
November 2007			2,520,833												2,520,833				0.20				2,520,833				November 2013
November 2007			2,016,667												2,016,667				0.29				2,016,667				November 2013
April 2008			4,537,500												4,537,500				0.29				4,537,500				November 2013
August 2008			3,529,166												3,529,166				0.29				3,529,166				November 2013
August 2008			1,008,334												1,008,334				0.29				1,008,334				November 2013
November 2008			100,000												100,000				0.15				100,000				September 2018
April 2009			200,000												200,000				0.1				200,000				April 2019
October 2009			200,000				100,000								100,000				0.067				66,667				October 2019
October 2009			4,537,500												4,537,500				0.29				4,537,500				November 2013
January 2010			1,250,000												1,250,000				0.5				1,250,000				January 2012
February 2010			125,000												125,000				0.001				125,000				February 2012
February 2010			3,000,000												3,000,000				0.5				3,000,000				February 2012
January 2011			4,537,500												4,537,500				0.29				4,537,500				November 2013
February 2011			641,026												641,026				0.39				641,026				February 2012
February 2011			6,407,500				946,834								5,460,666				0.28				5,460,666				February 2012
February 2011			12,815,000												12,815,000				0.5				12,815,000				February 2013
April 2010			33,334												33,334				0.00005				33,334				April 2020
April 2011			33,334												33,334				0.00005				22,222				April 2021
February 2010			1,500,000												1,500,000				0.01				500,000				February 2020
			78,604,165				15,495,027				3,967,070				59,142,068								58,064,289

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

a)

Warrants: (Cont.)

 

The fair value for the warrants to service providers was estimated on the date of grant using a Black-Scholes option pricing model, with the following weighted-average assumptions for the year ended December 31, 2011 and December 31, 2010; weighted average volatility of 138% and 126%-165%, respectively, risk free interest rates of 1.69% and 0.37%-2.12%, respectively, dividend yields of 0% and a weighted average life of the options of 5.2 and 1-9 years, respectively.

 

b)

Shares:

 

On June 1 and June 4, 2004, the Company issued 40,000 and 150,000 shares of Common Stock for 12 months of filing services and legal and due-diligence services, respectively, with respect to a private placement. Compensation expense related to filing services, totaling $26, was amortized over a 12-month period. Compensation related to legal services, totaling $105 was recorded as equity issuance cost and had no effect on the statement of operations.

 

On July 1 and September 22, 2004, the Company issued 20,000 and 15,000 shares to a former director for financial services for the first and second quarters of 2004, respectively. Related compensation in the amount of $39 was recorded as general and administrative expense.

 

On February 10, 2005, the Company signed an agreement with one of its service providers under which the Company issued to the service provider 100,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed.

 

In March and April 2005, the Company signed an agreement with four members of its Scientific Advisory Board under which the Company issued to the members of the Scientific Advisory Board 400,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan (100,000 each). All restrictions on these shares have lapsed.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

In July 2005, the Company issued to its legal advisors 50,000 shares for legal services for 12 months. The compensation related to the shares in the amount of $37.5 was recorded as general and administrative expense.

 

In January 2006, the Company issued to two service providers 350,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed. Related compensation in the amount of $23 was recorded as general and administrative expense.

 

On March 6, 2006, the Company issued to its legal advisor 34,904 shares of Common Stock. The shares are in lieu of $18.5 payable to the legal advisor. Related compensation in the amount of $18.5 was recorded as general and administrative expense.

 

On April 13, 2006, the Company issued to service providers 60,000 shares at a purchase price of $0.00005 par value under the U.S Stock Option and Incentive Plan of the Company. Related compensation in the amount of $25.8 was recorded as general and administrative expense.

 

On May 9, 2006, the Company issued to its legal advisor 65,374 shares of Common Stock in lieu of payment for legal services. Related compensation in the amount of $33 was recorded as general and administrative expense.

 

On June 7, 2006, the Company issued 50,000 shares of Common Stock for filing services for 12 months. Related compensation in the amount of $24.5 was recorded as general and administrative expense.

 

On May 5, 2006, the Company issued 200,000 shares to a finance consultant for his services. Related compensation in the amount of $102 was recorded as general and administrative expense.

 

On August 14, 2006, the Company issued 200,000 shares to a service provider. Related compensation in the amount of $68 was recorded as general and administrative expense.

 

On August 17, 2006, the Company issued 100,000 shares to a service provider. Related compensation in the amount of $35 was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On September 17, 2006, the Company issued to its legal advisor 231,851 shares of Common Stock in lieu of $63 payable to the legal advisor. Related compensation in the amount of $63 was recorded as general and administrative expense.

 

On April 1 and September 30, 2006, the Company issued to its business development advisor, based on an agreement, 240,000 shares of Common Stock. Related compensation in the amount of $74 was recorded as general and administrative expense.

 

On January 3, 2007, the Company issued to its legal advisor 176,327 shares of Common Stock. The shares are for the $45 payable to the legal advisor. Related compensation in the amount of $49 was recorded as general and administrative expense.

 

On April 12, 2007, the Company issued to its filing and printing service providers 80,000 shares of Common Stock. The shares issued are for the $15 payable to the service provider. Related compensation in the amount of $30 was recorded as general and administrative expense. In addition, the Company is obligated to issue the filing and printing service providers additional shares, in the event that the total value of the shares previously issued (as quoted on the Over-the-Counter Bulletin Board or such other exchange where the Common Stock is quoted or listed) is less than $0.20, on March 20, 2008. In no event shall the Company issue more than 30,000 additional shares to the service providers. As a result, the Company recorded a liability in the amount of $20.

 

On April 12, 2007, the Company issued to its legal advisor 108,511 shares of Common Stock. The shares are for $29 payable to the legal advisor. Related compensation in the amount of $40 was recorded as general and administrative expense.

 

On May 18, 2007, the Company issued to its legal advisor 99,257 shares of Common Stock. The shares are for $33, payable to the legal advisor. Related compensation in the amount of $33 was recorded as general and administrative expense.

 

On October 29, 2007, the Company issued to a Scientific Advisory Board member 80,000 shares of the Company’s Common Stock for scientific services. Compensation of $67 was recorded as research and development expense.

 

On May 20, 2008, the Company issued to its finance advisor 90,000 shares of the Company's common stock. The shares are for $35 payable to the finance advisor for introduction fee of past convertible loans. Related compensation in the amount of $36 is recorded as finance expenses.

 

On April 5, 2009, the Company issued to its Chief Technology Advisor 1,800,000 shares of Common Stock. The shares are for $180 payable to the advisor. Related compensation in the amount of $144 was recorded as research and development expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On June 24, 2009, the Company issued to its public relations advisor 250,000 shares of Common Stock. The shares are for $25 payable to the advisor. Related compensation in the amount of $18 was recorded as general and administrative expense.

 

On July 8, 2009, the Company issued to its finance consultant 285,714 shares of the Company's Common Stock. The shares are for $20 payable to the finance consultant for valuation of options and warrants. Related compensation in the amount of $20 is recorded as general and administrative expense.

 

On July 15, 2009, the Company issued to its service provider 357,142 shares of the Company's Common Stock. The shares are for $25 payable to the service provider for filing services. Related compensation in the amount of $21 is recorded as general and administrative expense.

 

On August 10, 2009, the Company issued to its service provider 71,428 shares of the Company's Common Stock. The shares are for $5 payable to the service provider for IT services. Related compensation in the amount of $4 is recorded as general and administrative expense.

 

On October 1, 2009, the Company issued to its service provider 150,000 shares of the Company's Common Stock. The shares are for financial and investor relation services done by the provider. Related compensation in the amount of $51 is recorded as general and administrative expense.

 

On October 2, 2009, the Company issued to its service provider 1,250,000 shares of the Company's Common Stock. The shares are for investor and public relation services. Related compensation in the amount of $400 is recorded as general and administrative expense.

 

On December 30, 2009, the Company issued to Ramot 1,120,000 shares of the Company's Common Stock (see note 3).

 

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to it legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the note accrued at the rate of 4%.

 

On January 5, 2010, the Company issued to its public relations advisor 50,000 shares of the Company's Common Stock for six months’ service. The issuance of the shares is part of the agreement with the public relations advisor that entitles it to a monthly grant of 8,333 shares of the Company's Common Stock.

 

On January 6, 2010, the Company issued to its service provider 60,000 shares of the Company's Common Stock. The shares are for $15 payable to the service provider for insurance and risk management consulting and agency services for three years.

 

On February 19, 2010, the Company's legal advisor converted the entire accrued principal and interest amount outstanding under the note into 402,385 shares of Common Stock.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 11 -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On April 6, 2010, Prof. Melamed fully exercised his warrant to purchase 1,097,215 shares of the Company’s Common Stock. The warrant was issued to him pursuant to the agreement with the Consultants effective as of November 4, 2004 (See Note 4a).

 

In May 2010, based on a board resolution dated June 29, 2009, the Company issued to one of its public relations advisors 100,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

On December 16, 2010, the Company granted to its service provider 200,000 shares of the Company's Common Stock. The shares are for investor and public relations services. Related compensation in the amount of $40 is recorded as general and administrative expense.

 

On December 16, 2010, the Company granted to its Chief Medical Advisor 900,000 shares of the Company's Common Stock for services rendered through December 31, 2010. Related compensation in the amount of $180 is recorded as research and development expense.

 

On December 16, 2010, the Company granted to its Chief Scientist 200,000 shares of the Company's Common Stock for services rendered through December 31, 2010. Related compensation in the amount of $40 is recorded as research and development expense.

 

On February 18, 2011, the Company's legal advisor converted the entire accrued principal and interest of the Convertible Promissory Note granted on September 15, 2010, totaling $137, into 445,617 shares of Common Stock.

 

On June 27, 2011, the Company granted to its legal advisor 180,000 shares of Common Stock for 2011 legal services. Half of the shares of Common Stock are fully vested and half vest in six equal monthly installments through December 2011. Related compensation in the amount of $86 is recorded as general and administrative expense.

 

On June 27, 2011, the Company granted to its consultant 400,000 shares of the Company's Common Stock, for services rendered through December 31, 2009. Related compensation in the amount of $192 is recorded as research and development expense. (See note 4 C)

 

On June 27, 2011, the Company granted to a service provider 10,870 shares of the Company's Common Stock. Related compensation in the amount of $5 is recorded as general and administrative expense.

 

On December 31, 2011, the Company issued to Hadasit warrants to purchase up to 1,500,000 restricted shares of the Company's Common Stock at an exercise price of $0.001 per share, exercisable for a period of 5 years.  The warrants shall vest over the course of the trials as follows: 500,000 upon enrollment of 1/3 of the patients; an additional 500,000 upon enrollment of all the patients and the final 500,000 upon completion of the study.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

In 2011, three consultants of the Company exercised 462,128 options for $31.

 

A summary of the Company's stock awards activity related to shares issued to service providers and related information is as follows:

 

		Year ended December 31,								Year ended December 31,
		2011								2010
		Amount of shares				Weighted average issue price				Amount of shares				Weighted average issue price
						$								$
Outstanding at beginning of period			9,735,508				0.25				8,225,508				0.26
Issued			1,265,870				0.41				1,510,000				0.20
Outstanding at end of period			11,001,378				0.27				9,735,508				0.25

 

c)

Stock-based compensation and issuance of shares recorded by the Company in respect of shares and warrants granted to service providers amounted to $449 and $96 for the year ended December 31, 2011 and 2010, respectively.

 

The total stock-based compensation expense, related to shares, options and warrants granted to employees and service providers, was comprised, at each period, as follows:

 

		Year ended December 31,								Period from September 22, 2000 (inception date) through December 31,
		2011				2010				2011
		U.S. $ in thousands
Research and development		$	316			$	325		$	17,556
General and administrative			1,075				560			10,113
Financial expenses, net			192				-			248
Total stock-based compensation expense		$	1,584			$	885		$	27,917

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 12 -

RESEARCH AND DEVELOPMENT, NET

		Year ended December 31,								Period from September 22, 2000 (inception date) through December 31,
		2011				2010				2011
		U.S. $ in thousands
Research and development			2,077				1,385				26,833
Less : Ramot reverse accruals (See Note 3)							-				(760	)
Less : Participation by the Israeli Office of the Chief Scientist			(388	)			(340	)			(1,654	)
			1,689				1,045				24,419

 

NOTE 13 -

TAXES ON INCOME

 

A.

Tax rates applicable to the income of the subsidiary:

 

The corporate tax rate in Israel is as follows: 2008 - 27%, 2009 - 26%, 2010 - 25%, 2011 - 24%. In July 2009, the “Knesset” (Israeli parliament) passed the Economic Efficiency Law (Legislative Amendments for implementation of the economic plan for 2009 and 2010) of 2009 which defines, inter alia, further gradual reductions of corporate tax rates and real capital gains tax, in Israel, starting in 2011, to the following rates: 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20% and in 2016 and onwards - 18%. Such tax reductions have no significant impact on the Company's financial statements.

 

In February 2008, the "Knesset" passed an amendment to the Income Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law beginning in 2008 and thereafter. Beginning in 2008, the results for tax purposes will be measured in nominal values, excluding certain adjustments for changes in the Consumer Price Index carried out in the period up to December 31, 2007. The amended law includes, inter alia, the elimination of the inflationary additions and deductions and the additional deduction for depreciation starting in 2008.

 

On September 26, 2011, the Social-Economic Reform Committee headed by Professor Manuel Trajtenberg published a report with its recommendations. Consequently, on December 6, 2011, the Law for Change in the Tax Burden (Legislative Amendments), based on the recommendations in the Tax Section of that report, was published, after being approved in a third reading in the Israeli Knesset.

 

The main changes of the new law regarding corporate income taxes are as follows:

 

1. Cancellation of the planned gradual reduction of income taxes and corporate income taxes commencing in 2012.

 

2. Increase of the corporate income tax rate to 25% in 2012.

 

3. Increase of the capital gains tax rate and betterment tax rate to 25%.

 

Such tax rate changes have no significant impact on the Company's financial statements.

 

B.

Tax laws applicable to the income of the Subsidiary:

 

Income Tax (Inflationary Adjustments) Law, 1985:

 

According to the law, the results for tax purposes are measured based on the changes in the Israeli Consumer Price Index ("CPI").

 

The Law for the Encouragement of Capital Investments, 1959 ("the Law"):

 

According to the Law, BCT is entitled to various tax benefits by virtue of "beneficiary enterprise" status granted, as defined by this Law.

 

In March 2005, the Israeli Parliament passed the Arrangements Law for fiscal year 2005, which includes a broad and comprehensive amendment to the provisions of the Law ("Amendment No. 60 to the Law").

 

The principal benefits by virtue of the Law are:

 

Tax benefits and reduced tax rates under the Alternative Track of Benefits:

 

The Company is tax exempt for a benefit period of two years and in the five/eight subsequent years of the benefit period is subject to a reduced tax rate of 10%-25%.

 

On January 6, 2011, an amendment to the Law for the Encouragement of Capital Investment-1959 (the "Law") was published. The amendment has a substantial effect on the current provisions of the Law. The following are the major changes in the amendment:

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 13 -

TAXES ON INCOME (Cont.)

 

1.

A company located in Preferred Area A can file for both grants and tax benefits.

 

2.

The requisites for benefits were changed with the most significant change that the minimum investment requirement was removed. In addition, the definition of approved entity was changed.

 

3.

The income attribution based on revenues was cancelled, the result is that an approved entity would be taxable on its entire income at a fixed rate.

 

4.

Tax exemption was cancelled.

 

5.

Dividend payable to Israeli corporations from preferred income would be tax exempt.

 

6.

The Grant Rate out of the approved investment would be up to 24%.

 

The Tax rates applicable to Approved Industrial Enterprise would be 6% and 12% for those located in Preferred Area A or elsewhere, respectively, with effectiveness for the taxable year 2 of 2015 and onwards. Prior to 2015, the following tax rates will be applicable:

 

For the years 2011-2012 10% and 15%, respectively and for the years 2013-2014 7% and 12.5%, respectively. The amendment to the law is not expected to have a material impact on the Company's consolidated financial statements.

 

C.

Deferred income taxes:

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:

 

		December 31,
		2011				2010
		U.S. $ in thousands
Operating loss carryforward			32,165				30,206
Net deferred tax asset before valuation allowance			13,187				12,858
Valuation allowance			(13,187	)			(12,858	)
Net deferred tax asset			-				-

 

As of December 31, 2010, the Company has provided valuation allowances of $13,012 in respect of deferred tax assets resulting from tax loss carryforward and other temporary differences. Management currently believes that because the Company has a history of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will not be realized in the foreseeable future.

 

D.

Available carryforward tax losses:

 

As of December 31, 2010, the Company has an accumulated tax loss carryforward of approximately $12,716. Carryforward tax losses in the U.S. can be carried forward and offset against taxable income in the future for a period of 20 years. Utilization of U.S. net operating losses may be subject to substantial annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

 

E.

Loss from continuing operations, before taxes on income, consists of the following:

 

		Year ended December 31,
		2011				2010
		U.S. $ in thousands
United States			(1,886	)			(1,235	)
Israel			(2,032	)			(1,165	)
			(3,918	)			(2,400	)

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

U.S. dollars in thousands  

 

NOTE 13 -

TAXES ON INCOME (Cont.)

 

F.

Due to the Company’s cumulative losses, the effect of ASC 740 as codified from ASC 740-10 (formerly FIN 48) is not material.

 

G.

BCT has not received final tax assessments since its incorporation.

 

NOTE 14 -

TRANSACTIONS WITH RELATED PARTIES

		Year ended December 31,
		2011				2010
		U.S. $ in thousands
A.        Fees and related benefits and compensation expenses in respect of options granted to a member of the Board who is a related party			150				318

B.

As for transactions with Ramot, see Note 3.

 

NOTE 15 -

SUBSEQUENT EVENTS

 

A.

In January 2012, one of the Company’s service providers exercised a warrant for 125,000 shares of Common Stock of the Company.

 

B.

On February 3, 2012, the Company filed an S-1 Registration Statement with the Securities and Exchange Commission.

 

C.

In February 2012, the former CEO exercised options to purchase 132,038 shares of Common Stock.

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

 

		March 31,				December 31,
		2012				2011
		Unaudited				Audited
ASSETS
Current Assets:
Cash and cash equivalents			1,145				1,923
Account receivable			482				312
Prepaid expenses			148				69
Total current assets			1,775				2,304
Long-Term Investments:
Prepaid expenses			17				17
Severance payment fund			129				109
Total long-term investments			146				126
Property and Equipment, Net			328				314
Total assets			2,249				2,744
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Trade payables			325				244
Accrued expenses			839				750
Other accounts payable			126				141
Total current liabilities			1,290				1,135
Accrued Severance Pay			142				121
Total liabilities			1,432				1,256
Commitments And Contingencies Stockholders' Equity:
Stock capital: (Note 8)			6				6
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at March 31, 2012 and December 31, 2011; Issued and outstanding: 126,737,158 and 126,444,309 shares at March 31, 2012 and December 31, 2011 respectively.
Additional paid-in-capital			45,761				45,560
Deficit accumulated during the development stage			(44,950	)			(44,078	)
Total stockholders' equity			817				1,488
Total liabilities and stockholders' equity			2,249				2,744

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands

(Except share data)

 

		Three months								Period from September 22, 2000 (inception date) through
		ended March 31								March 31,
		2012				2011				2012 (*)
		Unaudited								Unaudited
Operating costs and expenses:
Research and development, net			369				270				24,788
General and administrative			510				258				17,513
Total operating costs and expenses			879				528				42,301
Financial expenses (income), net			(11	)			177				2,536
Other income			-				-				(132	)
Operating loss			868				705				44,705
Taxes on income			4				-				81
Loss from continuing operations			872				705				44,786
Net loss from discontinued operations			-				-				164
Net loss			872				705				44,950
Basic and diluted net loss per share from continuing operations			0.01				0.01
Weighted average number of shares outstanding used in computing basic and diluted net loss per share			126,591,262				108,895,199

 

(*) Out of which, $163, relating to the period from inception to March 31 2004, is unaudited.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

 

																		Deficit accumulated				Total
		Common stock								Additional paid-in				Deferred  Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of September 22, 2000 (date of inception) (unaudited)			-			$	-			$	-			$	-			$	-			$	-
Stock issued on September 22, 2000 for cash at $0.00188 per share			8,500,000				1				16				-				-				17
Stock issued on March 31, 2001 for cash at $0.0375 per share			1,600,000				*  -				60				-				-				60
Contribution of capital			-				-				8				-				-				8
Net loss			-				-				-				-				(17	)			(17	)
Balance as of March 31, 2001 (unaudited)			10,100,000				1				84				-				(17	)			68
Contribution of capital			-				-				11				-				-				11
Net loss			-				-				-				-				(26	)			(26	)
Balance as of March 31, 2002 (unaudited)			10,100,000				1				95				-				(43	)			53
Contribution of capital			-				-				15				-				-				15
Net loss			-				-				-				-				(47	)			(47	)
Balance as of March 31, 2003 (unaudited)			10,100,000				1				110				-				(90	)			21
2-for-1 stock split			10,100,000				*  -				-				-				-				-
Stock issued on August 31, 2003 to purchase mineral option at $0.065 per share			100,000				*  -				6				-				-				6
Cancellation of shares granted to Company's President			(10,062,000	)			*  -				*   -				-				-				-
Contribution of capital			-				*  -				15				-				-				15
Net loss			-				-				-				-				(73	)			(73	)
Balance as of March 31, 2004 (unaudited)			10,238,000			$	1			$	131			$	-			$	(163	)		$	(31	)

 

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of March 31, 2004			10,238,000			$	1			$	131			$	-			$	(163	)		$	(31	)
Stock issued on June 24, 2004 for private placement at $0.01 per share, net of $25,000 issuance expenses			8,510,000				*  -				60				-				-				60
Contribution capital			-				-				7				-				-				7
Stock issued in 2004 for private placement at $0.75 per unit			1,894,808				*  -				1,418				-				-				1,418
Cancellation of shares granted to service providers			(1,800,000	)			*  -								-				-				-
Deferred stock-based compensation related to options granted to employees			-				-				5,979				(5,979	)			-				-
Amortization of deferred stock-based compensation related to shares and options granted to employees			-				-				-				584				-				584
Compensation related to shares and options granted to service providers			2,025,000				*   -				17,506				-				-				17,506
Net loss			-				-				-				-				(18,840	)			(18,840	)
Balance as of March 31, 2005			20,867,808			$	1			$	25,101			$	(5,395	)		$	(19,003	)		$	704

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

 

																		Deficit accumulated				Total
										Additional				Deferred				during the				stockholders'
		Common stock								paid-in				Stock - based				development				equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of March 31, 2005			20,867,808			$	1			$	25,101			$	(5,395	)		$	(19,003	)		$	704
Stock issued on May 12, 2005 for private placement at $0.8 per share			186,875				*   -				149				-				-				149
Stock issued on July 27, 2005 for private placement at $0.6 per share			165,000				*   -				99				-				-				99
Stock issued on September 30, 2005 for private placement at $0.8 per share			312,500				*   -				225				-				-				225
Stock issued on December 7, 2005 for private placement at $0.8 per share			187,500				*   -				135				-				-				135
Forfeiture of options granted to employees			-				-				(3,363	)			3,363				-				-
Deferred stock-based compensation related to shares and options granted to directors and employees			200,000				*   -				486				(486	)			-				-
Amortization of deferred stock-based compensation related to options and shares granted to employees and directors			-				-				51				1,123				-				1,174
Stock-based compensation related to options and shares granted to service providers			934,904				*   -				662				-				-				662
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)			-				-				(7,906	)											(7,906	)
Beneficial conversion feature related to a convertible bridge loan			-				-				164				-				-				164
Net loss			-				-				-				-				(3,317	)			(3,317	)
Balance as of March 31, 2006			22,854,587			$	1			$	15,803			$	(1,395	)		$	(22,320	)		$	(7,911	)
Elimination of deferred stock compensation due to implementation of ASC 718-10 (formerly SFAS 123(R))			-				-				(1,395	)			1,395				-				-
Stock-based compensation related to shares and options granted to directors and employees			200,000				*   -				1,168				-				-				1,168
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)			-				-				7,191				-				-				7,191
Stock-based compensation related to options and shares granted to service providers			1,147,225				-				453				-				-				453
Warrants issued to convertible note holder			-				-				11				-				-				11
Warrants issued to loan holder			-				-				110				-				-				110
Beneficial conversion feature related to convertible bridge loans			-				-				1,086				-				-				1,086
Net loss			-				-				-				-				(3,924	)			(3,924	)
Balance as of December 31, 2006			24,201,812			$	1			$	24,427			$	-			$	(26,244	)		$	(1,816	)

 

* Represents an amount less than $1.  The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit accumulated				Total
										Additional				Deferred				during the				stockholders'
		Common stock								paid-in				Stock - based				development				equity
		Number				Capital				compensation				stage				stage				(deficiency)
Balance as of December 31, 2006			24,201,812			$	1			$	24,427			$	-			$	(26,244	)		$	(1,816	)
Stock-based compensation related to options and shares granted to service providers			544,095								1,446				-				-				1,446
Warrants issued to convertible note holder			-				-				109				-				-				109
Stock-based compensation related to shares and options granted to directors and employees			200,000				*   -				1,232				-				-				1,232
Beneficial conversion feature related to convertible loans			-				-				407				-				-				407
Conversion of convertible loans			725,881				*   -				224				-				-				224
Exercise of warrants			3,832,621				*   -				214				-				-				214
Stock issued for private placement at $0.1818 per unit, net of finder's fee			11,500,000				1				1,999				-				-				2,000
Net loss			-				-				-				-				(6,244	)			(6,244	)
Balance as of December 31, 2007			41,004,409			$	2			$	30,058			$	-			$	(32,488	)		$	(2,428	)
Stock-based compensation related to options and stock granted to service providers			90,000				-				33				-				-				33
Stock-based compensation related to stock and options granted to directors and employees			-				-				731				-				-				731
Conversion of convertible loans			3,644,610				*   -				1,276				-				-				1,276
Exercise of warrants			1,860,000				*   -				-				-				-				-
Exercise of options			17,399				*   -				3				-				-				3
Stock issued for private placement at $0.1818 per unit, net of finder's fee			8,625,000				1				1,499				-				-				1,500
Subscription of shares for  private placement at $0.1818 per unit			-				-				281				-				-				281
Net loss			-				-				-				-				(3,472	)			(3,472	)
Balance as of December 31, 2008			55,241,418			$	3			$	33,881			$	-			$	(35,960	)		$	(2,076	)

 

* Represents an amount less than $1. The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

		Common stock								Additional paid-in				Deferred  stock - based				Deficit accumulated during the development				Total stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2008			55,241,418			$	3			$	33,881			$	-			$	(35,960	)		$	(2,076	)
Stock-based compensation related to options and stock granted to service providers			5,284,284				(*	)			775				-				-				775
Stock-based compensation related to stock and options granted to directors and employees			-				-				409				-				-				409
Conversion of convertible loans			2,500,000				(*	)			200				-				-				200
Exercise of warrants			3,366,783				(*	)			-				-				-				-
Stock issued for amendment of private placement			9,916,667				1				-				-				-				1
Subscription of shares			-				-				729				-				-				729
Net loss			-				-				-				-			$	(1,781	)			(1,781	)
Balance as of December 31, 2009			76,309,152			$	4			$	35,994			$	-			$	(37,741	)		$	(1,743	)

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2009			76,309,152			$	4			$	35,994			$	-			$	(37,741	)		$	(1,743	)
Stock-based compensation related to options and stock granted to service providers			443,333				*   -				96				-				-				96
Stock-based compensation related to stock and options granted to directors and employees			466,667				*   -				388				-				-				388
Stock issued for amendment of private placement			7,250,000				1				1,750				-				-				1,751
Conversion of convertible note			402,385				*   -				135				-				-				135
Conversion of convertible loans			1,016,109				*   -				189				-				-				189
Issuance of shares			2,475,000								400												400
Exercise of options			1,540,885				*   -				77				-				-				77
Exercise of warrants			3,929,446				*   -				11				-				-				11
Subscription of shares for private placement at $0.12 per unit							-				455				-				-				455
Conversion of trade payable to stock							-				201				-				-				201
Issuance of shares on account of previously subscribed shares (See also Note 8 B.1.f)			2,000,001				*   -				-				-				-				-
Net loss																			(2,419	)			(2,419	)
Balance as of December 31, 2010			95,832,978			$	5			$	39,696			$	-			$	(40,160	)		$	(459	)

  

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				Stage				(deficiency)
Balance as of December 31, 2010			95,832,978			$	5			$	39,696			$	-			$	(40,160	)		$	(459	)
Stock-based compensation related to options and stock granted to service providers							-				(20	)			-				-				(20	)
Stock-based compensation  related to stock and options granted to directors and employees							-				27				-				-				27
Stock issued for private placement			833,333				-				250				-				-				250
Conversion of convertible note			445,617				-				137				-				-				137
Exercise of options , net			94,764				-				55				-				-				55
Stock issued for private placement			13,327,600				1				3,356				-				-				3,357
Issuance of shares on account of previously subscribed shares (See also Note 8 B.1.f)			10,499,999				-				24				-				-				24
Net loss																			(705	)			(705	)
Balance as of March 31, 2011			121,034,291			$	6			$	43,525			$	-			$	(40,865	)		$	2,666

  

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

 

																		Deficit
																		Accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				Stage				(deficiency)
Balance as of December 31, 2010			95,832,978			$	5			$	39,696			$	-			$	(40,160	)		$	(459	)
Stock-based compensation related to options and stock granted to service providers			474,203				-				449				-				-				449
Stock-based compensation related to stock and options granted to directors and employees			2,025,040				-				1,135				-				-				1,135
Conversion of convertible note			755,594				-				140				-				-				140
Exercise of options			1,648,728				-				243				-				-				243
Exercise of warrants			1,046,834				-				272				-				-				272
Issuance of shares for private placement			14,160,933				1				3,601				-				-				3,602
Issuance of shares on account of previously subscribed shares (See Note 8 B.1.f)			10,499,999				-				24				-				-				24
Net loss			-				-				-				-				(3,918	)			(3,918	)
Balance as of December 31, 2011			126,444,309			$	6			$	45,560			$	-			$	(44,078	)		$	1,488

 

* Represents an amount less than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

 

																		Deficit
																		accumulated				Total
		Common stock								Additional paid-in				Deferred Stock - based				during the development				stockholders' equity
		Number				Amount				capital				compensation				stage				(deficiency)
Balance as of December 31, 2011			126,444,309			$	6			$	45,560			$	-			$	(44,078	)		$	1,488
Stock-based compensation related to options and stock granted to service providers							-				4				-				-				4
Stock-based compensation  related to stock and options granted to directors and employees							-				177				-				-				177
Exercise of options			167,849				-				20				-				-				20
Exercise of warrants			125,000				-				(*	)			-				-				(*	)
Net loss			-				-				-				-				(872	)			(872	)
Balance as of March 31, 2012			126,737,158			$	6			$	45,761			$	-			$	(44,950	)		$	817

 

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(except share data)

 

										Period from
										September 22, 2000
		Three months								(inception date)
		ended March 31								through March 31,
		2012				2011				2012 (*)
		Unaudited								Unaudited
Cash flows from operating activities:
Net loss			(872	)			(705	)			(44,950	)
Less - loss for the period from discontinued operations			-				-				164
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of deferred charges			38				38				1,039
Severance pay, net			1				(8	)			13
Accrued interest on loans			-				-				451
Amortization of discount on short-term loans			-				-				1,864
Change in fair value of options and warrants			-				-				(795	)
Expenses related to shares and options granted to service providers			4				(20	)			21,490
Stock-based compensation related to options granted to employees			177				27				6,998
Decrease (increase) in accounts receivable and prepaid expenses			(249	)			265				(630	)
Increase in trade payables and convertible note			81				94				798
Increase in other accounts payable and accrued expenses			74				254				1,471
Erosion of restricted cash			-				-				(6	)
Net cash used in continuing operating activities			(746	)			(55	)			(12,093	)
Net cash used in discontinued operating activities			-				-				(23	)
Total net cash used in operating activities			(746	)			(55	)			(12,116	)
Cash flows from investing activities:
Purchase of property and equipment			(52	)			(37	)			(1,185	)
Restricted cash			-				-				6
Investment in lease deposit			-				1				(17	)
Net cash used in continuing investing activities			(52	)			(36	)			(1,196	)
Net cash used in discontinued investing activities			-				-				(16	)
Total net cash used in investing activities			(52	)			(36	)			(1,212	)
Cash flows from financing activities:
Proceeds from issuance of Common stock, net			-				3,607				12,319
Proceeds from loans, notes and issuance of warrants, net			-				-				2,061
Proceeds from exercise of warrants and options			20				55				651
Repayment of short-term loans			-				-				(601	)
Net cash provided by continuing financing activities			20				3,662				14,430
Net cash provided by discontinued financing activities			-				-				43
Total net cash provided by financing activities			20				3,662				14,473
Increase (decrease) in cash and cash equivalents			(778	)			3,571				1,145
Cash and cash equivalents at the beginning of the period			1,923				93				-
Cash and cash equivalents at end of the period			1,145				3,664				1,145
Non-cash financing activities:
Conversion of convertible loan and convertible note to shares Conversion of a debt to a trade payable to Common Stock $ 84			-				137
Conversion of other accounts payable to Common Stock			-				24

 

(*) Out of the which, cash flows used in discontinued operating activities of $36, cash flows used in discontinued investing activities of $16 and cash flows provided in discontinued financing activities of $57, relating to the period from inception to March 31, 2004, is unaudited.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 1    -

GENERAL

 

A.

Brainstorm Cell Therapeutics Inc. (formerly: Golden Hand Resources Inc.) (the "Company") was incorporated in the State of Washington on September 22, 2000.

 

B.

On May 21, 2004, the former major stockholders of the Company entered into a purchase agreement with a group of private investors, who purchased from the former major stockholders 6,880,000 shares of the then issued and outstanding 10,238,000 shares of Common Stock.

 

C.

On July 8, 2004, the Company entered into a licensing agreement with Ramot of Tel Aviv University Ltd. ("Ramot"), to acquire certain stem cell technology (see Note 4). Subsequent to this agreement, the Company decided to focus on the development of novel cell therapies for neurodegenerative diseases based on the acquired technology and research to be conducted and funded by the Company.

 

Following the licensing agreement dated July 8, 2004, the management of the Company decided to abandon all old activities related to the sale of the digital data recorder product. The discontinuation of this activity was accounted for under the provision of Statement of Financial Accounting Standard ASC 360-10 (formerly "SFAS" 144), "Accounting for the Impairment or Disposal of Long-Lived Assets".

 

D.

On October 25, 2004, the Company formed a wholly-owned subsidiary in Israel, Brainstorm Cell Therapeutics Ltd. ("BCT").

 

E.

On November 22, 2004, the Company changed its name from Golden Hand Resources Inc. to Brainstorm Cell Therapeutics Inc. to better reflect its new line of business in the development of novel cell therapies for neurodegenerative diseases. BCT, as defined below, owns all operational property and equipment.

 

F.

On September 17, 2006, the Company changed the Company's fiscal year-end from March 31 to December 31.

 

G.

In December 2006, the Company changed its state of incorporation from Washington to Delaware.

 

H.

Since its inception, the Company has devoted substantially all of its efforts to research and development, recruiting management and technical staff, acquiring assets and raising capital. In addition, the Company has not generated revenues. Accordingly, the Company is considered to be in the development stage, as defined in Statement of Financial Accounting Standards No. 7, "Accounting and reporting by development Stage Enterprises" ASC 915-10 (formerly "SFAS No. 7").

 

I.

In October 2010, the Israeli Ministry of Health (“MOH”) granted clearance for a Phase I/II clinical trial using the Company’s autologous NurOwn™ stem cell therapy in patients with amyotrophic lateral sclerosis (“ALS”), subject to some additional process specifications as well as completion of the sterility validation study for tests performed.

 

On February 23, 2011, the Company submitted to the MOH all the required documents. Following approval of the MOH, a Phase I/II clinical study for ALS patients using the Company’s autologous NurOwn™ stem cell therapy (the “Clinical Trial”) was initiated in June 2011.

 

In January 2012, the Company reported on an interim safety follow-up of the first 4 patients enrolled in its Clinical Trial indicating that no significant treatment-related adverse events were reported. The NurOwn™ treatment has thus so far proven to be safe, and has shown some initial indications of beneficial clinical effects.

 

J.

In February 2011, the U.S. Food and Drug Administration (“FDA”) granted orphan drug designation to the Company’s NurOwn™ autologous adult stem cell product candidate for the treatment of ALS.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 1     -

GENERAL (Cont.)

 

GOING CONCERN

 

As reflected in the accompanying financial statements, the Company’s operations for the three months ended March 31, 2012, resulted in a net loss of $872. The Company’s balance sheet reflects an accumulated deficit of $44,950. These conditions, together with the fact that the Company is a development stage Company and has no revenues nor are revenues expected in the near future, raise substantial doubt about the Company's ability to continue to operate as a going concern. The Company’s ability to continue operating as a “going concern” is dependent on several factors, among them is its ability to raise sufficient additional working capital.

 

In 2009, the Company decided to focus only on the effort to commence clinical trials for ALS and such trials did commence in 2011.

 

In February 2011, the Company raised approximately $3.8 million from institutional and private investors. However, there can be no assurance that additional funds will be available on terms acceptable to the Company, or at all.

 

These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

 

NOTE 2     -

SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2011 are applied consistently in these financial statements.

 

NOTE 3     -

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited interim financial statements have been prepared in a condensed format and include the consolidated financial operations of the Company and its wholly-owned subsidiary as of March 31, 2012 and for the three months then ended, in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2012, are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

 

NOTE 4     -

RESEARCH AND LICENSE AGREEMENT

 

The Company has a Research and License Agreement, as amended and restated, with Ramot. The Company obtained a waiver and release from Ramot pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations under the Research and License Agreement and waived all claims against the Company resulting from the Company's previous defaults and non-payment under the Research and License Agreement. The waiver and release amended and restated the original payment schedule under the original agreement providing for payments during the initial research period and additional payments for any extended research period.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 4     -

RESEARCH AND LICENSE AGREEMENT (Cont.)

 

As of December 24, 2009, the Company had paid to Ramot $400 but did not make payments totaling $240 for the initial research period and payments totaling $380 for the extended research period.

 

On December 24, 2009, the Company and Ramot entered into a settlement agreement which amended the Research and License Agreement, as amended and restated pursuant to which, among other things, the following matters were agreed upon:

 

a)

Ramot released the Company from its obligation to fund the extended research period in the total amount of $1,140. Therefore, the Company deleted an amount in 2009, equal to $760 from it research and development expenses that were previously expensed.

 

b)

Past due amounts of $240 for the initial research period plus interest of $32 owed by the Company to Ramot was converted into 1,120,000 shares of common stock on December 30, 2009. Ramot was required to deposit the shares with a broker and only sell the shares in the open market after 185 days from the issuance date.

 

c)

In the event that the total proceeds generated by sales of the shares on December 31, 2010, together with the March 31, 2010 payment, are less than $240 on or prior to December 31, 2010, then on such date the Company shall pay to Ramot the difference between the proceeds that Ramot has received from sales of the shares up to such date together with the September Payment (if any) that has been transferred to Ramot up to such date, and $240. Related compensation in the amount of $51 was recorded as research and development expenses.

 

In January 2011 Ramot exercised additional 167,530 Common Stock of the Company, for $35, which finalized the sale of the 1,120,000 Common Stock of the Company granted to Ramot for $235. In February 2011 the Company paid the remaining $5 and finalized the balance due to Ramot according to the settlement agreement between the parties dated December 24, 2009.

 

NOTE 5    -

CONSULTING AGREEMENTS

 

A.

On July 8, 2004, the Company entered into two consulting agreements with Prof. Eldad Melamed and Dr. Daniel Offen (together, the "Consultants"), under which the Consultants provide the Company scientific and medical consulting services in consideration for a monthly payment of $6 each. In addition, the Company granted each of the Consultants, a fully vested warrant to purchase 1,097,215 shares of Common Stock at an exercise price of $0.01 per share. The warrants issued pursuant to the agreement were issued to the Consultants effective as of November 4, 2004. Each of the warrants is exercisable for a seven-year period beginning on November 4, 2005. As of September 2010, all the above warrants had been exercised.

 

B.

On December 16, 2010, the Company approved a grant of 1,100,000 shares of the Company's Common Stock to the two Consultants, for services rendered through December 31, 2010. Related compensation in the amount of $220 was recorded as research and development expense. A sum of $487 was cancelled concurrently with the issuance of the 1,100,000 shares of Common Stock of the Company.

 

C.

On June 27, 2011, the Company approved an additional grant of 400,000 shares of the Company's Common Stock to Prof. Daniel Offen, for services rendered through December 31, 2009. Related compensation in the amount of $192 is recorded as research and development expense.

 

D.

As of March 31, 2012, the Company has a total obligation of $135 for services rendered by the Consultants under the abovementioned agreements.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 6   -

SHORT-TERM CONVERTIBLE NOTE

 

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to its legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the Note accrued at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

 

The gap between the amount the Company owed to the legal advisor and the principal of the Convertible Promissory Note in the amount of $82 was deducted from general and administrative expenses.

 

On February 19, 2010, the Company's legal advisor converted the entire accrued principal and interest of $135 Convertible Promissory Note into 402,385 shares of Common Stock.

 

On September 15, 2010, the Company issued a $135 Convertible Promissory Note to its legal advisor for legal fees accrued through December 31, 2010. Interest on the Note was at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

 

On February 18, 2011, the legal advisor converted the entire accrued principal and interest into 445,617 shares of Common Stock.

 

NOTE 7   -

SHORT-TERM LOANS

 

In March 2007, the Company issued a $150 convertible note to a lender, with an annual interest rate of 8% for the first year, with an increase up to 10% after the first year. On January 27, 2010, the lender converted the entire accrued principal and interest of $189 into 1,016,109 shares of Common Stock of the Company. In July 2011, the Company issued to the lender an additional 309,977 shares of Common Stock of the Company with regard to the above conversion.

 

Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 (formerly FASB No 140) and ASC 450-20 Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.

 

NOTE 8   -

STOCK CAPITAL

 

A.

The rights of Common Stock are as follows:

 

Holders of Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the right to a share in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.

 

The Common Stock is registered and publicly traded on the Over-the-Counter Bulletin Board service of the National Association of Securities Dealers, Inc. under the symbol BCLI.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares warrants and options:

 

1.

Private placements:

 

a)

On June 24, 2004, the Company issued to investors 8,510,000 shares of Common Stock for total proceeds of $60 (net of $25 issuance expenses).

 

b)

On February 23, 2005, the Company completed a private placement for sale of 1,894,808 units for total proceeds of $1,418. Each unit consists of one share of Common Stock and a three-year warrant to purchase one share of Common Stock at $2.50 per share. This private placement was consummated in three tranches which closed in October 2004, November 2004 and February 2005.

 

c)

On May 12, 2005, the Company issued to an investor 186,875 shares of Common Stock at a price of $0.8 per share for total proceeds of $149.

 

d)

On July 27, 2005, the Company issued to investors 165,000 shares of Common Stock at a price of $0.6 per share for total proceeds of $99.

 

e)

On August 11, 2005, the Company signed a private placement agreement with investors for the sale of up to 1,250,000 units at a price of $0.8 per unit. Each unit consists of one share of Common Stock and one warrant to purchase one share of Common Stock at $1.00 per share. The warrants are exercisable for a period of three years from issuance. On March 31, 2005, the Company sold 312,500 units for total net proceeds of $225. On December 7, 2005, the Company sold 187,500 units for total net proceeds of $135.

 

f)

On July 2, 2007, the Company entered into an investment agreement, pursuant to which the Company agreed to sell up to 27,500,000 shares of Common Stock, for an aggregate subscription price of up to $5 million and warrants to purchase up to 30,250,000 shares of Common Stock. Separate closings of the purchase and sale of the shares and the warrants were originally scheduled to take place as follows:

 

Purchase date		Purchase price				Number of subscription shares				Number of warrant shares
August 30, 2007		$	1,250 (includes $250 paid as a convertible loan)				6,875,000				7,562,500
November 15, 2007		$	750				4,125,000				4,537,500
February 15, 2008		$	750				4,125,000				4,537,500
May 15, 2008		$	750				4,125,000				4,537,500
July 30, 2008		$	750				4,125,000				4,537,500
November 15, 2008		$	750				4,125,000				4,537,500

 

On August 18, 2009, the Company entered into an amendment to the investment agreement with the investor providing for the following:

 

(a)

The investor shall invest the remaining amount of the original investment agreement at price per share of $0.12 in monthly installments of not less than $50 starting August 1, 2009. The investor may accelerate such payments at his discretion.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares warrants and options: (Cont.)

 

1.

Private placements: (Cont.)

 

(b)

The exercise price of the last 10,083,334 warrants decreased from an exercise price of $0.36 per share to $0.29 per share.

 

(c)

All warrants expire on November 5, 2013 instead of November 5, 2011.

 

(d)

The price per share of the investment agreement decreased from $0.1818 to $0.12, therefore the Company adjusted the number of Shares of Common Stock issuable pursuant the investment agreement retroactively and issued to the investor on October 28, 2009 an additional 9,916,667 shares of Common Stock for past investment.

 

(e)

The investor has the right to cease payments in the event that the price per share as of the closing on five consecutive trading days shall decrease to $0.05.

 

On January 18, 2011 the Company and an investor signed an agreement to balance amounts due to the investor, totaling $20, against the remaining balance of the investment. The Company issued to the investor 10,499,999 shares of Common Stock and a warrant to purchase 4,539,500 shares of the Company's Common Stock at an exercise price of $0.20 per share

 

As of March 31, 2011, the Company issued to the investor and its designees an aggregate of 41,666,667 shares of common stock and a warrant to purchase 10,083,333 shares of the Company's common stock at an exercise price of $0.20 per share and a warrant to purchase 20,166,667 shares of common stock at an exercise price of $0.29 per share. The warrants may be exercised at any time and expire on November 5, 2013.

 

In addition, the Company agreed to issue an aggregate of 1,250,000 shares of Common Stock to a related party as an introduction fee for the investment. The shares shall be issued pro rata to the funds received from the investor.

 

As of December 31, 2010, the introduction fee was paid in full.

 

g)

In January 2010, the Company issued 1,250,000 units to a private investor for total proceeds of $250. Each unit consists of one share of Common Stock and a two-year warrant to purchase one share of Common Stock at $0.50 per share.

 

h)

In February 2010, the Company issued 6,000,000 shares of Common Stock to 3 investors (2,000,000 to each investor) and warrants to purchase an aggregate of 3,000,000 shares of Common Stock (1,000,000 to each investor) with an exercise price of $0.5 for aggregate proceeds of $1,500 ($500 each).

 

i)

On February 7, 2011, the Company issued 833,333 shares of Common Stock, at a price of $0.3 per share, and a warrant to purchase 641,026 shares of the Company's Common Stock at an exercise price of $0.39 per share for one year for total proceeds of $250.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares warrants and options: (Cont.)

 

1.

Private placements: (Cont.)

 

j)

On February 23, 2011, the Company entered into an investment agreement, pursuant to which the Company agreed to sell up to 12,815,000 shares of Common Stock, for an aggregate subscription price of up to $3.6 million and warrants to purchase up to 19,222,500 shares of Common Stock as follows: warrant to purchase 12,815,000 shares of Common Stock at $0.5 for two years, and warrants to purchase 6,407,500 shares of Common Stock at $0.28 for one year.

 

In addition, the Company agreed to pay 10% of the funds received for the distribution services received, out of this amount, 4% was be paid in stock and the remaining 6% in cash. Accordingly, in March 2011, the company issued 512,600 Common Stock and paid $231.

 

2.

Share-based compensation to employees and to directors:

 

a)

Options to employees and directors:

 

On November 25, 2004, the Company's stockholders approved the 2004 Global Stock Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) and on March 28, 2005, the Company's stockholders approved the 2005 U.S. Stock Option and Incentive Plan, and the reservation of 9,143,462 shares of Common Stock for issuance in the aggregate under these stock option plans.

 

Each option granted under the plans is exercisable until the earlier of ten years from the date of grant of the option or the expiration dates of the respective option plans. The 2004 and 2005 options plans will expire on November 25, 2014 and March 28, 2015, respectively. The exercise price of the options granted under the plans may not be less than the nominal value of the shares into which such options are exercised. The options vest primarily over three or four years. Any options that are canceled or forfeited before expiration become available for future grants.

 

On June 5, 2008, the Company's stockholders approved an amendment and restatement of the Company’s 2004 Global Share Option Plan and 2005 U.S. Stock Option and Incentive Plan to increase the number of shares of common stock available for issuance under these stock option plans in the aggregate by 5,000,000 shares.

 

In June 2011, the Company's stockholders approved an increase the number of shares of common stock available for issuance under these stock option plans in the aggregate by 5,000,000 shares.

 

As of March 31, 2012, 1,825,103 options are available for future grants.

 

On May 27, 2005, the Company granted one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.75 per share. The option is fully vested and expires after 10 years.

 

On February 6, 2006, the Company entered into an amendment to the Company's option agreement with the Company's former Chief Financial Officer. The amendment changed the exercise price of the 400,000 options granted to him on February 13, 2005 from $0.75 to $0.15 per share.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

a)

Options to employees and directors: (Cont.)

 

On May 2, 2006, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and expires after 10 years. The compensation related to the option, in the amount of $48, was recorded as general and administrative expense.

 

On June 22, 2006, the Company entered into an amendment to the Company's option agreement with two of its employees. The amendment changed the exercise price of 270,000 options granted to them from $0.75 to $0.15 per share. The excess of the fair value resulting from the modification, in the amount of $2, was recorded as general and administration expense over the remaining vesting period of the options.

 

On September 17, 2006, the Company entered into an amendment to the Company's option agreement with one of its directors. The amendment changed the exercise price of 100,000 options granted to the director from $0.75 to $0.15 per share.

 

On March 21, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $43, was recorded as general and administrative expense.

 

On July 1, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $38, was recorded as general and administrative expense. On October 22, 2007, the Company and the director agreed to cancel and relinquish all the options which were granted on July 1, 2007.

 

On July 16, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $75, was recorded as general and administrative expense.

 

On August 27, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $84, was recorded as general and administrative expense.

 

On October 23, 2007, the Company granted to its Chief Executive Officer an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.87 per share. The option is fully vested and expires after 10 years. The total compensation related to the option is $733, which is amortized over the vesting period as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

a)

Options to employees and directors: (Cont.)

 

On November 5, 2008, the Company entered into an amendment to the Company's option agreement with the Company's Chief Executive Officer. The amendment changed the exercise price of the 1,000,000 options from $0.87 to $0.15 per share. The compensation related the modification of the purchase price in the amount of $4 was recorded as general and administrative expense.

 

On June 29, 2009, the Company granted to its former Chief Executive Officer and director an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.067 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $68, which is amortized over the vesting period as general and administrative expense. In February 2011, the former CEO resigned. On July 25, 2011 the Company signed a settlement agreement with the former CEO under which 483,333 shares out of the above grant became fully vested exercisable through April 30 2012. An additional $30 was written as compensation in general and administrative expense.

 

After the balance sheet date, the former CEO exercised the option to 483,333 shares of Common Stock for an exercise price of $32.

 

On June 29, 2009, the Company granted to its former Chief Financial Officer an option to purchase 200,000 shares of Common Stock at an exercise price of $0.067 per share. The option vested with respect to 1/3 of the shares subject to the option. In connection with the former Chief Financial Officer’s resignation, 2/3 of the above shares were cancelled and the remaining 66,667 are valid through April 7, 2011.

 

On August 31, 2009, the Company granted to two of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. Each option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $32, which is amortized over the vesting period as general and administrative expense.

 

On December 13, 2009, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $21, was recorded as general and administrative expense.

 

On February 10, 2010, the Company granted to an employee an option to purchase 30,000 shares of Common Stock at an exercise price of $0.32 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $9, which is amortized over the vesting period as research and development expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

a)

Options to employees and directors: (Cont.)

 

On April 13, 2010, the Company, Abraham Israeli and Hadasit Medical Research Services and Development Ltd. (“Hadasit”) entered into an Agreement (the “Agreement”) pursuant to which Mr. Israeli agreed, during the term of the Agreement, to serve as (i) the Company’s Clinical Trials Advisor and (ii) a member of the Company’s Board of Directors.  In consideration of the services to be provided by Mr. Israeli to the Company under the Agreement, the Company agreed to grant options annually during the term of the Agreement for the purchase of its Common Stock, as follows:

 

·

An option for the purchase of 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share to Mr. Israeli; and

·

An option for the purchase of 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share to Hadasit,

·

*    Such options will vest and become exercisable in twelve (12) consecutive equal monthly amounts.

In April 2010, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option was $50, which is amortized over the vesting period as general and administrative expense.

 

On January 30, 2011 the Company signed an agreement with a new COO and acting CEO. According to the employment agreement, the new COO received 450,000 options to purchase Common Stock of the Company at $0.20.

 

On June 27 2011, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option was $48, which is amortized over the vesting period as general and administrative expense.

 

On June 27 2011, the Company granted to four of its directors an option to purchase 634,999 shares of Common Stock of the Company at $0.15. The total compensation related to the option was $287, which is amortized over the vesting period as general and administrative expense.

 

On August 10 2011, the Company granted to its CEO, an option to purchase 70,000 shares of Common Stock of the Company at $0.20. The total compensation related to the option was $26, which was amortized as general and administrative expense.

 

In the three months ended March 31 2012, 167,849 options were exercised by former CEO of the Company for $20.

 

After the balance sheet date, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

b)

Restricted shares to directors (Cont.):

 

A summary of the Company's option activity related to options to employees and directors, and related information is as follows:

 

		For the period ended March 31, 2012
		Amount of options				Weighted average exercise price				Aggregate intrinsic value
							$				$
Outstanding at beginning of period			4,938,821				0.168
Granted			-
Exercised			167,849				0.150
Reclassified			13,784				0.067
Outstanding at end of period			4,784,756				0.169				807,430
Vested and expected-to-vest at end of period			3,784,617				0.166				627,162

 

On May 2, 2006, the Company issued to two of its directors 200,000 restricted shares of common stock (100,000 each). The restrictions on the shares have fully lapsed. The compensation related to the stocks issued amounted to $104, which was amortized over the vesting period as general and administrative expenses.

 

On April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to a director 100,000 restricted shares of Common Stock. The restrictions on the shares have fully lapsed. The compensation related to the shares issued amounted to $47, which was amortized over the vesting period as general and administrative expenses.

 

In addition, on April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to another director 100,000 restricted shares of Common Stock. The restricted shares are not subject to any right to repurchase, and the compensation related to the shares issued amounted to $47 was recorded as prepaid general and administrative expenses in the three months ended March 31, 2007.

 

On August 27, 2008, the Company issued to one of its directors 960,000 shares of Common Stock upon a cashless exercise by a shareholder of a warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $.01 per share that was acquired by the shareholder from Ramot. The shares were allocated to the director by the shareholder.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

2.

Share-based compensation to employees and to directors: (Cont.)

 

b)

Restricted shares to directors (Cont.):

 

In May 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its directors 300,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

In May and in June 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its Scientific Advisory Board members and two of its Advisory Board members 500,000 restricted shares of common stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

On April 6, 2010, Prof. Melamed fully exercised his warrant to purchase 1,097,215 shares of the Company’s Common Stock; the warrant was issued to him pursuant to the agreement with the Consultants effective as of November 4, 2004.

 

3.

Shares and warrants to investors and service providers:

 

The Company accounts for shares and warrants issued to non-employees using the guidance of ASC 718-10 (formerly "SFAS" 123(R)), "Accounting for Stock-Based Compensation" and ASC 505-50-30 (formerly "EITF" 96-18), "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," whereby the fair value of such option and warrant grants is determined using a Black-Scholes options pricing model at the earlier of the date at which the non-employee's performance is completed or a performance commitment is reached.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to investors and service providers: (Cont.)

 

a)

Warrants to investors and service providers and investors:

Issuance date		Number of warrants issued				Exercised				Forfeited				Outstanding				Exercise Price $				Warrants exercisable				Exercisable through
November 2004			12,800,845				11,761,281				151,803				887,761				0.01				887,761				April 2012
December 2004			1,800,000				1,800,000								-				0.00005				–				-
February 2005			1,894,808								1,894,808				-				2.5				-				-
May 2005			47,500								47,500				-				1.62				-				-
June 2005			30,000												30,000				0.75				30,000				June 2015
August 2005			70,000								70,000				-				0.15				-				-
September 2005			3,000				3,000								-				0.15				-				-
September 2005			36,000								36,000				-				0.75				-				-
September-December 2005			500,000								500,000				-				1				-				-
December 2005			20,000				20,000								-				0.15				-				-
December 2005			457,163				150,000								307,163				0.15				307,163				December 2015
February 2006			230,000												230,000				0.65				230,000				February 2016
February 2006			40,000								40,000				-				1.5				-
February 2006			8,000								8,000				-				0.15				-
February 2006			189,000				97,696				91,304				-				0. 5				-				-
May 2006			50,000												50,000				0.0005				50,000				May 2016
May -December 2006			48,000								48,000				-				0.35				-				-
May -December 2006			48,000								48,000				-				0.75				-				-
May 2006			200,000												200,000				1				200,000				May 2011
June 2006			24,000								24,000				-				0.15				-				-
May 2006			19,355								19,355				-				0.15				-				-
October 2006			630,000				630,000								-				0.3				-				-
December 2006			200,000								200,000				-				0.45				-				-
March 2007			200,000								200,000				-				0.47				-				-
March 2007			500,000												500,000				0.47				500,000				March 2017
March 2007			50,000								50,000				-				0.15				-				-
March 2007			15,000								15,000				-				0.15				-				-
February 2007			50,000								50,000				-				0.45				-				-
March 2007			225,000								225,000				-				0.45				-				-
March 2007			50,000								50,000				-				0.45				-				-
April 2007			33,300								33,300				-				0.45				-				-
May 2007			250,000								250,000				-				0.45				-				-
July 2007			500,000												500,000				0.39				500,000				July 2017
September 2007			500,000												500,000				0.15				500,000				August 2017
August 2007			7,562,500												7,562,500				0.2				7,562,500				November 2013
July 2007			30,000								30,000				-				0.45				-				-
July 2007			100,000								100,000				-				0.45				-				-
October 2007			200,000												200,000				0.15				200,000				August-October 2017
November 2007			2,520,833												2,520,833				0.20				2,520,833				November 2013
November 2007			2,016,667												2,016,667				0.29				2,016,667				November 2013
April 2008			4,537,500												4,537,500				0.29				4,537,500				November 2013
August 2008			3,529,166												3,529,166				0.29				3,529,166				November 2013
August 2008			1,008,334												1,008,334				0.29				1,008,333				November 2013
November 2008			100,000												100,000				0.15				100,000				September 2018
April 2009			200,000												200,000				0.1				200,000				April 2019
October 2009			200,000				100,000								100,000				0.067				66,667				October 2019
October 2009			4,537,500												4,537,500				0.29				4,537,500				November 2013
January 2010			1,250,000								1,250,000				-				0.5				-				-
February 2010			125,000				125,000								-				0.01				-				-
February 2010			3,000,000								3,000,000				-				0.5				-				-
January 2011			4,537,500												4,537,500				0.29				4,537,500				November 2013
February 2011			641,026								641,026				-				0.39				-				-
February 2011			6,407,500				946,834				5,460,666				-				0.28				-				-
February 2011			12,815,000												12,815,000				0.5				12,815,000				February 2013
April 2010			33,334												33,334				0.00005				33,334				April 2020
April 2011			33,334												33,334								33,334				April 2021
February 2010			1,500,000												1,500,000								500,000				February 2020
			78,604,165				15,633,811				14,533,762				48,436,590								47,403,257

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

a)

Warrants: (Cont.)

 

The fair value for the warrants to service providers was estimated on the date of grant using a Black-Scholes option pricing model, with the following weighted-average assumptions for the 3 month activity ended on March 31, 2011; weighted average volatility of 134%-141%, risk free interest rates of 2.26%-3.47% dividend yields of 0% and a weighted average life of the options of 6-10 years.

 

b)

Shares:

 

On June 1 and June 4, 2004, the Company issued 40,000 and 150,000 shares of Common Stock for 12 months of filing services and legal and due-diligence services, respectively, with respect to a private placement. Compensation expense related to filing services, totaling $26, was amortized over a 12-month period. Compensation related to legal services, totaling $105 was recorded as equity issuance cost and had no effect on the statement of operations.

 

On July 1 and September 22, 2004, the Company issued 20,000 and 15,000 shares to a former director for financial services for the first and second quarters of 2004, respectively. Related compensation in the amount of $39 was recorded as general and administrative expense.

 

On February 10, 2005, the Company signed an agreement with one of its service providers under which the Company issued the service provider 100,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed.

 

In March and April 2005, the Company signed an agreement with four members of its Scientific Advisory Board under which the Company issued to the members of the Scientific Advisory Board 400,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan (100,000 each). All restrictions on these shares have lapsed.

 

In July 2005, the Company issued to its legal advisors 50,000 shares for legal services for 12 months. The compensation related to the shares in the amount of $37.5 was recorded as general and administrative expense.

 

In January 2006, the Company issued to two service providers 350,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed. Related compensation in the amount of $23 was recorded as general and administrative expense.

 

On March 6, 2006, the Company issued to its legal advisor 34,904 shares of Common Stock. The shares are in lieu of $18.5 payable to the legal advisor. Related compensation in the amount of $18.5 was recorded as general and administrative expense.

 

On April 13, 2006, the Company issued to service providers 60,000 shares of Common Stock at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. Related compensation in the amount of $25.8 was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

On May 9, 2006, the Company issued to its legal advisor 65,374 shares of Common Stock in lieu of payment for legal services. Related compensation in the amount of $33 was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On June 7, 2006, the Company issued to a service provider 50,000 shares of Common Stock for filing services for 12 months. Related compensation in the amount of $24.5 was recorded as general and administrative expense.

 

On May 5, 2006, the Company issued 200,000 shares of Common Stock to a finance consultant for his services. Related compensation in the amount of $102 was recorded as general and administrative expense.

 

On August 14, 2006, the Company issued 200,000 shares of Common Stock to a service provider. Related compensation in the amount of $68 was recorded as general and administrative expense.

 

On August 17, 2006, the Company issued 100,000 shares of Common Stock to a service provider. Related compensation in the amount of $35 was recorded as general and administrative expense.

 

On September 17, 2006, the Company issued to its legal advisor 231,851 shares of Common Stock in lieu of $63 payable to the legal advisor. [Related compensation in the amount of $63 was recorded as general and administrative expense.]

 

On April 1 and September 30, 2006, the Company issued to its business development advisor, based on an agreement, 240,000 shares of Common Stock. Related compensation in the amount of $74 was recorded as general and administrative expense.

 

On January 3, 2007, the Company issued to its legal advisor 176,327 shares of Common Stock in lieu of $45 payable to the legal advisor. Related compensation in the amount of $49 was recorded as general and administrative expense.

 

On April 12, 2007, the Company issued to its filing and printing service providers 80,000 shares of Common Stock in lieu of $15 payable to the service provider. Related compensation in the amount of $30 was recorded as general and administrative expense. In addition, the Company was obligated to issue the filing and printing service providers additional shares, in the event that the total value of the shares previously issued (as quoted on the Over-the-Counter Bulletin Board or such other exchange where the Common Stock is quoted or listed) was less than $0.20 on March 20, 2008. As a result, the Company recorded a liability in the amount of $20.

 

On April 12, 2007, the Company issued to its legal advisor 108,511 shares of Common Stock in lieu of $29 payable to the legal advisor. Related compensation in the amount of $40 was recorded as general and administrative expense.

 

On May 18, 2007, the Company issued to its legal advisor 99,257 shares of Common Stock in lieu of $33 payable to the legal advisor. Related compensation in the amount of $33 was recorded as general and administrative expense.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On October 29, 2007, the Company issued to a scientific advisory board member 80,000 shares of the Company’s Common Stock for scientific services. Compensation of $67 was recorded as research and development expense.

 

On May 20, 2008, the Company issued to its financial advisor 90,000 shares of the Company's Common Stock. The shares were for $35 payable to the financial advisor for introduction fee of past convertible loans. Related compensation in the amount of $36 was recorded as financial expenses.

 

On April 5, 2009, the Company issued to its Chief Technology Advisor 1,800,000 shares of Common Stock. The shares were for $180 payable to the advisor. Related compensation in the amount of $144 was recorded as research and development expense.

 

On June 24, 2009, the Company issued to its public relations advisor 250,000 shares of Common Stock. The shares were for $25 payable to the advisor. Related compensation in the amount of $18 was recorded as general and administrative expense.

 

On July 8, 2009, the Company issued to its financial consultant 285,714 shares of the Company's Common Stock. The shares were for $20 payable to the financial consultant for valuation of options and warrants. Related compensation in the amount of $20 was recorded as general and administrative expense.

 

On July 15, 2009, the Company issued to a service provider 357,142 shares of the Company's Common Stock. The shares were for $25 payable to the service provider for filing services. Related compensation in the amount of $21 was recorded as general and administrative expense.

 

On August 10, 2009, the Company issued to a service provider 71,428 shares of the Company's Common Stock. The shares were for $5 payable to the service provider for IT services. Related compensation in the amount of $4 was recorded as general and administrative expense.

 

On January 5, 2010, the Company issued to its public relations advisor 50,000 shares of the Company's Common Stock for six months service. The issuance of the shares is part of the agreement with the public relations advisor that entitled them to a monthly grant of 8,333 shares of the Company's Common Stock. Related compensation in the amount of $12 was recorded as general and administrative expense.

 

On January 6, 2010, the Company issued to a service provider 60,000 shares of the Company's Common Stock. The shares were for $15 payable to the service provider for insurance and risk management consulting and agency services for three years. Related compensation in the amount of $16 was recorded as general and administrative expense.

 

On March 5, 2007, the Company issued a $150 Convertible Promissory Note to a third party. Interest on the note accrued at the rate of 8% per annum for the first year and 10% per annum after the first year. On January 27, 2010, the third party converted the entire accrued principle and interest outstanding under the note, amounting to $189, into 1,016,109 shares of Common Stock.

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 8   -

STOCK CAPITAL (Cont.)

 

B.

Issuance of shares, warrants and options: (Cont.)

 

3.

Shares and warrants to service providers: (Cont.)

 

b)

Shares: (Cont.)

 

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to it legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the note accrued at the rate of 4%. On February 19, 2010, the Company’s legal advisor converted the entire accrued principal and interest of outstanding under the note into 402,385 shares of Common Stock.

 

In May 2010, based on a board resolution dated June 29, 2009 the Company issued to one of its public relations advisors 100,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

 

On December 16, 2010, the Company issued to a service provider 83,333 shares of the Company's Common Stock. The shares were for public relations services. Related compensation in the amount of $40 is recorded as general and administrative expense.

 

On December 16, 2010, the Company granted to its Chief Medical Advisor 900,000 shares of the Company's Common Stock for services rendered through December 31 2010. Related compensation in the amount of $180 is recorded as research and development expense (see Note 5B).

 

On December 16, 2010 the Company granted to its Chief Scientist 200,000 shares of the Company's Common Stock for services rendered through December 31 2010. Related compensation in the amount of $40 is recorded as research and development expense (see Note 5B).

 

On February 16, 2011 one of the Company's consultants exercised 100,000 warrants to Common Stock for $33.

 

On February 18, 2011, the Company's legal advisor converted the entire accrued principal and interest of the Convertible Promissory Note granted on September 15, 2010, totaling $137, into 445,617 shares of Common Stock.

 

The total stock-based compensation expense, related to shares, options and warrants granted to employee’s directors and service providers, was comprised, at each period, as follows:

 

		Three months ended March 31								Period from September 22, 2000  (inception date) through March 31,
		2012				2011				2012
		Unaudited								Unaudited
Research and development			13				9				17,556
General and administrative			168				-2				10,281
Financial expenses, net			-				-				248
Total stock-based compensation expense			181				7				28,098

 

 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

 

Notes to the financial statements

 

NOTE 9   -

SUBSEQUENT EVENTS

 

A.

In April 2012, the former CEO exercised 1,014,757 options to shares of Common Stock of the Company. An exercise fee of $112 was paid to the Company. (See note 8 B 2 (a))

 

B.

In April 2012, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. (See note 8 B 2 (a))

 

C.

In April 2012, the Company granted to Hadasit a warrant to purchase 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share. (See note 8 B 2 (a))

 

 

			Amount to be paid
SEC registration fee		$	1,444	*
FINRA filing fee			1,500
Legal fees and expenses			275,000
Accounting fees and expenses			35,000
Transfer Agent and Registrar fees			1,000
Printing and miscellaneous expenses			5,000
Total			318,944

*

Previously paid.

 

·

5,000,000 shares to Yosef  Sternberg

·

1,416,667 shares to Tayside Trading

·

1,100,000 shares to Sarah Laufer

·

1,000,000 shares to Seastripe Trading Corp.

·

1,000,000 shares to Schanzengraben SA

·

400,000 shares to PR Diamonds Inc.

On July 7, 2011, we issued 309,977 shares of common stock to Tayside Trading Ltd. (“Tayside”), in addition to the 1,016,109 shares of common stock previously issued in connection with the conversion of a convertible loan received in 2007 and converted to our common stock. The issuance of these securities was effected without registration in reliance on Section 4(2) of the Securities Act as a sale by the Company not involving a public offering. No underwriters were involved with the issuance of such securities.

 

On July 18, 2011, we issued 180,000 shares of common stock to Thomas B. Rosedale as payment for unpaid 2011 legal fees, which were owed to BRL Law Group LLC, of which Mr. Rosedale is the managing member. The issuance of these securities was effected without registration in reliance upon Regulation D promulgated under the Securities Act. No underwriters were involved with the issuance of such securities and no commissions were paid in connection with such transaction.

 

In September 2011, Fidelity Venture Capital Ltd. exercised a warrant, dated as of March 1, 2011, held by such entity for the purchase of 187,500 shares of common stock.  The exercise price paid upon exercise of the warrant was $0.28 per share for a total of $52,500.00, which has been received by us. The issuance of these securities was effected without registration in reliance on Section 4(2) of the Securities Act as a sale by the Company not involving a public offering.  No underwriters were involved with the issuance of such securities and no commissions were paid in connection with such transaction.

On April 13, 2012, pursuant to the Hadasit Agreement, we issued a warrant to purchase up to 33,334 shares of our common stock at an exercise price of $0.00005 per share, exercisable for a period of 10 years, to Hadasit Medical Research Services and Development Ltd. The issuance of these securities was effected without registration in reliance upon Regulation D promulgated under the Securities Act. No underwriters were involved with the issuance of such securities and no commissions were paid in connection with such transaction.

 

On April 22, 2012, we issued 834,729 shares of our common stock to Yossef Levy in connection with his exercise of a warrant to purchase common stock previously issued.  The exercise price paid upon exercise of the warrant was $0.01 per share for a total of $8,347, which has been received by us. The issuance of these securities was effected without registration in reliance on Section 4(2) of the Securities Act as a sale by the Company not involving a public offering. No underwriters were involved with the issuance of such securities.

10.22*		Option Agreement, dated as of December 31, 2004, by and between the Company and David Stolick is incorporated herein by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K dated March 28, 2005 (File No. 333-61610).
10.23*		Amendment to Option Agreement, dated as of February 6, 2006, by and between the Company and David Stolick is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated February 6, 2006 (File No. 333-61610).
10.24		Common Stock Purchase Warrant, dated as of May 16, 2005, issued to Trout Capital LLC is incorporated herein by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-QSB dated June 30, 2005 (File No. 333-61610).
10.25		Collaboration Agreement, dated as of December 26, 2006, by and between the Company and Fundacion para la Investigacion Medica Aplicada is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 23, 2007. (File No. 333-61610).
10.26		Subscription Agreement, dated July 2, 2007, by and between the Company and ACCBT Corp. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 5, 2007 (File No. 333-61610).
10.27		Amendment to Subscription Agreement, dated as of July 31, 2009, by and between the Company and ACCBT Corp. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 24, 2009 (File No. 333-61610).
10.28		Form of Common Stock Purchase Warrant issued by the Company to ACCBT Corp. is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on July 5, 2007 (File No. 333-61610).
10.29		Form of Registration Rights Agreement by and between the Company and ACCBT Corp. is incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on July 5, 2007 (File No. 333-61610).
10.30		Form of Security Holders Agreement, by and between ACCBT Corp. and certain security holders of the Registrant is incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on July 5, 2007 (File No. 333-61610).
10.31		Finder’s Fee Agreement, dated as of October 29, 2007, by and between the Company and Tayside Trading Ltd. is incorporated herein by reference to Exhibit 10.63 of the Company’s Annual Report on Form 10-KSB filed on April 14, 2008 (File No. 333-61610).
10.32		Subscription Agreement, dated January 24, 2010, by and between the Company and Reytalon Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 1, 2010 (File No. 333-61610).
10.33		Common Stock Purchase Warrant, dated January 24, 2010, issued by the Company to Reytalon Ltd. is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on February 1, 2010 (File No. 333-61610).
10.34		Securities Purchase Agreement, dated as of February 17, 2010, by and between the Company and Abraham Suisse is incorporated herein by reference to Exhibit 10.69 of the Company’s Annual Report on Form 10-K filed on March 25, 2010 (File No. 333-61610).
10.35		Securities Purchase Agreement, dated as of February 17, 2010, by and between the Company and Yaakov Ben Zaken is incorporated herein by reference to Exhibit 10.70 of the Company’s Annual Report on Form 10-K filed on March 25, 2010 (File No. 333-61610).

10.36		Securities Purchase Agreement, dated as of February 17, 2010, by and between the Company and Abram Nanikashvili is incorporated herein by reference to Exhibit 10.71 of the Company’s Annual Report on Form 10-K filed on March 25, 2010 (File No. 333-61610).
10.37*		Agreement, dated April 13, 2010, by and between the Company, Abraham Israeli and Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on April 15, 2010 (File No. 333-61610).
10.38*		First Amendment Agreement, dated as of December 31, 2011, to the Agreement by and between the Company, Abraham Israeli and Hadasit Medical Research Services and Development Ltd. **
10.39		Common Stock Purchase Warrant, dated as of April 13, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. **
10.40		Common Stock Purchase Warrant, dated as of April 13, 2011, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. **
10.41		Convertible Promissory Note, dated as of September 15, 2010, issued by the Company to Thomas B. Rosedale is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on November 15, 2010 (File No. 333-61610).
10.42*		Employment Agreement, dated June 23, 2010, by and between the Brainstorm Cell Therapeutics Ltd. and Liat Sossover is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on August 16, 2010 (File No. 333-61610).
10.43*		Employment Agreement, dated January 30, 2011, by and between Brainstorm Cell Therapeutics Ltd. and Dr. Adrian Harel is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 2, 2011 (File No. 333-61610).
10.44		Form of Securities Purchase Agreement, dated as of February 2011, by and between the Company and certain investors is incorporated herein by reference to Exhibit 10.37 of the Company’s Annual Report on Form 10-K filed on March 31, 2011(File No. 333-61610).
10.45		Form of Common Stock Purchase Warrant, dated as of February 2011, issued by the Company to certain investors is incorporated herein by reference to Exhibit 10.38 of the Company’s Annual Report on Form 10-K filed on March 31, 2011(File No. 333-61610).
10.46		Form of Securities Purchase Agreement, dated as of February 7, 2011, by and between the Company and Karinel Ltd. is incorporated herein by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K filed on March 31, 2011(File No. 333-61610).
10.47		Form of Common Stock Purchase Warrant, dated as of February 7, 2011, issued by the Company to Karinet Ltd. is incorporated herein by reference to Exhibit 10.40 of the Company’s Annual Report on Form 10-K filed on March 31, 2011(File No. 333-61610).
10.48		Clinical Trial Agreement, entered into as of February 17, 2010, among BrainStorm Cell Therapeutics Ltd., Prof. Dimitrios Karussis and Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011 (File No. 000-54365).
10.49		Amendment to the Clinical Trial Agreement, entered into as of June 27, 2011, among BrainStorm Cell Therapeutics Ltd., Prof. Dimitrios Karousis and Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011 (File No. 000-54365).
10.50*		BrainStorm Cell Therapeutics Inc. Director Compensation Plan is incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011 (File No. 000-54365).
10.51		Common Stock Purchase Warrant, dated as of February 17, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. **

	BRAINSTORM CELL THERAPEUTICS INC.
	By:	/s/ Adrian Harel
		Adrian Harel
		Chief Executive Officer
		(Principal Executive Officer)

Signature		Title		Date
/s/ Adrian Harel		Chief Executive Officer		July 10, 2012
Adrian Harel		(Principal Executive Officer)
/s/ Liat Sossover		Chief Financial Officer		July 10, 2012
Liat Sossover		(Principal Financial and Accounting Officer)
*		Director		July 10, 2012
Irit Arbel
*		Director		July 10, 2012
Mordechai Friedman
*		Director		July 10, 2012
Abraham Israeli
*		Director		July 10, 2012
Alon Pinkas
*		Director		July 10, 2012
Chen Schor
		Director		___, 2012
Robert Shorr
*		Director		July 10, 2012
Malcolm Taub

*By	/s/ Adrian Harel
	Adrian Harel
	Attorney-in-fact