UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
FORM 10-K
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ANNUAL
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER
31, 2011
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TRANSITION
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________
TO __________
COMMISSION FILE NUMBER 000-54365
BRAINSTORM CELL
THERAPEUTICS INC.
(Exact Name of Registrant as specified
in its charter)
Delaware
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20-8133057
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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605 Third Avenue, 34th Floor
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New York, NY
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(Address of principal executive offices)
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10158
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(Zip Code)
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Registrant’s telephone number,
including area code (646) 666-3188
Securities registered under Section 12(b)
of the Act: None
Securities registered under Section 12(g)
of the Act:
Title of each class
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Name of each exchange on which registered
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Common Stock, $0.00005 par value
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OTC Markets Group
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
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No
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
x
No
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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No
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The approximate aggregate market value of the voting and
non-voting common equity held by non-affiliates of the issuer as of June 30, 2011 (the last business day of the registrant’s
most recently completed second fiscal quarter), was $43,398,267.
As of March 9, 2012, the number of shares outstanding of
the registrant's common stock, $0.00005 par value per share, was 126,569,309.
DOCUMENTS INCORPORATED BY REFERENCE
None.
BRAINSTORM CELL THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2011
TABLE OF CONTENTS
ITEM
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Page
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PART I
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1.
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Business
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3
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1A.
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Risk Factors
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14
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1B.
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Unresolved Staff Comments
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24
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2.
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Properties
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25
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3.
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Legal Proceedings
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25
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4.
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Mine Safety Disclosures
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25
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PART II
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5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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25
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6.
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Selected Financial Data
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28
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7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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28
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7A.
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Quantitative and Qualitative Disclosures About Market Risk
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31
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8.
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Financial Statements and Supplementary Data
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32
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9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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79
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9A.
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Controls and Procedures
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79
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9B.
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Other Information
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80
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PART III
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10.
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Directors, Executive Officers and Corporate Governance
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80
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11.
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Executive Compensation
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88
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12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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92
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13.
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Certain Relationships and Related Transactions, and Director Independence
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95
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14.
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Principal Accounting Fees and Services
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98
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PART IV
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15.
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Exhibits, Financial Statement Schedules
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99
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PART I
SPECIAL NOTE
Unless otherwise specified in this annual report on Form
10-K, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This annual report contains numerous statements, descriptions,
forecasts and projections, regarding Brainstorm Cell Therapeutics Inc. and its potential future business operations and performance.
These statements, descriptions, forecasts and projections constitute “forward-looking statements,” and as such involve
known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance and
achievements to be materially different from any results, levels of activity, performance and achievements expressed or implied
by any such “forward-looking statements.” Some of these are described under “Risk Factors” in this annual
report. In some cases you can identify such “forward-looking statements” by the use of words like “may,”
“will,” “should,” “could,” “expects,” “hopes,” “anticipates,”
“believes,” “intends,” “plans,” “estimates,” “predicts,” “likely,”
“potential,” or “continue” or the negative of any of these terms or similar words. These “forward-looking
statements” are based on certain assumptions that we have made as of the date hereof. To the extent these assumptions are
not valid, the associated “forward-looking statements” and projections will not be correct. Although we believe that
the expectations reflected in these “forward-looking statements” are reasonable, we cannot guarantee any future results,
levels of activity, performance or achievements. It is routine for our internal projections and expectations to change as the year
or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs
upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change,
we may not inform you if they do and we undertake no obligation to do so. We caution investors that our business and financial
performance are subject to substantial risks and uncertainties. In evaluating our business, prospective investors should carefully
consider the information set forth under the caption “Risk Factors” in addition to the other information set forth
herein and elsewhere in our other public filings with the Securities and Exchange Commission (“SEC”).
Item 1. BUSINESS.
Company Overview
Brainstorm Cell Therapeutics Inc. (“we,”
“us,” “our” or the “Company”) is a biotechnology company developing innovative stem cell therapeutic
products based on technologies enabling the
in-vitro
differentiation of bone marrow stem cells into neural-like cells. We
aim to become a leader in adult stem cell transplantation for neurodegenerative diseases. Our technology entails exploiting the
patient’s own bone marrow stem cells to generate glial-like cells that may provide an effective treatment for Amyotrophic
Lateral Sclerosis (“ALS”), Parkinson’s Disease (“PD”), Multiple Sclerosis (“MS”) and
Spinal Cord Injury.
Our core technology was developed in
collaboration with prominent neurologist, Prof. Eldad Melamed, former head of Neurology of the Rabin Medical Center and member
of the Scientific Committee of the Michael J. Fox Foundation for Parkinson's Research, and expert Cell biologist Prof. Daniel Offen,
of the Felsenstein Medical Research Center of Tel Aviv University.
Our team demonstrated formation of neurotrophic-factor
secreting cells (glial-like cells) from
in-vitro
differentiated bone marrow cells that produce neurotrophic factors (“NTF”)
including Glial Derived Neurotrophic factor (“GDNF”), Brain Derived Neurotrophic factor (“BDNF”) and additional
factors
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Moreover, in research conducted by our team, implantation of these differentiated cells into brains of animal models
that had been induced to Parkinsonian behavior markedly improved their condition.
Our aim is to provide neural-supporting
stem cell transplants that are expected to maintain, preserve and possibly restore the damaged neurons, protecting them from further
degeneration.
Our wholly-owned Israeli subsidiary,
Brainstorm Cell Therapeutics Ltd. (the “Israeli Subsidiary”) holds exclusive worldwide rights to commercialize
the technology, through a licensing agreement with Ramot at Tel Aviv University Ltd. (“Ramot”), the technology transfer
company of Tel Aviv University, Israel.
As a result of limited cash resources
and the desire to take a faster path to clinical trials, since the fourth quarter of 2008 we have focused all of our efforts on
ALS, and are currently not allocating resources towards PD, MS or other neurodegenerative diseases. Other indications
are currently being evaluated.
We are currently in the clinical stage
of development of our technology and we intend to begin the process of seeking regulatory approval from regulatory agencies in
the U.S.
In June 2011, we initiated a Phase I/II
clinical study for ALS patients using our autologous NurOwn™ stem cell therapy, after receiving final approval from the Israel
Ministry of Health (“MOH”).
In February 2011, the U.S. Food and
Drug Administration (“FDA”) granted Orphan Drug designation to our NurOwn™ autologous adult stem cell product
candidate for the treatment of ALS. Orphan Drug status entitles us to seven years of marketing exclusivity for NurOwn™ upon
regulatory approval, as well as the opportunity to apply for grant funding from the FDA of up to $400,000 per year for four years
to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA's application
user fee.
Our efforts are directed at:
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Operating a Good Manufacturing Practice (“GMP”) compliant production process;
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Demonstrating Safety Tolerability and Therapeutic effect of transplantation of Autologous cultured Bone Marrow Stromal Cells secreting Neurothrophic factors (MSC-NTF) in a Phase I/II Clinical trial in human ALS patients;
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Setting up a centralized facility to provide the therapeutic products and services for transplantation in patients in the US, as part of the clinical development program; and
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Submitting an Investigational New Drug application (“IND”) to the FDA.
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Our Approach
Our research team led by Prof. Melamed
and Prof. Offen has shown that human bone marrow mesenchymal stem cells can be expanded and induced to differentiate into two types
of brain cells, neuron-like and astrocyte-like cells, each having different therapeutic potential, as follows:
NurOwn™ program one
- NTF
secreting cells (MSC-NTF) - human bone marrow derived NTF secreting cells for treatment of, ALS, PD and MS. In-vitro differentiation
of the expanded human bone marrow derived mesenchymal stem cells in a proprietary medium led to the generation of neurotrophic-factors
secreting cells. The in-vitro differentiated cells were shown to express and secrete GDNF, as well as other NTFs, into the growth
medium. GDNF is a neurotrophic-factor, previously shown to protect, preserve and even restore neuronal function, particularly dopaminergic
cells in PD, but also neuron function in other neurodegenerative pathologies such as ALS and Huntington’s disease. Unfortunately,
therapeutic application of GDNF is hampered by its poor brain penetration and stability. Attempting to infuse the protein directly
to the brain is impractical and the alternative, using GDNF gene therapy, suffers from the limitations and risks of using viral
vectors. Our preliminary results show that our NTF secreting cells, when transplanted into a 6-OHDA lesion PD rat model, show significant
efficacy. Within weeks of the transplantation, there was an improvement of more than 50% in the animals’ characteristic disease
symptoms.
We have optimized the proprietary processes
for induction of differentiation of human bone marrow derived mesenchymal stem cells into differentiated cells that produce NTF
(MSC-NTF)
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The optimization and process development is conducted in GMP compliance.
NurOwn™ program two
- Dopaminergic
neuron-like cells - human bone marrow derived dopamine producing neural cells for restorative treatment in PD. Human bone marrow
mesenchymal stem cells were isolated and expanded. Subsequent differentiation of the cell cultures in a proprietary differentiation
medium generated cells with neuronal-like morphology and showing protein markers specific to neuronal cells. Moreover, the
in-vitro
differentiated cells were shown to express enzymes and proteins required for dopamine metabolism, particularly the enzyme tyrosine
hydroxylase. Most importantly, the cells produce and release dopamine
in-vitro
. Further research consisting of implanting
these cells in an animal model of PD (6-OHDA induced lesions), showed the differentiated cells exhibit long-term engraftment, survival
and function
in vivo
. Most importantly, such implantation resulted in marked attenuation of their symptoms, essentially
reversing their Parkinsonian movements.
Our technology is based on the NurOwn™
products - an autologous cell therapeutic modality, comprising the extraction of the patient bone marrow, which is then processed
into the appropriate neuronal-like cells and re-implanted into the patient’s muscles, spinal cord or brain. This approach
is taken in order to increase patient safety and minimize any chance of immune reaction or cell rejection.
The therapeutic modality will comprise
the following:
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Bone marrow aspiration from patient;
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Isolation and expansion of the mesenchymal stem cells;
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Differentiation of the expanded stem cells into neurotrophic-factor secreting cells; and
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Autologous transplantation into the patient into the site of damage.
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History
The Company was incorporated under the
laws of the State of Washington on September 22, 2000, under the name Wizbang Technologies, Inc. and acquired the right to market
and sell a digital data recorder product line in certain states in the U.S. Subsequently, the Company changed its name to Golden
Hand Resources Inc. On July 8, 2004, the Company entered into the licensing agreement with Ramot to acquire certain stem cell technology
and decided to discontinue all activities related to the sales of the digital data recorder product. 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 development of novel cell therapies for neurodegenerative diseases. On October 25, 2004, the Company formed its wholly-owned
subsidiary, Brainstorm Cell Therapeutics Ltd. in Israel. On December 18, 2006, the stockholders of the Company approved a proposal
to change the state of incorporation of the Company from the State of Washington to the State of Delaware. The reincorporation
was completed on December 21, 2006 through the merger of the Company into a newly formed, wholly-owned Delaware subsidiary of Brainstorm,
also named Brainstorm Cell Therapeutics Inc.
Recent Developments
In February 2011, the FDA’s Office
of Orphan Products Developments granted Orphan Drug designation for the Company’s NurOwn™ autologous adult stem cell
product candidate for the treatment of ALS. In July 2011, we entered into a Memorandum of Understanding with Massachusetts
General Hospital and the University of Massachusetts Medical School in anticipation of applying for FDA approval to begin ALS human
clinical trials in the United States.
Between February 22, 2011 and March
1, 2011, we entered into Securities Purchase Agreements with institutional and individual investors pursuant to which we issued
and sold 12,815,000 units comprised of shares of common stock and warrants for the purchase of common stock in exchange for $3,588,200
($0.28 per unit). Each unit includes (i) one share of common stock, (ii) a warrant to purchase one-half of one share of our common
stock until the first anniversary of the closing date at a purchase price of $0.28 per share and (iii) a warrant to purchase one
share of our common stock until the second anniversary of the closing date at a purchase price of $0.50 per share. The
warrants may only be exercised by the payment of the exercise price in cash. The warrants, if exercised in full, will
result in additional cash proceeds to the Company of approximately $8.2 million.
In June 2011, we initiated a Phase I/II
clinical study for ALS patients using our autologous NurOwn™ stem cell therapy, after receiving final approval from the Israel
MOH.
On February 17, 2010, our wholly owned
Israeli subsidiary entered into a series of agreements with Hadasit Medical Research Services and Development Ltd., a subsidiary
of the Hadassah Medical Organization (“Hadassah”) and Professor Dimitrios Karousis (the “Clinical Trial Agreement”).
Under the Clinical Trial Agreement, Hadassah and our personnel will conduct a clinical trial to evaluate the safety and tolerability
of our treatment using mesenchymal bone marrow stem cells secreting neurotrophic factors (MSC-NTF) in patients with ALS, in accordance
with a protocol developed jointly by us and Hadassah. The trial is expected to include between 24 and 26 patients.
Intellectual property generated through
the study will be owned by us. Hadassah will be entitled to use the intellectual property generated through the study
for non-commercial purposes. All existing intellectual property of the Company and Hadassah shall be retained by each respective
party.
In connection with the study, we agreed
to pay Hadassah $38,190 per patient totaling up to $992,880, as well as $31,250 per month for rental and operation of clean room
facilities according to GMP standards at Hadassah facilities in Jerusalem in order to apply the cell growth and differentiation
process in accordance with our methods.
On June 27, 2011, our wholly owned Israeli
subsidiary entered into the Amendment (the “Amendment”) to the Clinical Trial Agreement. The Amendment amended the
Clinical Trial Agreement to, among other things: (i) decrease the total payment due to Hadassah from $992,880 to $773,400 and
(ii) change the termination provisions so only we may terminate the agreement upon 60 days’ notice.
On September 22, 2011, our wholly owned
Israeli subsidiary entered into an additional Amendment to the Clinical Trial Agreement (“Amendment 2”) to rent an
additional clean room starting December 1, 2011.
In September 2011, we received notice
from the Israeli Office of the Chief Scientist (“OCS”) of its commitment to grant the Company approximately $1.1 million
in accordance with OCS guidelines. We are obligated to pay royalties to the OCS, amounting to 3% to 5% of revenues derived
from sales of the products funded with the OCS grant, up to an amount equal to 100% of the grant received.
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.
Stem Cell Therapy
Our activities are within the stem cell
therapy field. Stem cells are non-specialized cells with a potential for both self-renewal and differentiation into cell types
with a specialized function, such as muscle, blood or brain cells. The cells have the ability to undergo asymmetric division such
that one of the two daughter cells retains the properties of the stem cell, while the other begins to differentiate into a more
specialized cell type. Stem cells are therefore central to normal human growth and development, and also are a potential
source of new cells for the regeneration of diseased and damaged tissue. Stem cell therapy aims to restore diseased tissue function
by the replacement and/or addition of healthy cells by stem cell transplants.
Currently, two principal platforms for
cell therapy products are being explored: (i) embryonic stem cells (“ESC”), isolated from the inner mass of a few days
old embryo; and (ii) adult stem cells, sourced from bone marrow, cord blood and various organs. Although ESCs are the easiest to
grow and differentiate, their use in human therapy is limited by safety concerns associated with their tendency to develop Teratomas
(a form of tumor) and their potential to elicit an immune reaction. In addition, ESC has generated much political and ethical debate
due to their origin in early human embryos.
Cell therapy using adult stem cells
does not suffer from the same concerns. Bone marrow is the tissue where differentiation of stem cells into blood cells (haematopoiesis)
occurs. In addition, it harbors stem cells capable of differentiation into mesenchymal (muscle, bone, fat and other) tissues. Such
mesenchymal stem cells have also been shown capable of differentiating into nerve, skin and other cells. In fact, bone marrow transplants
have been safely and successfully performed for many years, primarily for treating leukemia, immune deficiency diseases, severe
blood cell diseases, lymphoma and multiple myeloma. Moreover, bone marrow may be obtained through a simple procedure of aspiration,
from the patient himself, enabling autologous cell therapy, thus obviating the need for donor matching, circumventing immune rejection
and other immunological mismatch risks, as well as avoiding the need for immunosuppressive therapy. We believe bone marrow, in
particular autologous bone marrow, capable of
in-vitro
growth and multipotential differentiation, presents a preferable
source of therapeutic stem cells.
Neurodegenerative Diseases
Studies of neurodegenerative diseases
suggest that symptoms that arise in afflicted individuals are secondary to defects in neuron cell function and neural circuitry
and, to date, cannot be treated effectively with systemic drug delivery. Consequently, alternative approaches for treating neurodegenerative
diseases have been attempted, such as transplantation of cells capable of replacing or supplementing the function of damaged neurons.
For such cell replacement therapy to work, implanted cells must survive and integrate, both functionally and structurally, within
the damaged tissue.
Amyotrophic Lateral Sclerosis (ALS)
ALS, often referred to as “Lou
Gehrig's disease,” is a progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord.
Motor neurons reach from the brain to the spinal cord and from the spinal cord to the muscles throughout the body. The progressive
degeneration of the motor neurons in ALS eventually leads to death. As motor neurons degenerate, they can no longer send impulses
to the muscle fibers that normally result in muscle movement. With voluntary muscle action progressively affected, patients in
the later stages of the disease may become completely paralyzed. However, in most cases, mental faculties are not affected.
Approximately 6,000 people in the U.S.
are diagnosed with ALS each year. It is estimated that as many as 30,000 Americans and 100,000 people across the western world
may have the disease at any given time. Consequently, the total estimated cost of treating ALS patients is approximately $1.25
billion per year in the U.S. and $3 billion per year in the western world.
Description
Early symptoms of ALS often include
increasing muscle weakness or stiffness, especially involving the arms and legs, speech, swallowing or breathing.
ALS is most often found in the 40 to
70 year age group with the same incidence as MS. There appear to be more MS sufferers because MS patients tend to live much longer,
some for 30 years or more. The life expectancy of an ALS patient averages about two to five years from the time of diagnosis. However,
up to 10% of ALS patients will survive more than ten years.
Current Treatments
The physician bases medication decisions
on the patient's symptoms and the stage of the disease. Some medications used for ALS patients include:
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Riluzole - the only medication approved by the FDA to slow the progress of ALS. While it does not reverse ALS, Riluzole has been shown to reduce nerve damage. Riluzole may extend the time before a patient needs a ventilator (a machine to assist breathing) and may prolong the patient's life by several months;
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Baclofen or Diazepam - these medications may be used to control muscle spasms, stiffness or tightening (spasticity) that interfere with daily activities; and
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Trihexyphenidyl or Amitriptyline - these medications may help patients who have excess saliva or secretions, and emotional changes.
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Other medications may be prescribed
to help reduce such symptoms as fatigue, pain, sleep disturbances, constipation, and excess saliva and phlegm.
Parkinson’s Disease (PD)
Background
PD is a chronic, progressive disorder,
affecting certain nerve cells, which reside in the Substantia Nigra of the brain and which produce dopamine, a neurotransmitter
that directs and controls movement. In PD, these dopamine-producing nerve cells break down, causing dopamine levels to drop below
the threshold levels and resulting in brain signals directing movement to become abnormal. The cause of the disease is unknown.
Over four million people suffer from
PD in the western world, of whom about 1.5 million are in the United States. In over 85% of cases, PD occurs in people over the
age of 65. Prevalence of PD is increasing in line with the general aging of the population. We believe the markets for pharmaceutical
treatments for PD have a combined value of approximately $4 billion per year. However, these costs are dwarfed when compared to
the total economic burden of the disease, which has been estimated by the National Institute of Neurological Disease (“NINDS”)
to exceed $26 billion annually in the U.S. alone, including costs of medical treatment, caring, facilities and other services,
as well as loss of productivity of both patients and caregivers.
Description
The classic symptoms of PD are shaking
(tremor), stiff muscles (rigidity) and slow movement (Bradykinesia). A person with fully developed PD may also have a stooped posture,
a blank stare or fixed facial expression, speech problems and difficulties with balance or walking. Although highly debilitating,
the disease is not life threatening and an average patient’s life span is approximately 15 years.
Current Treatments
Current drug therapy for PD primarily
comprises dopamine replacement, either directly (levodopa), with dopamine mimetics or by inhibition of its breakdown. Thus, the
current drugs focus on treating the symptoms of the disease and do not presume to provide a cure.
Levodopa, which remains the standard
and most potent PD medication available, has a propensity to cause serious motor response complications (“MRCs”) with
long-term use. Moreover, effective drug dosage often requires gradual increase, leading to more adverse side effects and eventual
resistance to their therapeutic action. This greatly limits patient benefit. Therefore, physicians and researchers are continuously
seeking levodopa-sparing strategies in patients with early-stage disease to delay the need for levodopa, as well as in patients
with late stage disease who no longer respond to therapy.
Prescription drugs to treat PD currently
generate sales of over $1 billion and the market is expected to grow to approximately $4 billion by 2011, driven by the increase
in size of the elderly population and the introduction of new PD therapies that carry a higher price tag than the generic levodopa.
Another method for treating PD is Deep
Brain Stimulation (“DBS”), which consists of transplanting electrodes deep into the brain to provide permanent electrical
stimulation to specific areas of the brain and to cause a delay in the activity in those areas. However, DBS is problematic as
it often causes uncontrollable and severe side effects such as bleeding in the brain, infection and depression. In addition, like
drug therapy, DBS focuses on treating the symptoms of PD and does not provide a cure.
There is a greatly unsatisfied need
for novel approaches towards management of PD. These include development of neurotrophic agents for neuroprotection and/or neurorestoration,
controlling levodopa-induced adverse side effects, developing compounds targeting nondopaminergic systems (e.g., glutamate antagonists)
controlling the motor dysfunction such as gait, freezing, and postural imbalance, treating and delaying the onset of disease-related
dementia and providing simplified dosing regimens.
In addition to the symptomatic drug
development approaches, there is an intense effort to develop cell and gene therapeutic “curative” approaches to restore
the neural function in patients with PD, by (i) replacing the dysfunctional cells with dopamine producing cell transplant, or by
(ii) providing growth factors and proteins, such as glial derived neurotrophic factor (“GDNF”), that can maintain or
preserve the patient’s remaining dopaminergic cells, protecting them from further degeneration. Preclinical evaluation of
cell therapeutic approaches based on transplantation of dopaminergic neurons differentiated
in-vitro
from ESC, have been
successful in ameliorating the Parkinsonian behavior of animal models, as has direct gene therapy with vectors harboring the GDNF
gene. However, these approaches are limited, in the first case, by the safety and ethical considerations associated with use of
ESC, and, in the second case, by the safety risks inherent to gene therapy.
In fact, PD is the first neurodegenerative
disease for which cell transplantation has been attempted in humans, first with adrenal medullary cells and, later, with tissue
grafts from fetal brains. About 300 such fetal transplants have already been performed and some benefits have been observed, mainly
in younger patients. However, this approach is not only impractical but greatly limited by the ethical issues influencing the availability
of human fetuses. The above considerations have led to intensive efforts to define and develop appropriate cells from adult stem
cells.
Company Business Strategy
Our efforts are currently focused on
the development of the technology to upscale the process from the lab stage to the clinical stage, with the following main objectives:
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Operating a GMP compliant production process;
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Demonstrating Safety Tolerability and Therapeutic effect of transplantation of Autologous cultured Bone Marrow Stromal Cells secreting Neurothrophic factors (MSC-NTF) in a Phase I/II Clinical trial in human ALS patients;
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Setting up a centralized facility to provide the therapeutic products and services for transplantation in patients in the US, as part of the clinical development program; and
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Submitting an IND to the FDA
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We intend to develop the NurOwn™
therapeutic technology to reach clinical proof of concept and proceed to commercialization with companies experienced in advanced
clinical development and commercialization. This approach is intended to generate an early inflow of up-front and milestone payments
and to enhance our capacities in regulatory and clinical infrastructure while minimizing expenditure and risk.
We have received interim safety data
for the first ALS patients in our Phase I/II clinical study at the Hadassah Medical Center, in the first quarter of 2012. This
clinical study is expected to be complete within an additional 12 to 15 months. Initial steps have been made for conducting FDA
approved clinical trials in the US. The study is intended to evaluate safety and efficacy of our' cell therapy. We are currently
considering developing our autologous cell therapy for the treatment of an additional Central Nervous System indication. Our clinical
development timeline is subject to a number of risks as described in the section entitled “Risk Factors.”
Company Business Model
Our objective is to have the proprietary
procedure adopted by many medical centers, throughout the U.S., Europe, Israel and East Asia for the treatment of ALS, MS, PD,
and other neurodegenerative diseases. Our intended procedure for supporting the degenerated neurons with healthy cells secreting
Neurotrophic factors derived by differentiation of bone marrow cells, may be among the earliest successes of stem cell technologies
and could be the starting point for a massive market potential in the area of autologous transplantation. A central laboratory
would be responsible for processing bone marrow extracted from patients, enabling the production of the cells required for transplantation.
Transplantation would be carried out by the medical centers, with revenues shared with us on an agreed basis.
We will consider seeking cooperation
with a major strategic marketing partner, having established distribution channels and the ability to gain relatively fast access
to the target markets.
Our approach will be optimized by working
with a major partner. We believe there is a substantial market opportunity and cooperation with strategic partners would facilitate
a more rapid and broad market penetration, by leveraging the partner’s market credibility and the proven ability to provide
service and support across a large and geographically spread target market.
Potential strategic partners include:
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Private Medical Center Chains - interested in expanding their service offerings and being associated with an innovative technology, thereby enhancing their professional standing and revenue potential; and
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Major Pharmaceutical and/or Medical Device Companies - seeking new product opportunities and/or wishing to maintain interest in the market, which may shift away from drugs towards surgical treatment.
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We cannot guarantee that we will succeed
in finding strategic partners that are willing to enter into collaborations for our potential products at the appropriate stage
of development, on economic terms that are attractive to us or at all. We have entered into a Memorandum of Understanding with
the Massachusetts General Hospital and the University of Massachusetts Medical School in anticipation of applying for FDA approval
to begin ALS human clinical trials in the United States.
Our business model calls for
significant investments in research and development. Our research and development expenditures (i) in 2011 (before
participation by the Israeli Office of Chief Scientist) were $2,077,000, which included $388,000 in stock-based compensation
and (ii) in 2010 (before participation by the Israeli Office of Chief Scientist) were $1,385,000, which included $340,000 in
stock-based compensation.
Intellectual Property
We have filed the following patent applications:
WO2004/046348 METHODS, NUCLEIC
ACID CONSTRUCTS AND CELLS FOR TREATING NEURODEGENERATIVE DISORDERS. National phase filings in the United States. Substantive
examination is ongoing in the U.S.
WO2006/134602 ISOLATED CELLS AND POPULATIONS
COMPRISING SAME FOR THE TREATMENT OF CNS DISEASES. National phase filings in the U.S. and Europe. Substantive examination is
ongoing in the U.S. and Europe. A divisional application has been submitted in Europe.
A joint Brainstorm-Ramot patent application
was submitted as PCT:
WO2009/144718 MESENCHYMAL STEM CELLS
FOR THE TREATMENT OF CNS DISEASES
National phase filings in the U.S.,
Europe and Israel. Substantive examination is ongoing in Europe.
The patent applications, as well as
relevant know-how and research results are licensed from Ramot. We intend to work with Ramot to protect and enhance our mutual
intellectual property rights by filing continuations and new patent applications on any improvements and any new discoveries arising
in the course of research and development.
Research and License Agreement with
Ramot
On July 8, 2004, we entered into a Research
and License Agreement (the “Original Ramot Agreement”) with Ramot, the technology licensing company of Tel Aviv University,
which agreement was amended on March 30, 2006 by the Amended Research and License Agreement (described below). Under the terms
of the Original Ramot Agreement, Ramot granted to us an exclusive license to (i) the know-how and patent applications on the above-mentioned
stem cell technology developed by the team led by Prof. Melamed and Prof. Offen, and (ii) the results of further research to be
performed by the same team on the development of the stem cell technology. Simultaneously with the execution of the Original Ramot
Agreement, we entered into individual consulting agreements with Prof. Melamed and Prof. Offen pursuant to which all intellectual
property developed by Prof. Melamed or Prof. Offen in the performance of services thereunder will be owned by Ramot and licensed
to us under the Original Ramot Agreement.
On March 30, 2006, we entered into an
Amended Research and License Agreement (the “Amended Research and License Agreement”) with Ramot. Under the Amended
Research and License Agreement, the funding of further research relating to the licensed technology in an amount of $570,000 per
year was reduced to $380,000 per year. Moreover, under the Amended Research and License Agreement, the initial period of time that
we agreed to fund the research was extended from an initial period of two (2) years to an initial period of three (3) years. The
Amended Research and License Agreement also extended the additional two-year period in the Original Ramot Agreement to an additional
three-year period, if certain research milestones were met. In addition, the Amended Research and License Agreement reduced (i)
certain royalties payments from five percent (5%) to three percent (3%) of all net sales in cases of third party royalties and
(ii) potential payments concerning sublicenses from 30% to 20-25% of sublicense receipts.
We entered into a Second Amended and
Restated Research and License Agreement with Ramot on July 26, 2007. Like the Original Ramot Agreement, the amended license agreement
imposed on us development and commercialization obligations, milestone and royalty payment obligations and other obligations.
In addition, in the event that the “research
period”, as defined in the amended license agreement, was extended for an additional three year period in accordance with
the terms of the amended license agreement, then we had to make payments to Ramot during the first year of the extended research
period in an aggregate amount of $380,000.
On December 24, 2009, we entered into
a Letter Agreement (the “Letter Agreement”) with Ramot, pursuant to which, among other things, Ramot agreed to: (i)
release us from our obligation to fund three years of additional research (which would have totaled $1,140,000); and (ii) accept
1,120,000 shares of our common stock in lieu of $272,000 in past-due amounts. Pursuant to the Letter Agreement,
we agreed, among other things, to: (i) reimburse Ramot for outstanding patent-related expenses; and (ii) abandon our rights in
certain patents of Ramot.
Through March 2011, Ramot sold the 1,120,000
shares of common stock of the Company for $235,000 and we paid the remaining $5,000 due to Ramot. There is no additional debt to
Ramot.
On December 20, 2011, we entered into
an Assignment Agreement with our Israeli Subsidiary (the “Assignment Agreement”). Under the Assignment Agreement,
we assigned and transferred all of our rights, interests, titles, liabilities and obligations (the “Rights”) under
the Second Amended and Restated Research and License Agreement with Ramot to our Israeli Subsidiary, effective as of January 1,
2007 and our Israeli Subsidiary agreed to assume all such Rights. We agreed to be a guarantor of all obligations of
our Israeli Subsidiary under the Second Amended and Restated Research and License Agreement with Ramot and Ramot can look to us
to demand compliance with the License Agreement.
Government Regulations and Supervision
Once fully developed, we intend to market
our bone marrow derived differentiated neurothrophic-factor secreting cell products, NurOwn™, for autologous transplantation
in patients by neurosurgeons in medical facilities in the U.S., Europe, Japan and the Pacific Rim. Accordingly, we believe our
research and development activities and the manufacturing and marketing of our technology are subject to the laws and regulations
of governmental authorities in the United States and other countries in which our technology and products will be marketed. Specifically,
in the U.S., the FDA, among other agencies, regulates new biological product approvals (“BLA”) to establish safety
and efficacy, as well as appropriate production of these products. Governments in other countries have similar requirements for
testing and marketing.
As we are currently in the research
and development stage of our technology and NurOwn™ cell product, we have initiated the process of seeking regulatory approval
from the FDA. We have retained/recruited expert regulatory consultants and employees to assist us in our approaches to the FDA.
In our efforts to obtain regulatory approval, we will request a pre-Investigational New Drug (“IND”) meeting with the
FDA. We are also engaging a regulatory consultant to assist us with the regulatory authorities in Israel.
In February 2011, the FDA granted Orphan
Drug designation to our NurOwn™ autologous adult stem cell product candidate for the treatment of ALS. Orphan Drug status
entitles us to seven years of marketing exclusivity for NurOwn™ upon regulatory approval, as well as the opportunity to apply
for grant funding from the FDA of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits
for clinical research expenses and potential exemption from the FDA's application user fee.
Regulatory Process in the United
States
Regulatory approval of new biological
products is a lengthy procedure leading from development of a new product through pre-clinical animal testing and clinical studies
in humans. This process is regulated by the FDA, may take a number of years, and requires the expenditure of significant resources.
The Orphan Drug designation we have recently been granted by the FDA will no doubt assist us through the regulatory process. However,
there can be no assurance that our technology will ultimately receive regulatory approval. We summarize below our understanding
of the regulatory approval requirements that may be applicable to us if we pursue the process of seeking an approval from the FDA.
The Federal Food, Drug, and Cosmetic
Act and other federal statutes and regulations govern or influence the research, testing, manufacture, safety, labeling, storage,
record-keeping, approval, distribution, use, reporting, advertising and promotion of our future products. Non-compliance with applicable
requirements can result in civil penalties, recall, injunction or seizure of products, refusal of the government to approve or
clear product approval applications or to allow us to enter into government supply contracts, withdrawal of previously approved
applications and criminal prosecution.
The FDA has developed and is continuously
updating the requirements with respect to cell and gene therapy products and has issued documents concerning the regulation of
cellular and tissue-based products, as new biological products. In order to file for a BLA, we will be required to develop our
stem cell product in accordance with the regulatory guidelines for cell therapy and manufacture the cell products under GMP. GMP,
or Good Manufacturing Practice, is a standard set of guidelines for pharmaceutical and bio-pharmaceutical production operations
and facilities by the FDA and other health regulatory authorities, which apply caution in allowing any biologically active material
to be administered into the human body.
Although there can be no assurance that
the FDA will not choose to change its regulations, current regulation proposes that cell products which are manipulated, allogeneic,
or as in our case, autologous but intended for a different purpose than the natural source cells (NurOwn™ are bone marrow
derived and are intended for transplantation into the spinal cord, brain or into the muscles) must be regulated through a "tiered
approach intended to regulate human cellular and tissue based products only to the extent necessary to protect public health".
Thus the FDA requires: (i) preclinical laboratory and animal testing; (ii) submission of an IND exemption which must be in effect
prior to the initiation of human clinical studies; (iii) adequate and well-controlled clinical trials to establish the safety and
efficacy of the product for its intended use; (iv) submission to the FDA of a BLA; and (v) review and approval of the BLA as well
as inspections of the manufacturing facility for GMP compliance, prior to commercial marketing of the product.
Generally, in seeking an approval from
the FDA for sale of a new medical product, an applicant must submit proof of safety and efficacy. Such proof entails extensive
pre-clinical studies in the lab and in animals and, if approved by the agency, in humans. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and may take several years to complete. There can be
no assurance that the FDA will act favorably or in a timely manner in reviewing submitted applications, and an applicant may encounter
significant difficulties or costs in its efforts to obtain FDA approvals. This, in turn, could delay or preclude the applicant
from marketing any products it may develop. The FDA may also require post-marketing testing and surveillance of approved products,
or place other conditions on the approvals. These requirements could cause it to be more difficult or expensive to sell the products,
and could therefore restrict the commercial applications of such products. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial marketing. For patented technologies, delays imposed
by the governmental approval process may materially reduce the period during which an applicant will have the exclusive right to
exploit such technologies.
In order to conduct clinical trials
of the proposed product, the manufacturer or distributor of the product will have to file an IND submission with the FDA for its
approval to commence human clinical trials. The submission must be supported by data, typically including the results of pre-clinical
and laboratory testing. Following submission of the IND, the FDA has 30 days to review the application and raise safety and other
clinical trial issues. If an applicant is not notified of objections within that period, clinical trials may be initiated at a
specified number of investigational sites with the number of patients, as applied. Clinical trials which are to be conducted in
accordance with Good Clinical Practice (“GCP”) guidelines are typically conducted in three sequential phases. Phase
I represents the initial administration of the drug or biologic to a small group of humans, either healthy volunteers or patients,
to test for safety and other relevant factors. Phase II involves studies in a small number of patients to explore the efficacy
of the product, to ascertain dose tolerance and the optimal dose range and to gather additional data relating to safety and potential
adverse affects. Once an investigational drug is found to have some efficacy and an acceptable safety profile in the targeted patient
population, multi-center Phase III studies are initiated to establish safety and efficacy in an expanded patient population and
multiple clinical study sites. The FDA reviews both the clinical plans and the results of the trials and may request an applicant
to discontinue the trials at any time if there are significant safety issues.
In addition, the manufacturer of our
cell therapy product, whether it is performed in-house or by a contract manufacturer, should be registered as a biologic product
manufacturer with the FDA product approval process. The FDA may inspect the production facilities on a routine basis for compliance
with the GMP and Good Tissue Practice (“GTP”) guidelines for cell therapy products. The regulations of the FDA require
that we, and/or any contract manufacturer, design, manufacture and service products and maintain documents in the prescribed manner
with respect to manufacturing, testing, distribution, storage, design control and service activities. The FDA may prohibit a company
from promoting an approved product for unapproved applications and reviews product labeling for accuracy.
Compliance with Environmental, Health
and Safety Laws
In addition to FDA regulations, we are
also subject to evolving federal, state and local environmental, health and safety laws and regulations. In the past, compliance
with environmental, health and safety laws and regulations has not had a material effect on our capital expenditures. We believe
that we comply in all material respects with existing environmental, health and safety laws and regulations applicable to us. Compliance
with environmental, health and safety laws and regulations in the future may require additional capital expenditures.
Competition
We face significant competition in our
efforts to develop our products and services, including: (i) cell therapies competing with NurOwn™ and its applications and
(ii) other treatments or procedures to cure or slow the effects of ALS, PD and other neurodegenerative diseases. There are a number
of companies developing cell therapies for ALS, among them are companies that are involved in the controversial fetal cell transplant
or ESC-derived cell therapy, as well as companies developing adult stem cells. Other companies are developing traditional chemical
compounds, new biological drugs, cloned human proteins and other treatments, which are likely to impact the markets, which we intend
to target. We believe that as an autologous bone marrow derived product that has shown proof of concept
in-vitro
and in
animal studies, NurOwn™ has a first mover advantage in the adult stem cell space and such space has competitive advantages
over the fetal cell or ESC-derived cell space as it has a long safety record and does not have the same ethical limitations.
Employees
We currently have 13 scientific and
administrative employees, 8 of whom are full-time. None of our employees is represented by a labor union and we believe that we
have good relationships with our employees.
WHERE YOU CAN FIND MORE INFORMATION
We maintain a website at www.brainstorm-cell.com. We make
available through our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file
those reports with, or furnish them to, the Securities and Exchange Commission. We also similarly make available, free of charge
through our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16
under the Exchange Act. We are not including the information contained at www.brainstorm-cell.com or at any other Internet address
as part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Item 1A. RISK FACTORS.
We operate in a rapidly changing environment that involves
a number of risks, some of which are beyond our control. Forward-looking statements in this report and those made from time to
time by us through our senior management are made under the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements concerning the expected future revenues, earnings or financial results or concerning project
plans, performance, or development of products and services, as well as other estimates related to future operations are necessarily
only estimates of future results and there can be no assurance that actual results will not materially differ from expectations.
Forward-looking statements represent management’s current expectations and are inherently uncertain. We do not undertake
any obligation to update forward-looking statements. If any of the following risks actually occurs, our financial condition and
operating results could be materially adversely affected.
Risks related to our business
We need to raise additional capital. If we are unable
to raise additional capital on favorable terms and in a timely manner, we will not be able to execute our business plan and we
could be forced to restrict or cease our operations.
We will need to raise additional funds to meet our anticipated expenses
so that we can execute our business plan. We expect to incur substantial and increasing net losses for the foreseeable future as
we increase our spending to execute our development programs. Our auditors have expressed in their audit report that there is substantial
doubt regarding our ability to continue as a going concern.
The amount of financing required will depend on many factors
including our financial requirements to fund our research and clinical trials, and our ability to secure partnerships and achieve
partnership milestones as well as to fund other working capital requirements. Our ability to access the capital markets or to enlist
partners is mainly dependent on the progress of our research and development and regulatory approval of our products.
Assuming we raise additional funds through the issuance of
equity, equity-related or debt securities, these securities may have rights, preferences or privileges (including registrations
rights) senior to those of the rights of our common stock and our stockholders will experience additional dilution.
Our business in the foreseeable future will be based
on technology licensed from Ramot and if this license were to be terminated upon failure to make required royalty payments in the
future, we would need to change our business strategy and we may be forced to cease our operations.
Agreements we and our
Israeli Subsidiary have with Ramot impose on us royalty payment obligations. If we fail to comply with these obligations,
Ramot may have the right to terminate the license. If Ramot elects to terminate our license, we would need to change our
business strategy and we may be forced to cease our operations. We currently do not owe Ramot any overdue payments.
Our company has a history of losses and we expect to
incur losses for the foreseeable future.
As a development stage company, we are in the early stages of executing our business
plan. We had no revenues for the fiscal years ended December 31, 2011 or December 31, 2010. Our ability to operate successfully
is materially uncertain and our operations are subject to significant risks inherent in a developing business enterprise. We are
currently in the process of introducing the Company to strategic partners. In the upcoming three years, the Company will focus
on clinical trials. We are unable at this time to foresee when we will generate revenues from strategic partnerships or otherwise.
Furthermore, we expect to incur substantial and increasing operating losses for the next several years as we increase our spending
to execute our development programs. These losses are expected to have an adverse impact on our working capital, total assets and
stockholders’ equity, and we may never achieve profitability.
Our product development programs are based on novel
technologies and are inherently risky.
We are subject to the risks of failure inherent in the development
of products based on new technologies. The novel nature of our stem cell therapy creates significant challenges with regard to
product development and optimization, manufacturing, government regulations, and market acceptance. For example, the FDA has relatively
limited experience with stem cell therapies. None have been approved by them for commercial sale, and the pathway to regulatory
approval for our cell therapy product candidates may accordingly be more complex and lengthy. As a result, the development and
commercialization pathway for our therapies may be subject to increased uncertainty, as compared to the pathway for new conventional
drugs.
We are faced with uncertainties related to our research.
Our research programs
are based on scientific hypotheses and experimental approaches that may not lead to desired results. In addition, the timeframe
for obtaining proof of principle and other results may be considerably longer than originally anticipated, or may not be possible
given time, resource, financial, strategic and collaborator scientific constraints. Success in one stage of testing is not necessarily
an indication that the particular program will succeed in later stages of testing and development. It is not possible to predict,
based upon studies in in-vitro models and in animals, whether any of the therapies designed for these programs will prove to be
safe, effective, and suitable for human use. Each therapy will require additional research and development, scale-up, formulation
and extensive clinical testing in humans. Unsatisfactory results obtained from a particular study relating to a program may cause
the Company to abandon its commitment to that program or to the lead therapy or product candidate being tested. The discovery of
unexpected toxicities, lack of sufficient efficacy, unacceptable pharmacology, inability to increase scale of manufacture, market
attractiveness, regulatory hurdles, competition, as well as other factors, may make our targets, lead therapies or product candidates
unattractive or unsuitable for human use, and we may abandon our commitment to that program, target, lead therapy or product candidate.
In addition, preliminary results seen in animal and/or limited human testing may not be substantiated in larger controlled clinical
trials.
The field of stem cell therapy is relatively new and
our development efforts may not yield an effective treatment of human diseases.
Except for bone marrow transplants for
neoplastic disease, the field of stem cell therapy remains largely untested in the clinical setting. Our intended cell therapeutic
treatment methods for ALS involve a new approach that has not yet been proven to work in humans. We are currently conducting Phase
I/II clinical trials for ALS, which, together with other stem cell therapies, may ultimately prove ineffective in treatment of
human diseases. If we cannot successfully implement our NurOwnTM stem cell therapy in human testing, we would need to change our
business strategy and we may be forced to change our operations.
A significant
global market for our services has yet to emerge.
Very few companies
have been successful in their efforts to develop and commercialize a stem cell product.
We believe that there will be many
different applications for products successfully derived from our technologies and that the anticipated market for products under
development will continue to expand. No assurance, however, can be given that these beliefs will prove to be correct due to competition
from existing or new products and the yet to be established commercial viability of our products.
Stem
cell products in general may be susceptible to various risks, including undesirable and unintended side effects, unintended immune
system responses, inadequate therapeutic efficacy, or other characteristics that may prevent or limit their approval or commercial
use. The demand for stem cell processing and the number of people who may use cell or tissue-based therapies is difficult to forecast.
As there are no real experts who can forecast this market with accuracy, there is limited data from which the future use of our
services may be forecasted.
Physicians, patients, formularies, third party payers or the medical community in general may
not accept or utilize any products that the Company or its collaborative partners may develop.
Our success is dependent on the establishment of a large global market for our products and services and our ability to capture
a share of this market.
We have limited experience in conducting and managing
clinical trials and the application process necessary to obtain regulatory approvals
. Our limited experience in conducting
and managing clinical trials and the application process necessary to obtain regulatory approvals might prevent us from successfully
designing or implementing a preclinical study or clinical trial. Cell-based therapy products, in general, may be susceptible to
various risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy
or other characteristics that may prevent or limit their approval by regulators or commercial use. Many companies in the industry
have suffered significant setbacks in advanced clinical trials, despite promising results in earlier trials. If our clinical trials
are unsuccessful, or if we do not complete our clinical trials, we may not receive regulatory approval for or be able to commercialize
our product candidates.
If we do not succeed in conducting and managing our preclinical
development activities or clinical trials, or in obtaining regulatory approvals, we might not be able to commercialize our product
candidates, or might be significantly delayed in doing so, which will materially harm our business.
Our ability to generate revenues from any of our product
candidates will depend on a number of factors, including our ability to successfully complete clinical trials, obtain necessary
regulatory approvals and implement our commercialization strategy. We may, and anticipate that we will need to, transition from
a company with a research and development focus to a company capable of supporting commercial activities and we may not succeed
in such a transition.
We may not be able to secure and maintain research
institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical
trials. Specifically, the limited number of centers experienced with cell therapy product candidates heightens our dependence on
such research institutions. Our reliance upon research institutions, including hospitals and clinics, provides us with less control
over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreements with suitable
research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to quickly replace the
research institution with another qualified institution on acceptable terms. Furthermore, we may not be able to secure and maintain
suitable research institutions to conduct our clinical trials.
We are subject to a strict regulatory environment.
If we fail to obtain and maintain required regulatory approvals for our potential cell therapy products, our ability to commercialize
our potential cell therapy products will be severely limited.
None of our product
candidates have received regulatory approval for commercial sale.
Numerous statutes and
regulations govern human testing and the manufacture and sale of human therapeutic products in the United States and other countries
where we intend to market our products. Such legislation and regulation bears upon, among other things, the approval of protocols
and human testing, the approval of manufacturing facilities, testing procedures and controlled research, review and approval of
manufacturing, preclinical and clinical data prior to marketing approval including adherence to GMP during production and storage
as well as regulation of marketing activities including advertising and labeling.
The completion of the
clinical testing of our product candidates and the obtaining of required approvals are expected to take several years and require
the expenditure of substantial resources.
We may experience numerous unforeseen events during, or as a result of, the clinical
trial process that could delay or prevent regulatory approval and/or commercialization of our product candidates, including the
following:
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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;
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Officials at the MOH, the FDA or similar foreign regulatory authorities may interpret data from preclinical studies and clinical trials differently than we do;
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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;
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The MOH, the FDA or similar foreign regulatory authorities may change their approval policies or adopt new regulations;
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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;
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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;
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We may experience difficulties in managing multiple clinical sites;
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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
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We may be unable to manufacture or obtain from third party manufacturers sufficient quantities of our product candidates for use in clinical trials.
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Investors should be
aware of the risks, problems, delays, expenses and difficulties which may be encountered by us in light of the extensive regulatory
environment in which our business operates.
In particular, our development costs will increase if we have material delays
in our clinical trials, or if we are required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct
our clinical trials properly and on schedule, marketing approval may be delayed or denied by the MOH or the FDA.
Even if a product candidate
is approved by the MOH, the FDA or any other regulatory authority, we may not obtain approval for an indication whose market is
large enough to recoup our investment in that product candidate. We may never obtain the required regulatory approvals for any
of our product candidates. Later discovery of previously unknown problems with a product, manufacturer or facility may result in
restrictions on the product or manufacturer, including a withdrawal of the product from the market.
Even if regulatory approvals are obtained for our product
candidates, we will be subject to ongoing government regulation.
If we or one or more of
our partners or collaborators fail to comply with applicable current and future laws and government regulations, our business and
financial results could be adversely affected.
The healthcare industry
is one of the most highly regulated industries in the United States. The federal government, individual state and local governments
and private accreditation organizations all oversee and monitor the activities of individuals and businesses engaged in the delivery
of health care products and services.
Even if regulatory authorities approve any of our human therapeutic product candidates,
current laws, rules and regulations that could directly or indirectly affect our ability
and the ability of our strategic partners and customers to operate each of their businesses could include, without limitation,
the following:
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State and local licensing, registration and regulation of laboratories, the collection, processing and storage of human cells and tissue, and the development and manufacture of pharmaceuticals and biologics;
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The federal Clinical Laboratory Improvement Act and amendments of 1988;
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Laws and regulations administered by the FDA, including the Federal Food Drug and Cosmetic Act and related laws and regulations;
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The Public Health Service Act and related laws and regulations;
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Laws and regulations administered by the United States Department of Health and Human Services, including the Office for Human Research Protections;
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State laws and regulations governing human subject research;
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Occupational Safety and Health requirements; and
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State and local laws and regulations dealing with the handling and disposal of medical waste.
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Compliance with such regulation may be expensive and consume
substantial financial and management resources. If we, or any future marketing collaborators or contract manufacturers, fail to
comply with applicable regulatory requirements, we may be subject to sanctions including fines, product recalls or seizures, injunctions,
total or partial suspension of production, civil penalties, withdrawal of regulatory approvals and criminal prosecution. Any of
these sanctions could delay or prevent the promotion, marketing or sale of our products.
We are subject to environmental, health and safety
laws.
We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing
practices, the experimental use of animals and humans, emissions and wastewater discharges, and the use and disposal of hazardous
or potentially hazardous substances used in connection with our research. We also cannot accurately predict the extent of regulations
that might result from any future legislative or administrative action. Any of these laws or regulations could cause us to incur
additional expense or restrict our operations.
Compliance with environmental laws and regulations may be
expensive, and current or future environmental regulations may impair our research, development or production efforts.
Our success will
depend in part on establishing and maintaining effective strategic partnerships and collaborations, which may impose restrictions
on our business and subject us to additional regulation.
A key aspect of our
business strategy is to establish strategic relationships in order, to expand or complement our research and development or commercialization
capabilities, and to reduce the cost of research and development. There can be no assurance that we will enter into such relationships,
that the arrangements will be on favorable terms or that such relationships will be successful.
If we are ultimately successful
in executing our strategy of securing collaborations with companies that would undertake advanced clinical development and commercialization
of our products, we may not have day-to-day control over their activities. Any such collaborator may adhere to criteria for determining
whether to proceed with a clinical development program under circumstances where we might have continued such a program. Potential
collaborators may have significant discretion in determining the efforts and amount of resources that they dedicate to our collaborations
or may be unwilling or unable to fulfill their obligations to us, including their development and commercialization. Potential
collaborators may underfund or not commit sufficient resources to the testing, marketing, distribution or other development of
our products. They may also not properly maintain or defend our intellectual property rights or they may utilize our proprietary
information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or
expose us to potential liability. Potential collaboration partners may have the right to terminate the collaboration on relatively
short notice and if they do so or if they fail to perform or satisfy their obligations to us, the development or commercialization
of products would be delayed and our ability to realize any potential milestone payments and royalty revenue would be adversely
affected.
We face competition in our efforts to develop cell
therapies for ALS and other neurodegenerative diseases.
We face competition in our efforts to develop cell therapies
and other treatment or procedures to cure or slow the effects of ALS and other neurodegenerative diseases. Among our competitors
are companies that are involved in the fetal cell transplant or embryonic stem cell derived cell therapy and companies developing
adult stem cells. Other companies are developing traditional chemical compounds, new biological drugs, cloned human proteins and
other treatments, which are likely to impact the markets that we intend to target. Some of our competitors possess longer operating
histories and greater financial, managerial, scientific and technical resources than we do and some possess greater name recognition
and established customer bases. Some also have significantly more experience in preclinical testing, human clinical trials, product
manufacturing, the regulatory approval process and marketing and distribution than we do.
The trend towards consolidation in the pharmaceutical
and biotechnology industries may adversely affect us.
There is a trend towards
consolidation in the pharmaceutical and biotechnology industries. This consolidation trend may result in the remaining companies
having greater financial resources and discovery technological capabilities, thus intensifying competition in these industries.
This trend may also result in fewer potential collaborators or licensees for our therapeutic product candidates. Also, if a consolidating
company is already doing business with our competitors, we may lose existing licensees or collaborators as a result of such consolidation.
There is a scarcity of experienced professionals in
the field of cell therapy and we may not be able to retain key personnel or hire new key personnel needed to implement our business
strategy and develop our products and businesses. If we are unable to retain or hire key personnel, we may be unable to continue
to grow our business or to implement our business strategy, and our business may be materially and adversely affected.
Given the specialized
nature of cell therapy and the fact that it is a young field, there is an inherent scarcity of experienced personnel in the field.
Our success depends on a significant extent to the continued services of certain highly qualified scientific and management
personnel. We face competition for qualified personnel from numerous industry sources, and there can be no assurance
that we will be able to attract and retain qualified personnel on acceptable terms. The loss of service of any of our
key personnel could have a material adverse effect on our operations or financial condition. In the event of the loss
of services of such personnel, no assurance can be given that we will be able to obtain the services of adequate replacement personnel. We
do not have key person life insurance on all of our key personnel.
The future success of
the Company also depends upon our ability to attract and retain additional qualified personnel (including medical, scientific,
technical, commercial, business and administrative personnel) necessary to support our anticipated growth, develop our business,
and maintain appropriate licensure, on acceptable terms. There can be no assurance that we will be successful in attracting or
retaining personnel required by us to continue and grow our operations. The loss of a key employee, the failure of a key employee
to perform in his or her current position or our inability to attract and retain skilled employees, as needed, could result in
our inability to continue to grow our business or to implement our business strategy, or may have a material adverse effect on
our business, financial condition and results of operations.
Technological
and medical developments or improvements in conventional therapies could render the use of stem cells and our services and planned
products obsolete.
The pharmaceutical
industry is characterized by rapidly changing markets, technology, emerging industry standards and frequent introduction of new
products. The introduction of new products embodying new technologies, including new manufacturing processes, and the emergence
of new industry standards may render our technologies obsolete, less competitive or less marketable. Advances in other treatment
methods or in disease prevention techniques could significantly reduce or entirely eliminate the need for our stem cell services,
planned products and therapeutic efforts. Additionally, technological or medical developments may materially alter the commercial
viability of our technology or services, and require us to incur significant costs to replace or modify equipment in which we have
a substantial investment. In either event, we may experience a material adverse effect on our business, results of operations and
financial condition.
If Ramot is unable to obtain patents on the patent
applications and technology exclusively licensed to our Israeli Subsidiary or if patents are obtained but do not provide meaningful
protection, we may not be able to successfully market our proposed products.
We rely upon the patent application filed
by Ramot and the license granted to us and our Israeli Subsidiary by Ramot under the Research and License Agreement (the “Original
Ramot Agreement”), dated as of July 8, 2004, with Ramot, the technology licensing company of Tel Aviv University. We agreed
under the Original Ramot Agreement to seek comprehensive patent protection for all inventions licensed to us under the Original
Ramot Agreement. No assurance can be given that any of our pending or future patent applications will be approved, that the scope
of any patent protection granted will exclude competitors or provide us with competitive advantages, that any of the patents that
may be issued to us will be held valid if subsequently challenged, or that other parties will not claim rights to or ownership
of our patents or other proprietary rights that we hold. Furthermore, there can be no assurance that others have not
developed or will not develop similar products, duplicate any of our technology or products or design around any patents that have
been or may be issued to us or any future licensors. Since patent applications in the United States and in Europe are
not disclosed until applications are published, there can be no assurance that others did not first file applications for products
covered by our pending patent applications, nor can we be certain that we will not infringe any patents that may be issued to others.
We also rely upon unpatented proprietary technology, know-how
and trade secrets and seek to protect them through confidentiality agreements with employees, consultants and advisors. If these
confidentiality agreements are breached, we may not have adequate remedies for the breach. In addition, others may independently
develop or otherwise acquire substantially the same proprietary technology as our technology and trade secrets.
We may be unable to protect our intellectual property
from infringement by third parties.
Despite our efforts
to protect our intellectual property, third parties may infringe or misappropriate our intellectual property. Our competitors may
also independently develop similar technology, duplicate our processes or services or design around our intellectual property rights.
We may have to litigate to enforce and protect our intellectual property rights to determine their scope, validity or enforceability.
Intellectual property litigation is costly, time-consuming, diverts the attention of management and technical personnel and could
result in substantial uncertainty regarding our future viability. The loss of intellectual property protection or the inability
to secure or enforce intellectual property protection would limit our ability to develop or market our services in the future.
This would also likely have an adverse effect on the revenues generated by any sale or license of such intellectual property. Furthermore,
any public announcements related to such litigation or regulatory proceedings could adversely affect the price of our common stock.
Third parties may claim that we infringe on their intellectual
property.
We may be subject to
costly litigation in the event our technology is claimed to infringe upon the proprietary rights of others. Third parties may have,
or may eventually be issued, patents that would be infringed by our technology. Any of these third parties could make a claim of
infringement against us with respect to our technology. We may also be subject to claims by third parties for breach of copyright,
trademark or license usage rights. Litigation and patent interference proceedings could result in substantial expense to us and
significant diversion of efforts by our technical and management personnel. An adverse determination in any such proceeding or
in patent litigation could subject us to significant liabilities to third parties or require us to seek licenses from third parties.
Such licenses may not be available on acceptable terms or at all. Adverse determinations in a judicial or administrative proceeding
or failure to obtain necessary licenses could prevent us from commercializing our products, which would have a material adverse
affect on our business, results of operations and financial condition.
As a result of our reliance on consultants, we may
not be able to protect the confidentiality of our technology, which, if disseminated, could negatively impact our plan of operations.
We currently have relationships with two academic consultants who are not employed by us, and we may enter into additional relationships
of such nature in the future. We have limited control over the activities of these consultants and can expect only limited amounts
of their time to be dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other
entities that may conflict with or compete with their obligations to us. Our consultants typically sign agreements that provide
for confidentiality of our proprietary information and results of studies. However, in connection with every relationship, we may
not be able to maintain the confidentiality of our technology, the dissemination of which could hurt our competitive position and
results of operations. To the extent that our scientific consultants develop inventions or processes independently that may be
applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, we may
expend significant resources in such disputes and we may not win those disputes.
It is uncertain
to what extent the government, private health insurers and third-party payers will approve coverage or provide reimbursement for
the therapies and products to which our services relate. Availability for such reimbursement may be further limited by an increasing
uninsured population and reductions in Medicare and Medicaid funding in the United States.
Our ability to successfully commercialize our human therapeutic
products will depend significantly on our ability to obtain acceptable prices and the availability of reimbursement to the patient
from third-party payers, such as government and private insurance plans. While we have not commenced discussions with any such
parties, these third-party payers frequently require companies to provide predetermined discounts from list prices, and they are
increasingly challenging the prices charged for pharmaceuticals and other medical products. Our human therapeutic products may
not be considered cost-effective, and reimbursement to the patient may not be available or sufficient to allow us to sell our products
on a competitive basis.
Further, as cost containment pressures are increasing in the health
care industry, government and private payers adopt strategies designed to limit the amount of reimbursement paid to health care
providers. Such cost containment measures may include:
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Reducing reimbursement rates;
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Challenging the prices charged for medical products and services;
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Limiting services covered;
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Decreasing utilization of services;
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Negotiating prospective or discounted contract pricing;
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Adopting capitation strategies; and
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Seeking competitive bids.
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Similarly, the trend
toward managed health care and bundled pricing for health care services in the United States could significantly influence the
purchase of healthcare services and products, resulting in lower prices and reduced demand for our therapies.
We may not be able to negotiate favorable reimbursement rates
for our human therapeutic products. If we fail to obtain acceptable prices or an adequate level of reimbursement for our products,
the sales of our products would be adversely affected or there may be no commercially viable market for our products.
Unintended consequences of recently adopted health
reform legislation in the U.S. may adversely affect our business.
The healthcare industry
is undergoing fundamental changes resulting from political, economic and regulatory influences. In the U.S., comprehensive programs
are under consideration that seek to, among other things, increase access to healthcare for the uninsured and control the escalation
of healthcare expenditures within the economy. On March 23, 2010, health reform legislation was approved by Congress and has been
signed into law. While we do not believe this legislation will have a direct impact on our business, the legislation has only recently
been enacted and requires the adoption of implementing regulations, which may have unintended consequences or indirectly impact
our business. For instance, the scope and implications of the recent amendments pursuant to the Fraud Enforcement and Recovery
Act of 2009 have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives
may impact our business. Also, in some instances our clients may be health insurers that will be subject to limitations on their
administrative expenses and new federal review of “unreasonable” rate increases which could impact the prices they
pay for our services. If the legislation causes such unintended consequences or indirect impact, it could have a material adverse
effect on our business, financial condition and results of operations.
Ethical and other concerns surrounding the use of stem
cell therapy may negatively impact the public perception of our stem cell services, thereby suppressing demand for our services.
Although our stem cell
business pertains to adult stem cells only, and does not involve the more controversial use of embryonic stem cells, the use of
adult human stem cells for therapy could give rise to similar ethical, legal and social issues as those associated with embryonic
stem cells, which could adversely affect its acceptance by consumers and medical practitioners. Additionally, it is possible that
our business could be negatively impacted by any stigma associated with the use of embryonic stem cells if the public fails to
appreciate the distinction between adult and embryonic stem cells. Delays in achieving public acceptance may materially and adversely
affect the results of our operations and profitability.
We are exposed to fluctuations in currency exchange
rates.
A significant portion
of our business, particularly our research and development, is conducted outside the United States. Therefore, we are exposed to
currency exchange fluctuations in other currencies such as the New Israeli Shekels (“NIS”) and the Euro. Moreover,
a portion of our expenses in Israel and Europe are paid in NIS and Euros, respectively, which subjects us to the risks of foreign
currency fluctuations. Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease
payments on our Israeli facilities.
The dollar cost of our operations in Israel will increase
to the extent increases in the rate of inflation in Israel are not offset by a devaluation of the NIS in relation to the dollar,
which would harm our results of operations.
Since a considerable
portion of our expenses such as employees' salaries are linked to an extent to the rate of inflation in Israel, the dollar cost
of our operations is influenced by the extent to which any increase in the rate of inflation in Israel is or is not offset by the
devaluation of the NIS inrelation to the dollar. As a result, we are exposed to the risk that the NIS, after adjustment for inflation
in Israel, will appreciate in relation to the dollar. In that event, the dollar cost of our operations in Israel will increase
and our dollar-measured results of operations will be adversely affected. During the past few years inflation-adjusted NIS appreciated
against the dollar, which raised the dollar cost of our Israeli operations. We cannot predict whether the NIS will appreciate against
the dollar or vice versa in the future. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely
basis by a devaluation of the NIS in relation to the dollar, will increase labor and other costs, which will increase the dollar
cost of our operations in Israel and harm our results of operations.
We may be subject to significant product liability
claims and litigation which could adversely affect our future earnings and financial condition.
Our business exposes
us to potential product liability risks inherent in the testing, processing and marketing of stem cell therapy products. Specifically,
the conduct of clinical trials in humans involves the potential risk that the use of our stem cell therapy products will result
in adverse effects. Such liability claims may be expensive to defend and result in large judgments against us. We currently maintain
liability insurance for our clinical trials; however such liability insurance may not be adequate to fully cover any liabilities
that arise from clinical trials of our stem cell therapy products. We also maintain errors and omissions, directors and officers,
workers’ compensation and other insurance appropriate to our business activities. If we were to be subject to a claim in
excess of this coverage or to a claim not covered by our insurance and the claim succeeded, we would be required to pay the claim
from our own limited resources, which could have a material adverse effect on our financial condition, results of operations and
business. Additionally, liability or alleged liability could harm our business by diverting the attention and resources of our
management and damaging our reputation and that of our subsidiaries.
Political, economic and military instability in Israel
may impede our ability to execute our plan of operations.
Our principal operations and the research and development
facilities of the scientific team funded by us under the Original Ramot Agreement are located in Israel. Accordingly, political,
economic and military conditions in Israel may affect our business. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have occurred between Israel and its Arab neighbors.
Acts of random terrorism
periodically occur which could affect our operations or personnel.
Ongoing or revived hostilities or other factors related
to Israel could harm our operations and research and development process and could impede our ability to execute our plan of operations.
In addition, Israeli-based
companies and companies doing business with Israel have been the subject of an economic boycott by members of the Arab League and
certain other predominantly Muslim countries since Israel's establishment. Although Israel has entered into various
agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with
efforts to resolve some of the economic and political problems in the Middle East, we cannot predict whether or in what manner
these problems will be resolved. Wars and acts of terrorism have resulted in damage to the Israeli economy, including reducing
the level of foreign and local investment.
Furthermore, certain
of our officers and employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being
called up for active military duty at any time. Israeli citizens who have served in the army may be subject to an obligation
to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service.
Risks related to our common stock
The price of our stock is expected to be volatile.
The market price of our common stock has fluctuated significantly, and is likely to continue to be highly volatile. To date, the
trading volume in our stock has been relatively low and significant price fluctuations can occur as a result. An active public
market for our common stock may not continue to develop or be sustained. If the low trading volumes experienced to date continue,
such price fluctuations could occur in the future and the sale price of our common stock could decline significantly. Investors
may therefore have difficulty selling their shares.
Your percentage ownership will be diluted by future
issuances of our securities.
In order to meet our financing needs, we may issue additional significant amounts of our common
stock and warrants to purchase shares of our common stock. The precise terms of any future financings will be determined by us
and potential investors and such future financings may also significantly dilute your percentage ownership in the Company.
ACCBT Corp. holds equity participation rights
that could affect our ability to raise funds.
Pursuant to the subscription agreement with ACCBT Corp., a company under
the control of Mr. Chaim Lebovits, our President, we granted ACCBT Corp. the right to acquire additional shares of our common stock
whenever we issue additional shares of common stock or other securities of the Company, or options or rights to purchase shares
of the Company or other securities directly or indirectly convertible into or exercisable for shares of the Company (including
shares of any newly created class or series). This participation right could limit our ability to enter into equity financings
and to raise funds from third parties. ACCBT Corp. is entitled to purchase its pro rata share of any additional securities we offer,
so that its percentage ownership of the Company remains the same after any such issuance of additional securities. Such additional
securities will be offered to ACCBT Corp. at the same price and on the same terms as the other investors in the transaction. ACCBT
Corp. will have 30 days from the date of our notice to ACCBT Corp. of any intended transaction, to decide whether it wishes to
exercise its participation rights in the transaction.
You may experience difficulties in attempting to enforce
liabilities based upon U.S. federal securities laws against us and our non-U.S. resident directors and officers.
Our principal
operations are located through our subsidiary in Israel and our principal assets are located outside the U.S. Our Chief Executive
Officer, Chief Financial Officer, and some of our directors are foreign citizens and do not reside in the U.S. It may be difficult
for courts in the U.S. to obtain jurisdiction over our foreign assets or these persons and as a result, it may be difficult or
impossible for you to enforce judgments rendered against us or our directors or executive officers in U.S. courts. Thus, should
any situation arise in the future in which you have a cause of action against these persons or entities, you are at greater risk
in investing in our Company rather than a domestic company because of greater potential difficulties in bringing lawsuits or, if
successful, collecting judgments against these persons or entities as opposed to domestic persons or entities.
The trading price of our common stock entails additional
regulatory requirements, which may negatively affect such trading price.
Our common stock is currently listed on
the OTC Markets Group, an over-the-counter electronic quotation service, which stock currently trades below $5.00 per share. We
anticipate the trading price of our common stock may continue to be below $5.00 per share. As a result of this price level, trading
in our common stock would be subject to the requirements of certain “penny stock” rules promulgated under the Securities
Exchange Act of 1934, as amended. These rules require additional disclosure by broker-dealers in connection with any trades generally
involving any equity security not listed on either a securities exchange or NASDAQ that has a market price of less than $5.00 per
share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers
who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these
types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser's
written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity of our common stock could
be severely affected or limited by these regulatory requirements.
Delaware law could discourage a change in control,
or an acquisition of us by a third party, even if the acquisition would be favorable to you, and thereby adversely affect existing
stockholders.
The Delaware General Corporation Law contains provisions
that may have the effect of making more difficult or delaying attempts by others to obtain control of our Company, even when these
attempts may be in the best interests of stockholders. Delaware law imposes conditions on certain business combination transactions
with “interested stockholders.” These provisions and others that could be adopted in the future could
deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders
might otherwise receive a premium for their shares over then current market prices. These provisions may also limit the ability
of stockholders to approve transactions that they may deem to be in their best interests.
We do not expect to pay dividends in the foreseeable
future, and accordingly you must rely on stock appreciation for any return on your investment.
We have paid no cash dividends on our common stock to date,
and we currently intend to retain our future earnings, if any, to fund the continued development and growth of our business. As
a result, we do not expect to pay any cash dividends in the foreseeable future. Further, any payment of cash dividends
will also depend on our financial condition, results of operations, capital requirements and other factors, including contractual
restrictions to which we may be subject, and will be at the discretion of our Board of Directors.
Item 1B.
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UNRESOLVED STAFF COMMENTS.
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None.
Our executive offices are located in leased premises
at 605 Third Avenue, 34th Floor, New York, NY 10158.
On December 1, 2004, our Israeli subsidiary, Brainstorm Cell
Therapeutics Ltd. entered into a lease agreement for the lease of premises in 12 Basel Street, Petach Tikva, Israel, which include
approximately 600 square meters of office and laboratory space. The original term of the lease was 36 months, with two options
to extend: one for an additional 24 months (the “First Option”); and one for an additional 36 months (the “Second
Option”). We are currently in the Second Option period and rent is paid on a quarterly basis in the amount of NIS 32,200
per month.
We expanded our Petach Tikva facility in 2008 to include
an animal research facility.
As part of the clinical trials with Hadassah, we pay $67,000
per month for rental and operation of two clean room facilities at Hadassah facilities in Jerusalem.
We believe that the current office space is adequate to meet
our needs.
Item 3.
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LEGAL PROCEEDINGS.
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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 the Company improperly terminated its contract with CSC. The complaint seeks, among other things, the
following relief: (i) 400,000 shares of the common stock of the Company and (ii) warrants to purchase 250,000 shares of the common
stock of the Company at an exercise price of $0.30 per share. Further, the complaint alleges that CSC performed its
obligations under the contract and has suffered compensatory damages in an amount up to approximately $672,500. CSC
also seeks costs and attorneys’ fees. On June 5, 2008, the Company filed an answer with the Court. The Company believes that
it has substantial defenses to the claims made by CSC and has vigorously defended this action over this period of time. We cannot
predict the scope, timing or outcome of this matter. We cannot predict what impact, if any, this matter may have on our business,
financial condition, results of operations and cash flow.
From time to time, we may become involved in litigation relating
to claims arising out of operations in the normal course of business, which we consider routine and incidental to our business.
We currently are not a party to any legal proceedings other than as described above, the adverse outcome of which, in management’s
opinion, would have a material adverse effect on our business, results of operation or financial condition.
Item 4.
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MINE SAFETY DISCLOSURES.
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Not applicable.
PART II
Item 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
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Market Information
Our common stock is currently traded on the OTCQB under the
symbol “BCLI”.The following table contains information about the range of high and low sales prices for our common
stock based upon reports of transactions on the OTCQB.
Quarter Ended
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High
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Low
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December 31, 2011
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$
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0.40
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$
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0.20
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September 30, 2011
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$
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0.56
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$
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0.27
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June 30, 2011
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$
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0.60
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$
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0.25
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March 31, 2011
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$
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0.43
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$
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0.18
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December 31, 2010
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$
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0.30
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$
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0.18
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September 30, 2010
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$
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0.26
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$
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0.16
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June 30, 2010
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$
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0.34
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$
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0.19
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March 31, 2010
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$
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0.47
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$
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0.21
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The source of these high and low prices was the OTCQB. These
quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions.
The high and low prices listed have been rounded up to the next highest two decimal places.
On March 14, 2012, the closing bid price of our common
stock as reported by the OTCQB was $0.25 per share.
Trades in our common stock may be subject to Rule 15g-9 of
the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established
customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination
for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.
The Securities and Exchange Commission also has rules that
regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current
price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The
penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information
about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer
quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing
before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares
of common stock of the Company. As a result of these rules, investors may find it difficult to sell their shares.
Dividends
We have not paid or declared any cash or other dividends
on our common stock within the last two years. Any future determination as to the payment of dividends will depend upon our results
of operations, and on our capital requirements, financial condition and other factors relevant at the time.
Record Holders
As of February 24, 2012, there were approximately 93
holders of record of our common stock.
Equity Compensation Plans
Information regarding our equity compensation plans and the
securities authorized under the plans is included in Item 12 below.
Recent Sales of Unregistered Securities
On January 18, 2011, we entered into an agreement with
ACCBT to offset amounts due to ACCBT, totaling approximately $22,000. In connection with this agreement, we issued to ACCBT 10,499,999
shares of common stock and a warrant to purchase 4,537,500 shares of common stock at an exercise price of $0.29 per share. 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.
Between February 22, 2011 and February 27, 2011, we entered
into Securities Purchase Agreements with institutional and individual investors pursuant to which we issued and sold 12,815,000
units comprised of shares of common stock and warrants for the purchase of common stock (the “Units”) in exchange for
$3,588,200 ($0.28 per Unit).
Each unit includes (i) one share of common stock, (ii) a
warrant to purchase one-half of one share of our common stock until the first anniversary of the closing date at a purchase price
of $0.28 per share and (iii) a warrant to purchase one share of our common stock until the second anniversary of the closing date
at a purchase price of $0.50 per share. The warrants may only be exercised by the payment of the exercise price in cash. The
warrants, if exercised in full, will result in additional cash proceeds to the Company of approximately $6.8 million.
The securities issued in this private placement were to accredited
and other qualified investors outside of the United States in reliance upon available exemptions from the registration requirements
of the Securities Act, including Section 4(2) thereof and Regulation S promulgated thereunder.
Barak Capital Underwriting Ltd. (“Barak”) acted
as the placement agent in the offering. We paid Barak approximately $215,000 in cash and issued 512,600 shares of common
stock to Barak in consideration of the services provided to us in connection with the transaction.
On April 13, 2011, 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 June 27, 2011, we issued 10,870 shares of common stock
to Landoy Risk Management Ltd. for unpaid consulting services. 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 July 2011, Amatrine Ltd. exercised a warrant, dated as of March 1, 2011, held by such entity for the purchase of 759,334 shares
of common stock. The exercise price paid upon exercise of the warrant was $0.28 per share for a total of $212,613.52,
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 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 November 10, 2011, we issued 100,000 shares of our common
stock to Dani Offen in connection with his exercise of a warrant to purchase common stock previously issued. The exercise
price paid upon exercise of the warrant was $0.067 per share for a total of $6,700.00, 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.
On January 11, 2012, we issued 125,000 shares of our common
stock to E.H.O. Consulting and Holdings Ltd. in connection with its exercise of a warrant to purchase common stock previously issued. The
exercise price paid upon exercise of the warrant was $0.001 per share for a total of $125.00, 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.
Item 6.
|
SELECTED FINANCIAL DATA.
|
Not required.
Item 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Company Overview
We are a biotechnology company developing innovative stem
cell therapeutic products based on technologies enabling the
in-vitro
differentiation of bone marrow stem cells into neural-like
cells. We aim to become a leader in adult stem cell transplantation for neurodegenerative diseases. Our technology entails exploiting
the patient’s own bone marrow stem cells to generate glial-like cells that may provide an effective treatment for ALS, PD,
MS and Spinal Cord Injury.
Our core technology was developed in collaboration with prominent
neurologist, Prof. Eldad Melamed, former head of Neurology of the Rabin Medical Center and member of the Scientific Committee of
the Michael J. Fox Foundation for Parkinson's Research, and expert Cell biologist Prof. Daniel Offen, of the Felsenstein Medical
Research Center of Tel Aviv University.
Our team demonstrated formation of neurotrophic-factor secreting
cells (glial-like cells) from
in-vitro
differentiated bone marrow cells that produce NTF including GDNF, BDNF and additional
factors
.
Moreover, in research conducted by our team, implantation of these differentiated cells into brains of animal models
that had been induced to Parkinsonian behavior markedly improved their condition.
Our aim is to provide neural-supporting stem cell transplants
that are expected to maintain, preserve and possibly restore the damaged neurons, protecting them from further degeneration.
Our Israeli Subsidiary holds exclusive worldwide rights to
commercialize the technology, through a licensing agreement with Ramot, the technology transfer company of Tel Aviv University,
Israel.
As a result of limited cash resources and the desire to take
a faster path to clinical trials, since the fourth quarter of 2008 we have focused all of our efforts on ALS, and are currently
not allocating resources towards PD, MS or other neurodegenerative diseases. Other indications are currently being evaluated.
We are currently in the clinical stage of development of
our technology and we intend to begin the process of seeking regulatory approval from regulatory agencies in the U.S.
In June 2011, we initiated a Phase I/II clinical study for
ALS patients using our autologous NurOwn™ stem cell therapy, after receiving final approval from the Israel MOH.
In February 2011, the FDA granted Orphan Drug designation
to our NurOwn™ autologous adult stem cell product candidate for the treatment of ALS. Orphan Drug status entitles us to seven
years of marketing exclusivity for NurOwn™ upon regulatory approval, as well as the opportunity to apply for grant funding
from the FDA of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research
expenses and potential exemption from the FDA's application user fee.
Our efforts are directed at:
|
•
|
Operating a GMP compliant production process;
|
|
•
|
Demonstrating Safety Tolerability and Therapeutic effect of transplantation of Autologous cultured Bone Marrow Stromal Cells secreting Neurothrophic factors (MSC-NTF) in a Phase I/II Clinical trial in human ALS patients;
|
|
•
|
Setting up a centralized facility to provide the therapeutic products and services for transplantation in patients in the US, as part of the clinical development program; and
|
|
•
|
Submitting an IND to the FDA.
|
Results of Operations
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.
Liquidity and Capital Resources
We have financed our operations since inception primarily
through private sales of our common stock and warrants and the issuance of convertible promissory notes. At December 31, 2011,
we had $2,304,000 in total current assets and $1,135,000 in total current liabilities.
Net cash used in operating activities was $2,223,000 for
the year ended December 31, 2011. Cash used for operating activities in the year ended December 31, 2011 was primarily attributed
to cost of clinical trials, rent of clean rooms and materials for clinical trials, payroll costs, rent, outside legal fee
expenses and public relations expenses.
Net cash used in investing activities was $64,000 for the
year ended December 31, 2011.
Net cash provided by financing activities was $4,117,000
for the year ended December 31, 2011 and is primarily attributable to institutional and private fund raising and from funds received
from exercise of options.
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) $67,000 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.
|
Off Balance Sheet Arrangements
We have no off balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Not required.
Item
8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
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
|
33-34
|
|
|
Consolidated Balance Sheets
|
35
|
|
|
Consolidated Statements of Operations
|
36
|
|
|
Statements of Changes in Stockholders' Equity (Deficiency)
|
37 - 45
|
|
|
Consolidated Statements of Cash Flows
|
46
|
|
|
Notes to Consolidated Financial Statements
|
47 - 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
|
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
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.
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.)
|
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.
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.)
|
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.
|
|
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:
|
|
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.)
|
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.
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.)
|
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.)
|
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.)
|
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.)
|
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.
|
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None.
Item 9A.
|
CONTROLS AND PROCEDURES.
|
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this annual report,
we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as a result of the material weakness in our internal control over financial reporting
described below, our disclosure controls and procedures were not effective, as of the end of the period covered by this report,
to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that
the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2011 based on the criteria
set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the evaluation, our management concluded that, as of December 31, 2011, our internal control over financial reporting was not
effective.
A material weakness is a control deficiency, or combination
of control deficiencies in internal control over financial reporting, that results in more than a remote likelihood that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected. Management identified
the following material weakness in its assessment of the effectiveness of internal control over financial reporting as of December
31, 2011:
|
•
|
The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with the Company’s financial reporting requirements.
|
Nevertheless, based on a number of factors, including the
performance of additional procedures performed by management designed to ensure the reliability of our financial reporting, our
Chief Executive Officer and Chief Financial Officer believe that the consolidated financial statements included with this annual
report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates,
and for the periods, presented, in conformity with U.S. GAAP.
Management’s Remediation Initiatives
Based on our financial condition and if we are able to raise
sufficient funds, we plan to recruit new staff and develop policies and procedures for training of personnel or external advisers
to verify that we have a sufficient number of personnel with knowledge, experience and training in the application of generally
accepted accounting principles commensurate with our financial reporting and U.S. GAAP requirements. Where necessary, we will supplement
personnel with qualified external advisors. Additionally, where appropriate and if we have the resources, we plan to identify training
on accounting principles and procedures that would benefit our accounting and finance personnel.
Internal Control Enhancements Implemented During the Fiscal
Year Ended December 31, 2011
During the fiscal year ended December 31, 2011, we were unable
to implement any enhancements to our internal control over financial reporting due to insufficient funds.
Inherent Limitations on Internal Control
A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent
limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple
errors. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error
or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
Other than as described above, there were no changes in our
internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION.
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Executive Officers and Directors
The following table lists our current executive officers
and directors. Our executive officers are elected annually by our Board of Directors and serve at the discretion of
the Board of Directors. Each current director is serving a term that will expire at our Company’s next annual
meeting. There are no family relationships among any of our directors or executive officers.
Name
|
|
Age
|
|
Position
|
Adrian Harel
|
|
55
|
|
Acting Chief Executive Officer
|
Chaim Lebovits
|
|
41
|
|
President
|
Liat Sossover
|
|
43
|
|
Chief Financial Officer
|
|
|
|
|
|
Dr. Irit Arbel
|
|
52
|
|
Director
|
Mordechai Friedman
|
|
59
|
|
Director
|
Dr. Abraham Israeli
|
|
58
|
|
Chairman and Director
|
Alon Pinkas
|
|
50
|
|
Director
|
Chen Schor
|
|
39
|
|
Director
|
Dr. Robert Shorr
|
|
58
|
|
Director
|
Malcolm Taub
|
|
66
|
|
Director
|
Adrian Harel
joined the Company on January 24, 2011
as our Chief Operating Officer and Acting Chief Executive Officer. From 2009 until 2010, Dr. Harel set up Da-Ta Biotech
Ltd, a consulting and advisory business focused on early stage biotech companies. Also during 2010, Dr. Harel provided
consulting services to KMBY LTD in connection with a medical device in the orthopedic field. From 2008 through 2010,
Dr. Harel served as Chief Executive Officer of Meditor Pharmaceuticals Ltd. and Aminolab Technologies 2000 Ltd., which are focused
on the production of new ethical drugs. From 2003 through 2007, Dr. Harel served as Chief Operating Officer of Sepal
Pharma Ltd. and Molecular Cytomics Ltd.
Chaim Lebovits
joined the Company in July 2007 as
our President. Mr. Lebovits controls ACC Holdings, a holding company which controls subsidiaries: (i) Shemen Oil and
Gas Resources Ltd. ("Shemen"); (ii) ACC Resources; and (iii) ACCBT. ACC Holdings focuses on minerals exploration in West
Africa and Israel. ACC Resources holds 10 permits for gold exploration in Burkina Faso. Shemen holds the Shemen License offshore
Israel, which has contingent and prospective resources of over 250 million barrels of oil. ACCBT focuses on new and emerging biotechnologies.
Mr. Lebovits has been at the forefront of mining and natural resource management in the African region for close to a decade.
Liat Sossover
joined the Company in June 2010 as our
Chief Financial Officer. From 2001 until June 2010, Ms. Sossover served as the Vice President of Finance of ForeScout Technologies,
International. In such role, Ms. Sossover managed all financial and accounting aspects. Prior to that, Ms.
Sossover served as VP of Finance and Secretary of Maximal Innovative Intelligence, which was acquired by Microsoft. She has held
positions as Chief Financial Officer at RT Set, which is now part of Vizrt and Financial Controller for BVR Technologies, which
later was acquired by Esterline Technologies. Ms. Sossover holds an MBA from Edinburgh University, and a Bachelor's degree in Accounting
& Economics from Ben Gurion University.
Dr. Irit Arbel
has been an active Board Member of
the Company since May 2004 and also served initially as President for six months. From 2009 through 2011, Dr. Arbel served as
Chairperson of Real Aesthetics Ltd., a company specializing in cellulite ultrasound treatment, and BRH Medical, developer of medical
devices for wound healing. She was also Director of M & A at RFB Investment House, a private investment firm focusing on early
stage technology related companies. Previously, Dr. Arbel was President and CEO of Pluristem Life Systems, and prior to that,
Israeli Sales Manager of Merck, Sharp & Dohme. Dr. Arbel earned her Post Doctorate degree in 1997 in Neurobiology, after performing
research in the area of Multiple Sclerosis. Dr. Arbel also holds a Chemical Engineering degree from the Technion, Israel's Institute
of Technology.
Mordechai Friedman
joined the Company on April
4, 2011 as a director and as Chairman of the Audit Committee of the Board. Since 2010, Mr. Friedman has served as Chief
Executive Officer of Triple M Management and Investments Ltd. From 2007 through 2010, Mr. Friedman served as the Chairman
of the Board of The Israel Electric Corp. From 2005 to 2007, Mr. Friedman served as Deputy Chairman and Chief Executive
Officer of Brightman, Almagor & Zohar, Inc., a division of Deloitte Touche Tohmatsu. Mr. Friedman has been a partner
and director in several business ventures and companies in Israel and abroad in the transportation, consumer business, telecommunication
and energy industries. He has a B.A. in Economics and Accounting from the Tel Aviv University. Mr. Friedman currently serves as
a director of the following private companies: (i) Electra Consumer Products; (ii) Tel-Hashomer-Medical Research; (iii) Triple
M Management and Investments Ltd.; (iv) Mordechai Friedman Blue and White Management Services Ltd.; and (v) Double M Management
and Investments Ltd.
Dr. Abraham Israeli
joined the Company on April 13,
2010 as a director, as Chairman of the Board and as a consultant. Since November 2009, Dr. Israeli has served as Head
of the Department of Health Policy, Health Care Management and Health Economics at the Hebrew University, Hadassah Faculty of Medicine. Since
1996, Dr. Israeli has held the Chair of Dr. Julien Rozan Professorship of Family Medicine and Health Promotion at the Hebrew University
- Hadassah Medical School, Jerusalem. From November 2003 to October 2009, Dr. Israeli served as the Director General of the Israel
Ministry of Health. Dr. Israeli holds a M.D. and M.P.H. from Hebrew University, Hadassah Medical School and a Master’s
Degree from the Sloan School of Management at Massachusetts Institute of Technology. Dr. Israeli completed residencies in Internal
Medicine and in Health-Care Management at Hadassah University Hospital and has certification in both specialties.
Alon Pinkas
joined the Company on December 13, 2010
as a director. Mr. Pinkas served as the Israeli Consul General to New York from 2000 to 2004 and is an internationally respected
foreign affairs analyst. Mr. Pinkas currently serves as an Adviser at Tigris Financial Group and the Rhodium Group. Mr.
Pinkas currently serves as a director for Ormat Industries Limited, B.G.I. Investments (1961) Ltd. and Agri-Invest Ltd. Mr. Pinkas
has a Bachelors Degree in Political Science from The Hebrew University of Jerusalem and a Masters Degree in Politics from Georgetown
University.
Chen Schor
joined the Company as a director on August
22, 2011. Mr. Schor is a global industry leader with vast experience in biotechnology, medical devices, business development
and private equity. Mr. Schor led multiple licensing and M&A transactions valued at over $2 billion with companies such as
GlaxoSmithKline, Amgen, Pfizer, Bayer, Merck-Serono and OncoGeneX Pharmaceuticals, and raised significant funds from reputable
investors. Mr. Schor has a broad range of experience in multiple therapeutic areas including Neurology, Respiratory, Oncology,
Auto-Immune, Genetic Diseases, and Women’s Health. In addition to leading the global business development at Teva Pharmaceuticals,
Mr. Schor played a key role in building early stage companies to regulatory approvals, IPOs and M&As. From March
2009 until September 2011, Mr. Schor served as Vice President of Business Development, global branded products at Teva Pharmaceuticals.
Prior to joining Teva, Mr. Schor was Chief Business Officer at Predix Pharmaceuticals from December 2003 until March 2009, leading
the formation of more than $1.5 billion collaborations with GlaxoSmithKline, Amgen and additional pharmaceutical companies. Prior
to joining Predix, Mr. Schor was a Partner at Yozma Venture Capital from September 1998 until December 2003, managing the fund’s
investments in biotechnology and medical device companies. Mr. Schor previously held positions at Arthur Anderson and BDO consultants
and holds an MBA, B.A. in biology, B.A. in economics and is a Certified Public Accountant (CPA).
Dr. Robert Shorr
has been an active Board Member
of the Company since May 2004 and also served initially as President for six months. From 2009 through 2011, Dr. Arbel served
as Chairperson of Real Aesthetics Ltd., a company specializing in cellulite ultrasound treatment, and BRH Medical, developer of
medical devices for wound healing. She was also Director of M & A at RFB Investment House, a private investment firm focusing
on early stage technology related companies. Previously, Dr. Arbel was President and CEO of Pluristem Life Systems, and prior
to that, Israeli Sales Manager of Merck, Sharp & Dohme. Dr. Arbel earned her Post Doctorate degree in 1997 in Neurobiology,
after performing research in the area of Multiple Sclerosis. Dr. Arbel also holds a Chemical Engineering degree from the Technion,
Israel's Institute of Technology.
Malcolm Taub
joined the Company as a director in March
2009. Since October 2010, Mr. Taub has been a Partner at Davidoff Malito & Hutcher LLP, a full service law and government
relations firm. From 2001 to September 30, 2010, Mr. Taub was the Managing Member of Malcolm S. Taub LLP, a law firm which practiced
in the areas of commercial litigation, among other practice areas. Mr. Taub also works on art transactions, in the capacity
as an attorney and a consultant. Mr. Taub has also served as a principal of a firm which provides consulting services
to private companies going public in the United States. Mr. Taub has acted as a consultant to the New York Stock Exchange
in its Market Surveillance Department. Mr. Taub acts as a Trustee of The Gateway Schools of New York and The Devereux
Glenholme School in Washington, Connecticut. Mr. Taub has served as an adjunct professor at Long Island University,
Manhattan Marymount College and New York University Real Estate Institute. Mr. Taub holds a B.A. degree from Brooklyn
College and a J.D. degree from Brooklyn Law School. Mr. Taub formerly served on the Board of Directors of Safer Shot,
Inc. (formerly known as Monumental Marketing Inc.), a company which trades on the Pink Sheets.
Qualifications of Directors
The Board believes that each director has valuable individual
skills and experiences that, taken together, provide the variety and depth of knowledge, judgment and vision necessary for the
effective oversight of the Company. As indicated in the foregoing biographies, the directors have extensive experience in a variety
of fields, including biotechnology (Drs. Arbel and Shorr and Mr. Schor), accounting (Mr. Friedman), health care and health policy
(Dr. Israeli), foreign affairs (Mr. Pinkas) and law (Mr. Taub), each of which the Board believes provides valuable knowledge about
important elements of our business. Most of our directors have leadership experience at major companies or firms with operations
inside and outside the United States and/or experience on other companies’ boards, which provides an understanding of ways
other companies address various business matters, strategies and issues. As indicated in the foregoing biographies, the directors
have each demonstrated significant leadership skills, including as a chief executive officer (Drs. Arbel and Shorr and Mr. Friedman),
as the consul general of Israel to New York and as chief of staff to Ministers of Foreign Affairs of Israel (Mr. Pinkas), as the
director general of a governmental body (Dr. Israeli), as a managing member of a law firm (Mr. Taub) or as a partner of a venture
capital firm (Mr. Schor). A number of the directors have extensive public policy, government or regulatory experience, including
Consul General of Israel, New York (Mr. Pinkas) and Director General of Israel Ministry of Health (Dr. Israeli), which can provide
valuable insight into issues faced by companies in regulated industries such as the Company. One of the directors (Dr. Arbel) has
served as the President of the Company, which service has given her a deep knowledge of the Company and its business and directly
relevant management experience. The Board believes that these skills and experiences qualify each individual to serve as a director
of the Company.
Certain Arrangements
On April 13, 2010, the Company, Dr. Israeli and Hadasit Medical
Research Services and Development Ltd. (“Hadasit”) entered into an Agreement, which was amended to clarify certain
terms on December 31, 2011 (as amended, the “Agreement”) pursuant to which Dr. Israeli agreed, during the term
of the Agreement, to serve as (i) our Clinical Trials Advisor and (ii) a member of our Board of Directors. Any party
may terminate the Agreement upon 30 days prior notice to the other parties. In consideration of the services to be provided
by Dr. Israeli to us under the Agreement, we agreed to grant: (i) options to Dr. Israeli annually during the term of the Agreement
for the purchase of 166,666 shares of our common stock at an exercise price equal to $0.00005 per share and (ii) warrants to Hadasit
annually during the term of the Agreement for the purchase of 33,334 shares of our common stock at an exercise price equal to $0.00005
per share. Such options and warrants will vest and become exercisable in twelve (12) consecutive equal monthly amounts. In
addition, in December 2010 the Board granted Dr. Israeli an option to purchase 200,000 shares of common stock at an exercise price
equal to $0.15 in recognition of his service as the Chairman of the Board and the number of hours Dr. Israeli devotes to fulfillment
of his responsibilities of such role.
On August 22, 2011, we entered into an agreement with Chen
Schor, which was amended and restated on November 11, 2011 to clarify vesting terms (as amended and restated, the
“Executive Director Agreement”) pursuant to which we will pay $15,000 per quarter to Mr. Schor for his services as
an Executive Board Member. In accordance with the terms of the Executive Director Agreement, the Company and Mr. Schor have also
entered into an amended and restated Restricted Stock Agreement on November 11, 2011, pursuant to which Mr. Schor received 923,374
shares of our restricted common stock under our 2005 U.S. Stock Option and Incentive Plan. If we successfully raise $10,000,000
of proceeds through the issuance of equity securities in a private or public offering after August 22, 2011, or enter into a deal
with a strategic partner that brings in at least $10,000,000 of gross proceeds after August 22, 2011, then 307,791 of the shares
will vest upon such event, 307,791 of the shares will vest on August 22, 2012 and the remaining 307,792 shares will vest on August
22, 2013. If such capital is not raised by us prior to August 22, 2012, then the shares will vest over 3 years –
307,791 shares on August 22, 2012, 307,791 shares on August 22, 2013 and 307,792 shares on August 22, 2014. Mr. Schor is
not entitled to any other compensation for his services as a director.
Involvement in certain legal proceedings
None of our directors or executive officers has during the
past ten years:
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been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
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had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
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been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
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been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
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been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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Board Meetings
The Board of Directors held 7 meetings during the fiscal
year ended December 31, 2011. During the fiscal year ended December 31, 2011, each incumbent director attended at least 75% of
the aggregate of the total number of meetings of the Board of Directors and the total number of meetings of the committees on which
he or she served. Our directors are strongly encouraged to attend our annual meeting of stockholders. One of our directors attended
the prior year’s annual meeting.
Board Leadership Structure
On April 13, 2010, the Board elected Abraham (Avi) Israeli
as a director and to serve as Chairman of the Board. Previously, we did not have a Chairman of the Board. The
Chairman presides at all Board meetings. The Chairman’s role and responsibilities include maintaining an active
relationship with the Chief Executive Officer, participating in preparation for board meetings (suggesting agenda items as appropriate),
serving as a supplemental channel for communications between board members and the Chief Executive Officer and providing counsel
to individual directors on the performance of their duties. The position of Chairman (Dr. Israeli) and Chief Executive Officer
are separate. Together, the Chairman and Chief Executive Officer provide strategic guidance and oversight to the Company. The
Board believes that Dr. Israeli serving as Chairman is optimal because it will provide the Board with strong and consistent leadership,
and the other members of the Board bring various perspectives and opinions. Taken together, the Board believes that this leadership
structure provides an appropriate balance of experienced leadership, independent oversight and management input.
Committees of the Board of Directors
Audit Committee
On
February 7, 2008, the Board of Directors established a standing Audit Committee in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, which assists the Board of Directors in fulfilling its responsibilities to stockholders concerning our financial
reporting and internal controls, and facilitates open communication among the Audit Committee, Board of Directors, outside auditors
and management. The Audit Committee discusses with management and our outside auditors the financial information developed by us,
our systems of internal controls and our audit process. The Audit Committee is solely and directly responsible for appointing,
evaluating, retaining and, when necessary, terminating the engagement of the independent auditor. The independent auditors meet
with the Audit Committee (both with and without the presence of management) to review and discuss various matters pertaining to
the audit, including our financial statements, the report of the independent auditors on the results, scope and terms of their
work, and their recommendations concerning the financial practices, controls, procedures and policies employed by us. The Audit
Committee preapproves all audit services to be provided to us, whether provided by the principal auditor or other firms, and all
other services (review, attest and non-audit) to be provided to us by the independent auditor. The Audit Committee coordinates
the Board of Directors’ oversight of our internal control over financial reporting, disclosure controls and procedures and
code of conduct. The Audit Committee is charged with establishing procedures for (i) the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission
by employees of the Company of concerns regarding questionable accounting or auditing matters. The Audit Committee reviews all
related party transactions on an ongoing basis, and all such transactions must be approved by the Audit Committee. The Audit Committee
is authorized, without further action by the Board of Directors, to engage such independent legal, accounting and other advisors
as it deems necessary or appropriate to carry out its responsibilities. The Board of Directors has adopted a written charter for
the Audit Committee, which is available in the corporate governance section of our website at
www.brainstorm-cell.com
. The
Audit Committee currently consists of Mr. Friedman (Chair), Dr. Arbel and Dr. Shorr, each of whom is independent as defined under
applicable Nasdaq listing standards. The Board of Directors has determined that Mordechai Friedman is an “audit
committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.
The
Audit Committee held 4 meetings during the fiscal year ended December 31, 2011.
GNC Committee
On June 27, 2011, the Board of Directors established a standing
Governance, Nominating and Compensation Committee (the “GNC Committee”), which assists the Board in fulfilling its
responsibilities relating to (i) compensation of the Company’s executive officers, (ii) the director nomination process and
(iii) reviewing the Company’s compliance with SEC corporate governance requirements. The Board has adopted a written charter
for the GNC Committee, which is available in the corporate governance section of our website at
www.brainstorm-cell.com
.
The GNC Committee currently consists of Dr. Arbel (Chair), Mr. Pinkas and Mr. Taub, each of whom is independent as defined under
applicable Nasdaq listing standards. The GNC Committee held 2 meetings during the fiscal year ended December 31, 2011.
The GNC Committee determines salaries, incentives and other
forms of compensation for the Chief Executive Officer and the executive officers of the Company and reviews and makes recommendations
to the Board with respect to director compensation. The GNC Committee annually reviews and approves the corporate goals and objectives
relevant to the compensation of the Chief Executive Officer, evaluates the Chief Executive Officer’s performance in light
of these goals and objectives, and sets the Chief Executive Officer’s compensation level based on this evaluation. The GNC
Committee meets without the presence of executive officers when approving or deliberating on executive officer compensation, but
may invite the Chief Executive Officer to be present during the approval of, or deliberations with respect to, other executive
officer compensation. In addition, the GNC Committee administers the Company’s stock incentive compensation and equity-based
plans.
The GNC Committee makes recommendations to the Board concerning
all facets of the director nominee selection process. Generally, the GNC Committee identifies candidates for director nominees
in consultation with management and the independent members of the Board, through the use of search firms or other advisers, through
the recommendations submitted by stockholders or through such other methods as the GNC Committee deems to be helpful to identify
candidates. Once candidates have been identified, the GNC Committee confirms that the candidates meet the independence requirements
and qualifications for director nominees established by the Board. The GNC Committee may gather information about the candidates
through interviews, questionnaires, background checks, or any other means that the GNC Committee deems to be helpful in the evaluation
process. The GNC Committee meets to discuss and evaluate the qualities and skills of each candidate, both on an individual basis
and taking into account the overall composition and needs of the Board. Upon selection of a qualified candidate, the GNC Committee
would recommend the candidate for consideration by the full Board.
In considering whether to include any particular candidate
in the Board’s slate of recommended director nominees, the Board will consider the candidate’s integrity, education,
business acumen, knowledge of the Company’s business and industry, age, experience, diligence, conflicts of interest and
the ability to act in the interests of all stockholders. The Board believes that experience as a leader of a business or institution,
sound judgment, effective interpersonal and communication skills, strong character and integrity, and expertise in areas relevant
to our business are important attributes in maintaining the effectiveness of the Board. As a matter of practice, the Board considers
the diversity of the backgrounds and experience of prospective directors as well as their personal characteristics (e.g., gender,
ethnicity, age) in evaluating, and making decisions regarding, Board composition, in order to facilitate Board deliberations that
reflect a broad range of perspectives. The Board does not assign specific weights to particular criteria and no particular criterion
is a prerequisite for each prospective nominee. The Company believes that the backgrounds and qualifications of its directors,
considered as a group, should provide a significant breadth of experience, knowledge and abilities that will allow the Board to
fulfill its responsibilities.
Stockholder Nominations
On June 27, 2011, the Board of Directors adopted the Brainstorm
Cell Therapeutics Inc. Shareholder Nominations and Communications Policy (the “Policy”), pursuant to which procedures
by which stockholders may recommend nominees to our Board of Directors were established. Previously, we had no formal
policy by which a stockholder could recommend nominees to our Board of Directors.
Pursuant to the Policy, stockholders may recommend nominees
for consideration by submitting the following information to our Secretary at our executive offices: (i) a current resume and curriculum
vitae of the candidate; (ii) statement describing the candidate’s qualifications; and (iii) contact information for personal
and professional references. In addition, submission must include the name and address of the stockholder making the
nomination, the number of shares which are owned by such stockholder and a description of all arrangements or understandings between
such stockholder and the candidate. Assuming that the required material has been provided on a timely basis, the GNC Committee
will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same
criteria, as it follows for candidates submitted by others.
Risk Management and Oversight Process
We are still a development stage company and as such have
not yet developed a risk management policy or procedure. Generally, the entire Board, the Audit Committee and the GNC
Committee are involved in overseeing risk associated with the Company and monitor and assess those risks in reviews with management
and with our outside advisors and independent registered public accounting firm. The Audit Committee reviews regulatory
risk, operational risk and enterprise risk, particularly as they relate to financial reporting, on a regular basis with management,
our independent registered public accounting firm and our outside consultants and advisors. In its regular meetings,
the Audit Committee discusses the scope and plan for the internal audit and includes management in its review of accounting and
financial controls, assessment of business risks and legal and ethical compliance programs. The GNC Committee monitors our governance
and succession risk by review with management and outside advisors. The GNC Committee also monitors CEO succession and our compensation
policies and related risks by reviews with management.
Diversity
Diversity has always been very important to us. Although
we have no formal separate written policy, the Board annually reviews the appropriate skills and characteristics of the members
of the Board and diversity is one of the factors used in this assessment.
Stockholder Communication with the Board of Directors
Due to the size of the Company, we have no formal process
for stockholders to send communications to the Board of Directors. Stockholders may send written communications to the Board of
Directors or any individual members to our offices, 605 Third Avenue, 34th Floor, New York, NY 10158. All such communications
will be relayed accordingly, except for mass mailings, job inquiries, surveys, business solicitations or advertisements, or patently
offensive or otherwise inappropriate material.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our Common Stock (collectively, the “Reporting Persons”),
to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and
to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations
from the Reporting Persons, we believe that during the fiscal year ended December 31, 2011, all Reporting Persons complied with
the applicable requirements of Section 16(a) of the Exchange Act, except for the following:
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ACC International Holdings Ltd. filed a late Form 3 and one late Form 4, reporting two transactions late.
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Dr. Abraham Israeli filed one late Form 4, reporting one transaction late.
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Dr. Irit Arbel filed one late Form 4, reporting two transactions late.
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Mordechai Friedman filed one late Form 4, reporting two transactions late.
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Alon Pinkas filed one late Form 4, reporting two transactions late.
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Chen Schor filed one late Form 4, reporting one transaction late.
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Dr. Robert Shorr filed two late Form 4s, reporting a total of three transactions late.
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Malcolm Taub filed one late Form 4, reporting four transactions late.
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Dr. Adrian Harel filed two late Form 4s, each reporting one transaction late.
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There are no known failures to file a required Form 3, Form
4 or Form 5.
Code of Ethics
On May 27, 2005, our Board of Directors adopted a Code of
Business Conduct and Ethics that applies to, among other persons, members of our Board of Directors, officers, employees, contractors,
consultants and advisors. A copy of the Company’s Code of Business Conduct and Ethics is posted on the Company’s website
at
www.brainstorm-cell.com
.We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision
of the Code of Business Conduct and Ethics applicable to the Company’s principal executive officer or its senior financial
officers (principal financial officer and controller or principal accounting officer, or persons performing similar functions)
by posting such information on our website.
Item 11. EXECUTIVE COMPENSATION.
Summary Compensation
The following table sets forth certain summary information
with respect to the compensation paid during the fiscal years ended December 31, 2011 and 2010 earned by the former Chief Executive
Officer, our Acting Chief Executive Officer and our Chief Financial Officer (the “Named Executive Officers”). In
the table below, columns required by the regulations of the SEC have been omitted where no information was required to be disclosed
under those columns.
Summary Compensation Table (*)
Name and Principal Position
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Year
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Salary
($)
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Option
Awards
($) (1)(2)
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All Other
Compensation
($)(3)
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Total ($)
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Adrian Harel(4)
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2011
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117,000
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203,026
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65,000
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385,026
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Acting Chief Executive Officer
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Liat Sossover(5)
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2011
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98,000
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-
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46,000
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144,000
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Chief Financial Officer
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2010
|
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47,000
|
|
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67,584
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12,000
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126,584
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Abraham Efrati(6)
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2011
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264,000
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30,481
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25,000
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319,481
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Former Chief Executive Officer and Director
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2010
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167,000
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-
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13,000
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180,000
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(*) The Named Executive Officers were paid in NIS; the amounts
above are the U.S. dollar equivalent. The conversion rate used was the average of the end of month’s rate between the U.S.
dollar and the NIS as published by the Bank of Israel, the central bank of Israel.
(1) The amounts shown in the “Option Awards”
column represent the aggregate grant date fair value of awards computed in accordance with ASC 718, not the actual amounts paid
to or realized by the Named Executive Officer during fiscal 2011 and fiscal 2010. ASC 718 fair value amount as of the grant date
for stock options generally is spread over the number of months of service required for the grant to vest.
(2) The fair value of each stock option award is estimated
as of the date of grant using the Black-Scholes valuation model. Additional information regarding the assumptions used to estimate
the fair value of all stock option awards is included in Note 11 to Consolidated Financial Statements under Item 8.
(3) Includes management insurance (which includes pension,
disability insurance and severance pay), payments towards such employee’s education fund, amounts paid for use of a Company
car and Israeli social security.
(4) Mr. Harel commenced employment with the Company
on January 23, 2011.
(5) Ms. Sossover commenced employment with the
Company on June 1, 2010.
(6) Mr. Efrati resigned as Chief Executive Officer, effective
as of February 28, 2011.
Executive Employment Agreements and Termination of Employment
and Change-in-Control Arrangements
Abraham Efrati.
Pursuant to his employment agreement
dated October 7, 2007, Mr. Efrati was entitled to an initial base salary of $14,000 per month. Mr. Efrati was also entitled to
coverage under our Manager’s Insurance Policy and to an education fund and the use of a Company car.
Mr. Efrati resigned as Chief Executive Officer effective
as of February 28, 2011.
Per the terms of his employment agreement, Mr. Efrati agreed
not to compete with the Company or solicit the Company’s customers or employees during the term of his employment and for
a period of twelve (12) months following the termination of his employment for any reason.
On July 25, 2011, we entered into a Settlement and Waiver
Agreement (the “Settlement Agreement”) with Mr. Efrati and Pro Int. Ltd. (an entity believed to be controlled by Mr.
Efrati) regarding the termination of Mr. Efrati’s position as our Chief Executive Officer and certain unresolved compensatory
matters relating thereto. Under the Settlement Agreement, we have agreed to pay to Mr. Efrati (i) NIS 543,077 on or
before August 1, 2011, (ii) an additional NIS 200,000 on or before August 20, 2011 and (iii) an additional NIS 162,051 on or before
September 15, 2011. We also agreed that 150,000 of Mr. Efrati’s non-vested options to purchase our
common stock were accelerated in full and that the exercise period for all vested stock options held by Mr. Efrati was extended
until April 30, 2012. The parties to the Settlement Agreement also agreed to waive, and release the other parties from,
all claims they may have had against each other.
Adrian Harel.
Pursuant to his employment agreement
dated January 23, 2011, Dr. Harel is entitled to a monthly salary of 34,000 NIS (approximately $9,200) (including benefits for
monthly totals of approximately 51,000 NIS (approximately $13,800)). 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.
Terms of Option Awards
On October 23, 2007, Mr. Efrati was granted, pursuant
to our Global Plan, an option to purchase 1,000,000 shares of our common stock at a price per share of $0.87 each, which options
vested and became exercisable with respect to 1/6 of the shares subject to the option on each six-month anniversary of the date
of grant, provided Mr. Efrati was employed by or providing services to us on each applicable vesting date. As of October
15, 2010, this option was fully vested and exercisable. On November 5, 2008, our Board of Directors approved the repricing of this
option, such that said option now has an exercise price of $0.15 per share as opposed to $0.87 per share.
In addition, on June 29, 2009, Mr. Efrati was granted, pursuant
to our Global Plan, an option to purchase 1,000,000 shares of our common stock at a price per share of $0.067 each, which option
will vest and become exercisable with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant,
provided Mr. Efrati is employed by or providing services to us on each applicable vesting date. Mr. Efrati resigned as Chief Executive
Officer, effective February 28, 2011, and did not stand for re-election to the Board at our last annual meeting. Pursuant
to the Settlement Agreement, 150,000 of Mr. Efrati’s non-vested options were accelerated in full and the exercise period
for all vested options was extended until April 30, 2012. As of December 31, 2011, Mr. Efrati had exercised options to purchase
300,727 shares of our common stock. After the balance sheet date, Mr. Efrati had exercised additional options to purchase 70,038
shares of our common stock.
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. 1/3 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 $0.18 each. 1/3 of such option vested
and became exercisable on June 23, 2011 and the remainder of the shares subject to the option vest and become exercisable over
the following 24 months in equal installments. The option shall expire on the tenth anniversary of the grant date.
Outstanding Equity Awards
The following table sets forth information regarding equity
awards granted to the Named Executive Officers that are outstanding as of December 31, 2011. In the table below, columns required
by the regulations of the SEC have been omitted where no information was required to be disclosed under those columns.
Outstanding Equity Awards at December
31, 2011
|
|
Option Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option Expiration Date
|
|
Adrian Harel
|
|
|
—
|
|
|
|
450,000
|
(1)
|
|
|
0.20
|
|
|
|
6/26/2021
|
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
0.20
|
|
|
|
8/9/2021
|
|
Liat Sossover
|
|
|
200,000
|
|
|
|
200,000
|
(2)
|
|
|
0.18
|
|
|
|
6/22/2020
|
|
Abraham Efrati(3)
|
|
|
699,273
|
|
|
|
—
|
|
|
|
0.15
|
|
|
|
4/30/2012
|
|
|
|
|
483,333
|
|
|
|
—
|
|
|
|
0.067
|
|
|
|
4/30/2012
|
|
(1) Options for the purchase of 150,000 shares vested
and became exercisable on January 23, 2012 and options for the purchase of 12,500 shares vested and became exercisable on February
23, 2012. Options for the purchase of 12,500 shares will vest and become exercisable on the 23
rd
of each month until
the option is fully vested.
(2) Options for the purchase of 11,111 shares vested and became exercisable on each of January 23 and February 23, 2012. Options
for the purchase of 11,111 shares will vest and become exercisable on the 23
rd
of each month until the option is fully
vested.
(3) Mr. Efrati resigned as Chief Executive Officer effective as of February 28, 2011.
Stock Incentive Plans
In November 2004 and February 2005, our Board of Directors
adopted and ratified the Global Plan and the U.S. Plan, respectively, and further approved the reservation of 9,143,462 shares
of our common stock for issuance thereunder. Our stockholders approved the Plans and the shares reserved for issuance thereunder
at a special meeting of stockholders that was held on March 28, 2005.
On April 28, 2008, the Board approved the amendment and restatement
of the Plans to increase the number of shares available for issuance under the Plans by an additional 5,000,000 shares. Our
stockholders approved the amendment and restatement of the Plans on June 5, 2008.
On April 21, 2011, 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 5,000,000 shares. Our
stockholders approved the amendment and restatement of the Plans on June 10, 2011.
Under the Global Plan, we granted a total of 12,788,319 options
with various exercise prices (a weighted average exercise price of $0.15295) and expiration dates, to service providers, subcontractors,
directors, officers, and employees. Under the U.S. Plan, we issued an additional 4,530,040 shares of restricted stock and options
to Scientific Advisory Board members, consultants, and directors. As of December 31, 2011, there were 1,825,103 shares available
for issuance under the Plans.
Compensation of Directors
The following table sets forth certain summary information
with respect to the compensation paid during the fiscal year ended December 31, 2011 earned by each of the directors of the Company.
In the table below, columns required by the regulations of the SEC have been omitted where no information was required to be disclosed
under those columns.
Director Compensation Table for Fiscal
2011
Name
|
|
Stock
Awards
($) (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
|
|
(1) The amounts shown in the “Stock Awards” and
“Option Awards” columns represent the aggregate grant date fair value of awards computed in accordance with ASC 718,
not the actual amounts paid to or realized by the directors during fiscal 2011.
(2) At December 31, 2011, Dr. Arbel had options (vested and
unvested) to purchase 988,333 shares of common stock.
(3) Mr. Friedman was elected to the Board of Directors on
April 4, 2011. At December 31, 2011, he had options (vested and unvested) to purchase 166,666 shares of common stock.
(4) At December 31, 2011, Dr. Israeli had options (vested
and unvested) to purchase 533,332 shares of common stock.
(5) At December 31, 2011, Mr. Pinkas had options (vested
and unvested) to purchase 180,000 shares of common stock.
(6) Mr. Schor was elected to the Board of Directors
on August 22, 2011. At December 31, 2011, he had 923,374 shares of restricted common stock.
(7) At December 31, 2011, Mr. 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.
We reimburse our non-employee directors for reasonable travel
and other out-of-pocket expenses incurred in connection with attending board meetings.
On October 14, 2007, we implemented a compensation plan for
non-employee directors. Under this compensation plan, each director was entitled to receive an option to purchase 100,000
shares of our common stock or 100,000 restricted shares of common stock. Dr. Israeli did not earn compensation in accordance
with this compensation plan. In 2010, we issued an option to purchase 200,000 shares of common stock to Dr. Arbel under
this compensation policy. In addition, in 2010, we approved the issuance of 200,000 restricted shares of common stock
to Dr. Shorr and Mr. Taub under this compensation policy. The determination to grant equity awards in an amount greater
than as set forth in the compensation plan was made at the discretion of the Board and as recognition for service on the Audit
Committee by Drs. Arbel and Shorr and as recognition of service on the Board by Mr. Taub.
The Board also made the determination to issue an option
to purchase 200,000 shares of common stock to Dr. Israeli in recognition of his service as the Chairman of the Board and the number
of hours Dr. Israeli devotes to fulfillment of his responsibilities of such role.
On June 27, 2011, we implemented a new Director Compensation
Plan for non-employee directors (the “Director Compensation Plan”). Every non-employee director of the Company,
other than Mr. Israeli and Mr. Schor are eligible to participate in the Director Compensation Plan. Under the Director
Compensation Plan, each eligible director is granted an annual award immediately following each annual meeting of shareholders
beginning with the 2011 annual meeting. For non-U.S. directors, this annual award consists of a nonqualified stock option
to purchase 100,000 shares of common stock. For U.S. directors, at their option, this annual award is either (i) a nonqualified
stock option to purchase 100,000 shares of common stock or (ii) 100,000 shares of restricted stock. Additionally, each
member of the GNC Committee or Audit Committee receives (i) a nonqualified stock option to purchase 30,000 shares of common stock
or (ii) in the case of U.S. directors and at their option, 30,000 shares of restricted stock. A chairperson of the GNC
Committee or Audit Committee will instead of the above committee award receive (i) a nonqualified stock option to purchase 50,000
shares of common stock or (ii) in the case of U.S. directors and at their option, 50,000 shares of restricted stock. Any
eligible participant who is serving as chairperson of the Board of Directors of the Company shall also receive (i) a nonqualified
stock option to purchase 100,000 shares of common stock or (ii) in the case of U.S. directors and at their option, 100,000 shares
of restricted stock. Awards are granted on a pro rata basis for directors serving less than a year at the time of grant. The
exercise price for options for U.S. directors will be equal to the closing price per share of the common stock on the grant date
as reported on the Over-the-Counter Bulletin Board or the national securities exchange on which the common stock is then traded. The
exercise price for options for non-U.S. directors is $0.15. Every option and restricted stock award will vest monthly
as to 1/12 the number of shares subject to the award over a period of twelve months from the date of grant, provided that the recipient
remains a director of the Company on each such vesting date, or, in the case of a committee award, remains a member of the committee
on each such vesting date.
On June 27, 2011, the following grants were made under the
Director Compensation Plan to the eligible directors: Dr. Arbel received a stock option to purchase 180,000 shares of
common stock for her service as a director, chairperson of the GNC Committee and a member of the Audit Committee; Mr. Friedman
received a stock option to purchase 150,000 shares of common stock for his service as a director and chairperson of the Audit Committee;
Mr. Pinkas received a stock option to purchase 130,000 shares of common stock for his service as a director and a member of the
GNC Committee; Mr. Shorr received 130,000 shares of restricted stock for his service as a director and a member of the Audit Committee;
and Mr. Taub received 130,000 shares of restricted stock for his service as a director and a member of the GNC Committee.
Dr. Israeli receives an annual option for the purchase of
166,666 shares of common stock at an exercise price equal to $0.00005 per the terms of the Agreement, as described in detail in
“Certain Arrangements” under Item 10 and in “Certain Relationships and Related Transactions” under Item
13, which option is compensation for both his service as a director and as a clinical trials advisor. In addition, in
December 2010 the Board granted Dr. Israeli an option to purchase 200,000 shares of common stock at an exercise price equal to
$0.15 in recognition of his service as the Chairman of the Board and the number of hours Dr. Israeli devotes to fulfillment of
his responsibilities of such role.
On August 22, 2011, Mr. Schor received a grant of 923,374
shares of restricted stock and will receive $15,000 per quarter for his services as a director and advisor of the Company pursuant
to the terms of the Executive Director Agreement, as described in detail in “Certain Arrangements” under Item 10.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of
February 24, 2012 with respect to the beneficial ownership of our common stock by the following: (i) each of our current directors;
(ii) the Named Executive Officers; (iii) all of the current executive officers and directors as a group; and (iv) each person known
by us to own beneficially more than five percent (5%) of the outstanding shares of our common stock.
For purposes of the following table, beneficial ownership
is determined in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership
for any other purpose. Except as otherwise noted in the footnotes to the table, we believe that each person or entity named in
the table has sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by that
person or entity (or shares such power with his or her spouse). Under the SEC’s rules, shares of our common stock issuable
under options that are exercisable on or within 60 days after February 24, 2012 (“Presently Exercisable Options”) or
under warrants that are exercisable on or within 60 days after February 24, 2012 (“Presently Exercisable Warrants”)
are deemed outstanding and therefore included in the number of shares reported as beneficially owned by a person or entity named
in the table and are used to compute the percentage of the common stock beneficially owned by that person or entity. These shares
are not, however, deemed outstanding for computing the percentage of the common stock beneficially owned by any other person or
entity. Unless otherwise indicated, the address of each person listed in the table is c/o Brainstorm Cell Therapeutics Inc., 605
Third Avenue, 34th Floor, New York, New York 10158.
The percentage of the common stock beneficially owned by
each person or entity named in the following table is based on 126,569,309 shares of common stock outstanding as of February 24,
2012 plus any shares issuable upon exercise of Presently Exercisable Options and Presently Exercisable Warrants held by such person
or entity.
|
|
Shares Beneficially Owned
|
|
Name of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percentage of
Class
|
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
Adrian Harel
|
|
|
257,500
|
(1)
|
|
|
*
|
|
Liat Sossover
|
|
|
244,443
|
(1)
|
|
|
*
|
|
Abraham Efrati
|
|
|
1,182,606
|
(2)
|
|
|
*
|
|
Irit Arbel
|
|
|
3,182,919
|
(3)
|
|
|
2.5
|
%
|
Mordechai Friedman
|
|
|
125,001
|
(1)
|
|
|
*
|
|
Abraham Israeli
|
|
|
533,332
|
(1)
|
|
|
*
|
|
Alon Pinkas
|
|
|
135,000
|
(1)
|
|
|
*
|
|
Chen Schor
|
|
|
923,374
|
(4)
|
|
|
*
|
|
Robert Shorr
|
|
|
230,000
|
(5)
|
|
|
*
|
|
Malcolm Taub
|
|
|
338,333
|
(6)
|
|
|
*
|
|
All current directors and officers as a group (10 persons)
|
|
|
65,526,826
|
(7)
|
|
|
41.1
|
%
|
|
|
|
|
|
|
|
|
|
5% Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCBT Corp.
Morgan & Morgan Building
Pasea Estate, Road Town
Tortola
British Virgin Islands
|
|
|
59,556,924
|
(8)
|
|
|
38.0
|
%
|
(1)
|
Consists of shares of common stock issuable upon the exercise of Presently Exercisable Options.
|
(2)
|
Includes 881,879 shares of common stock issuable upon the exercise of Presently Exercisable Options. Mr. Efrati resigned as Chief Executive Officer effective February 28, 2011.
|
(3)
|
Includes 882,919 shares of common stock issuable upon the exercise of Presently Exercisable Options. Dr. Arbel’s address is 6 Hadishon Street, Jerusalem, Israel.
|
(4)
|
Consists of shares of restricted common stock. If the Company successfully raises $10,000,000 of proceeds through the issuance of equity securities in a private or public offering after August 22, 2011, or enters into a deal with a strategic partner that brings in at least $10,000,000 of gross proceeds after August 22, 2011, then 307,791 of the shares will vest upon such event, 307,791 of the shares will vest on August 22, 2012 and the remaining 307,792 shares will vest on August 22, 2013. If such capital is not raised by the Company prior to August 22, 2012, then 307,791 of the shares will vest on August 22, 2012, 307,791 of the shares will vest on August 22, 2013 and the remaining 307,792 shares will vest on August 22, 2014.
|
(5)
|
Consists of shares of restricted common stock. The shares of restricted stock vest in 12 consecutive, equal monthly installments commencing on July 27, 2011 until fully vested on the first anniversary of the date of grant, provided that Mr. Shorr remains a director of the Company on each vesting date.
|
(6)
|
Consists of 100,000 shares of common stock issuable upon the exercise of Presently Exercisable Options and 238,333 shares of restricted common stock. The shares of restricted stock vest in 12 consecutive, equal monthly installments commencing on July 27, 2011 until fully vested on the first anniversary of the date of grant, provided that Mr. Taub remains a director of the Company on each vesting date.
|
(7)
|
Includes (i) 29,006,924 shares of common stock owned by ACCBT Corp. (Chaim Lebovits, our President, may be deemed to be the beneficial owner of these shares), (ii) 30,250,000 shares of common stock issuable to ACCBT Corp. upon the exercise of Presently Exercisable Warrants (iii) 300,000 shares of common stock owned by ACC International Holdings Ltd. (Chaim Lebovits, our President, may be deemed to be the beneficial owner of these shares) and (iv) 2,278,195 shares of common stock issuable upon the exercise of Presently Exercisable Options.
|
(8)
|
Consists of (i) 29,006,924 shares of common stock owned by ACCBT Corp., (ii) 30,250,000 shares of common stock issuable to ACCBT Corp. upon the exercise of Presently Exercisable Warrants and (iii) 300,000 shares of common stock owned by ACC International Holdings Ltd. ACC International Holdings Ltd. and Chaim Lebovits, our President, may each be deemed the beneficial owners of these shares.
|
Equity Compensation Plan Information
The following table summarizes certain information regarding
our equity compensation plans as of December 31, 2011:
Plan Category
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
|
|
|
Weighted- average exercise price of outstanding options, warrants and rights
|
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
|
|
Equity compensation plans approved by security holders
|
|
|
17,318,359
|
(1)
|
|
$
|
0.12158
|
|
|
|
1,645,103
|
(2)
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
17,318,359
|
(1)
|
|
|
0.12158
|
|
|
|
1,645,103
|
(2)
|
(1)
|
Does not include 180,000 shares of restricted stock that the Company has issued pursuant to the
2005 U.S. Stock Option and Incentive Plan to scientific advisory board members, directors, service providers, and
consultants.
|
(2)
|
A total of 19,143,462 shares of our common stock was reserved for issuance in aggregate under
the 2004 Global Share Option Plan and the 2005 U.S. Stock Option and Incentive Plan and the amendments in June 2011. Any
awards granted under the 2004 Global Share Option Plan or the 2005 U.S. Stock Option and Incentive Plan will reduce the total
number of shares available for future issuance under the other plan.
|
Item 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
Certain Relationships and Related Transactions
The Audit Committee of our Board reviews and approves all
related-party transactions. A “related-party transaction” is a transaction that meets the minimum threshold for disclosure
under the relevant SEC rules (transactions involving amounts exceeding the lesser of $120,000 or one (1) percent of the average
of the smaller reporting company's total assets at year end for the last two fiscal years in which a “related person”
or entity has a direct or indirect material interest). “Related persons” include our executive officers, directors,
5% or more beneficial owners of our common stock, immediate family members of these persons and entities in which one of these
persons has a direct or indirect material interest. When a potential related-party transaction is identified, management presents
it to the Audit Committee to determine whether to approve or ratify it.
The Audit Committee reviews the material facts of any related-party
transaction and either approves or disapproves of the entry into the transaction. If advance approval of a related-party transaction
is not feasible, then the transaction will be considered and, if the Audit Committee determines it to be appropriate, ratified
by the Audit Committee. No director may participate in the approval of a transaction for which he or she is a related party.
Research and License Agreement with Ramot
On July 8, 2004, we entered into a Research and License Agreement
(the “Original Ramot Agreement”) with Ramot at Tel Aviv University Ltd. (“Ramot”), a former 5% stockholder
of the Company, the technology licensing company of Tel Aviv University, which agreement was amended on March 30, 2006 by the Amended
Research and License Agreement (described below). Under the terms of the Original Ramot Agreement, Ramot granted to us an exclusive
license to (i) the know-how and patent applications on the stem cell technology developed by the team led by Prof. Melamed and
Dr. Offen, and (ii) the results of further research to be performed by the same team on the development of the stem cell technology.
Simultaneously with the execution of the Original Ramot Agreement, we entered into individual consulting agreements with Prof.
Melamed and Dr. Offen pursuant to which all intellectual property developed by Prof. Melamed or Dr. Offen in the performance of
services thereunder will be owned by Ramot and licensed to us under the Original Ramot Agreement.
Under the Original Ramot Agreement, we agreed to fund further
research relating to the licensed technology in an amount of $570,000 per year for an initial period of two years, and for an additional
two-year period if certain research milestones were met.
In consideration for the license, we originally agreed to
pay Ramot:
|
•
|
An up-front license fee payment of $100,000;
|
|
•
|
An amount equal to 5% of all net sales of products; and
|
|
•
|
An amount equal to 30% of all sublicense receipts.
|
On March 30, 2006, we entered into an Amended Research and
License Agreement (the “Amended Research and License Agreement”) with Ramot. Under the Amended Research and License
Agreement, the funding of further research relating to the licensed technology in an amount of $570,000 per year was reduced to
$380,000 per year. Moreover, under the Amended Research and License Agreement, the initial period of time that we agreed to fund
the research was extended from an initial period of two (2) years to an initial period of three (3) years. The Amended Research
and License Agreement also extended the additional two-year period in the Original Ramot Agreement to an additional three-year
period, if certain research milestones were met. In addition, the Amended Research and License Agreement reduced (i) certain royalties
payments from five percent (5%) to three percent (3%) of all net sales in cases of third party royalties and (ii) potential payments
concerning sublicenses from 30% to 20-25% of sublicense receipts.
We entered into a Second Amended and Restated Research and
License Agreement with Ramot on July 26, 2007 (the “Second Ramot Agreement”), which amended and replaced the Amended
Research and License Agreement. Like the Original Ramot Agreement, the Second Ramot Agreement imposed on us development and commercialization
obligations, milestone and royalty payment obligations and other obligations. As of June 30, 2007, we owed Ramot an aggregate of
$513,249 in overdue payments and patent fees under the Amended Research and License Agreement. On August 1, 2007, we obtained a
waiver and release from Ramot pursuant to which Ramot agreed to an amended payment schedule regarding our payment obligations under
the Second Ramot Agreement and waived all claims against us resulting from our previous breaches, defaults and non-payment under
the Amended Research and License Agreement.
In addition, in the event that the “research period”,
as defined in the Second Ramot Agreement, was extended for an additional three year period in accordance with the terms of the
Second Ramot Agreement, then we had to make payments to Ramot during the first year of the extended research period in an aggregate
amount of $380,000.
On December 24, 2009, we entered into a Letter Agreement
(the “Letter Agreement”) with Ramot, pursuant to which, among other things, Ramot agreed to: (i) release the Company
from its obligation to fund three years of additional research (which would have totaled $1,140,000); and (ii) accept 1,120,000
shares of our common stock in lieu of $272,000 in past-due amounts. Pursuant to the Letter Agreement, we agreed, among
other things, to: (i) reimburse Ramot for outstanding patent-related expenses; and (ii) abandon our rights in certain patents of
Ramot.
Through March 2011, Ramot had sold the 1,120,000 shares of
common stock of the Company for $235,000 and the Company paid the remaining $5,000 due to Ramot. There is no additional debt to
Ramot.
On December 20, 2011, we entered into an Assignment Agreement
with our Israeli Subsidiary (the “Assignment Agreement”). Under the Assignment Agreement, we assigned and
transferred all of our rights, interests, titles, liabilities and obligations (the “Rights”) under the Second Ramot
Agreement to our Israeli Subsidiary, effective as of January 1, 2007 and our Israeli Subsidiary agreed to assume all such Rights. We
agreed to be a guarantor of all obligations of our Israeli Subsidiary under the Second Ramot Agreement and Ramot can look to us
to demand compliance with the Second Ramot Agreement.
Investment Agreement with ACCBT Corp.
On July 2, 2007, we entered into a Subscription Agreement
with ACCBT, a 5% stockholder and a company under the control of Mr. Chaim Lebovits, our President, pursuant to which we agreed
to sell (i) up to 27,500,000 shares of our common stock for an aggregate subscription price of up to $5.0 million, and (ii) for
no additional consideration, warrants to purchase up to 30,250,000 shares of our common stock. Subject to certain closing conditions,
separate closings of the purchase and sale of the shares and the warrants were scheduled to take place from August 30, 2007 through
November 15, 2008. The warrants originally had the following exercise prices: (i) warrants for the first 10,083,333 shares of our
common stock had an exercise price of $0.20; (ii) warrants for the next 10,083,333 shares of our common stock had an exercise price
of $0.29; and (iii) warrants for the final 10,083,334 shares of our common stock had an exercise price of $0.36. Each warrant issued
pursuant to the Subscription Agreement was to expire on November 5, 2011.
On August 20, 2007, we received an aggregate of $1,000,000
from ACCBT, and, in connection therewith, ACCBT agreed to apply the principal amounts outstanding under a $250,000 convertible
promissory note, dated as of May 6, 2007, issued to ACCBT by us towards the $5 million aggregate subscription price under the subscription
agreement in exchange for shares of common stock (at which point the promissory note was cancelled). Accordingly, we issued to
ACCBT an aggregate of 6,875,000 shares of common stock and a warrant to purchase an aggregate of 7,562,500 shares of common stock.
In November 2007, we received an aggregate of $750,000 from ACCBT, and we issued to ACCBT an aggregate of 4,125,000 shares of common
stock and a warrant to purchase an aggregate of 4,537,500 shares of common stock. On April 3, 2008, we closed a transaction where
we received an aggregate of $750,000 from ACCBT and a permitted assignee, and we issued 2,125,000 shares of common stock to the
permitted assignee, 2,000,000 shares of common stock to ACCBT and a warrant to purchase an aggregate of 4,537,500 shares of common
stock to ACCBT. On September 8, 2008, we received an aggregate of $750,000 from ACCBT, and we issued to ACCBT an aggregate of 4,125,000
shares of common stock and a warrant to purchase an aggregate of 4,537,500 shares of common stock.
On August 18, 2009, we entered into an amendment to the Subscription
Agreement (the “Amendment”), dated as of July 31, 2009, with ACCBT.
Under the terms of the Subscription Agreement, ACCBT was
no longer obligated to invest any further amounts in the Company. Pursuant to the Amendment, ACCBT agreed to invest
the remaining amount outstanding under the Subscription Agreement up to $5.0 million in the Company, and, in return, we agreed
to amend the Subscription Agreement to, among other things: (i) decrease the purchase price per share of the up to 27,500,000 shares
(the “Subscription Shares”) of our common stock that ACCBT previously purchased or will purchase pursuant to the terms
of the Subscription Agreement, as amended, from $0.1818 to $0.12 (the “Repricing”); (ii) adjust the number of shares
of common stock issuable under the Subscription Agreement in accordance with the Repricing; (iii) extend the expiration date of
all Warrants (as described below); (iv) amend the exercise price of certain of the Warrants from $0.36 to $0.29; and (v) revise
the investment schedule of the purchase and sale of the Subscription Shares. Pursuant to the Amendment, the Repricing
retroactively applied to all Subscription Shares purchased by the Investor prior to the Amendment.
Pursuant to the Amendment, ACCBT agreed to purchase the remainder
of the Subscription Shares, as adjusted, at an aggregate purchase price of $947,347 at a price per share of $0.12 in monthly installments
of not less than $50,000 (with the last payment in an amount up to the maximum subscription price of $5.0 million) at closings
to be held monthly beginning on August 1, 2009.
As described above, pursuant to the terms of the Subscription
Agreement, we originally agreed to sell to ACCBT the Subscription Shares for an aggregate subscription price of up to $5.0 million
and, for no additional consideration, if ACCBT purchased the Subscription Shares, warrants to purchase up to 30,250,000 shares
of common stock (the “Warrants”). As of July 31, 2009, ACCBT had purchased an aggregate of 18,306,925 shares
of common stock for an aggregate purchase price of $4,052,652, and the following Warrants (the “Issued Warrants”) had
been issued to ACCBT: (i) 10,083,333 Warrants with an exercise price of $0.20; (ii) 10,083,333 Warrants with an exercise price
of $0.29; and (iii) 1,008,334 Warrants (the “Last Warrant”) with an exercise price of $0.36. Pursuant to
the Amendment, the exercise price of the Last Warrant decreased from $0.36 to $0.29. Pursuant to the Amendment, all
of the Warrants, including the Issued Warrants, shall expire on November 5, 2013 instead of November 5, 2011.
In connection with the Repricing and the Amendment, we agreed
to issue 9,916,667 shares of common stock to ACCBT for no additional consideration in order to retroactively apply the Repricing. On
October 28, 2009, we issued the 9,916,667 shares of common stock to various designees of ACCBT, including 5,000,000 shares to Yosef
Sternberg, a former 5% stockholder of the Company.
As of the date of this annual report, ACCBT has purchased
all of the Subscription Shares. In connection with ACCBT’s completion of the investment of up to $5.0 million,
we issued the following: (i) a Warrant, on October 5, 2009, to ACCBT to purchase 4,537,500 shares of common stock at an exercise
price of $0.29; (ii) 2,000,001 shares of common stock to various designees of ACCBT on February 24, 2010; (iii) a Warrant, on January
23, 2011, to ACCBT to purchase 4,537,500 shares of common stock at an exercise price of $0.29; and (iv) 10,499,999 shares of common
stock to ACCBT on January 23, 2011.
Agreement with Abraham Israeli
On April 13, 2010, the Company, Dr. Israeli, a director of
the Company, and Hadasit entered into an Agreement, which was amended to claify certain terms on December 31, 2011, pursuant
to which Dr. Israeli agreed, during the term of the Agreement, to serve as (i) our Clinical Trials Advisor and (ii) a member of
our Board of Directors. Any party may terminate the Agreement upon 30 days prior notice to the other parties. In consideration
of the services to be provided by Dr. Israeli to us under the Agreement, we agreed to grant options and warrants annually during
the term of the Agreement for the purchase of our common stock, as follows:
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•
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an option for the purchase of 166,666 shares of common stock at an exercise price equal to $0.00005 per share to Dr. Israeli; and
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|
•
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warrants for the purchase of 33,334 shares of common stock at an exercise price equal to $0.00005 per share to Hadasit.
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Such options will vest and become exercisable in twelve (12)
consecutive equal monthly amounts.
Agreement with Dr. Jonathan Javitt
On December 12, 2011, we entered into a Settlement Agreement
with Dr. Jonathan Javitt, a former director of the Company, to settle certain disputed stock issuances. Under this agreement,
we issued 350,000 shares of our common stock to Dr. Javitt to settle the disputed stock issuances. As part of this agreement,
Dr. Javitt released the Company and related parties from all claims he may have had against the Company and its related parties.
Independence of the Board of Directors
The Board of Directors has determined that each of Dr. Arbel,
Mr. Friedman, Dr. Israeli, Mr. Pinkas, Mr. Schor, Dr. Shorr and Mr. Taub satisfies the criteria for being an “independent
director” under the standards of the Nasdaq Stock Market, Inc. (“Nasdaq”) and has no material relationship with
the Company other than by virtue of service on the Board of Directors. During the course of determining the independence of Dr.
Israeli, the Board of Directors considered the Agreement entered into by and among the Company, Hadasit and Dr. Israeli described
in “Certain Arrangements” under Item 10 and “Certain Relationships and Related Transactions” above.
The Board of Directors is comprised of a substantial majority
of independent directors and the Audit and GNC Committees are comprised entirely of independent directors.
Item 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES.
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Independent Registered Public Accounting Firm
Principal Accountant Fees and Services
The following table presents fees for professional audit
services rendered by Brightman Almagor Zohar & Co., a member of Deloitte Touche Tohmatsu (“Deloitte”) for the audit
of our financial statements for the fiscal years ended December 31, 2011 and 2010 and fees billed for other services rendered by
Deloitte during those periods.
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December 31,
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December 31,
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2011
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2010
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Audit Fees (1)
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$
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53,000
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$
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45,000
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Audit-Related Fees
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—
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—
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Tax Fees
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$
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5,000
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—
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All Other Fees(2)
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$
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26,000
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$
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37,000
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Total Fees
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$
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84,000
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$
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82,000
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(1)
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Audit fees are comprised of fees for professional services performed by Deloitte for the audit of our annual financial statements and the review of our quarterly financial statements, as well as other services provided by Deloitte in connection with statutory and regulatory filings or engagements.
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(2)
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All other fees are comprised of fees for professional services performed by Deloitte with respect to a potential IPO on the Tel Aviv Stock Exchange.
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We did not use Deloitte for financial information system
design and implementation. These services, which include designing or implementing a system that aggregates source data underlying
the financial statements and generates information that is significant to our financial statements, are provided internally or
by other service providers. We did not engage Deloitte to provide compliance outsourcing services.
Pre-approval Policies
Our Audit Committee is responsible for pre-approving all
services provided by our independent auditors. All of the above services and fees were reviewed and approved by the Audit Committee
before the services were rendered.
The Board of Directors has considered the nature and amount
of fees billed by Deloitte and believes that the provision of services for activities unrelated to the audit is compatible with
maintaining Deloitte’s independence.
PART IV
Item 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
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Financial Statements.
The financial statements listed in the Index to Consolidated
Financial Statements are filed as part of this report.
Financial Statement Schedules.
All financial statement schedules have been omitted as they
are either not required, not applicable, or the information is otherwise included.
Exhibits.
The exhibits listed in the Exhibit Index are filed with or
incorporated by reference in this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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BRAINSTORM CELL THERAPEUTICS INC.
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Date: March 15, 2012
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By:
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/s/ Adrian Harel
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Name: Adrian Harel
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Title: Chief Executive Officer and Chief Operating Officer
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In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
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Title
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Date
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/s/ Adrian Harel
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Chief Executive Officer and Chief Operating Officer
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March 15, 2012
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Adrian Harel
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(Principal Executive Officer)
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/s/
Liat Sossover
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Chief Financial Officer
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March 15, 2012
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Liat Sossover
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(Principal Financial and Accounting Officer)
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/s/
Irit Arbel
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March 14, 2012
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Irit Arbel
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Director
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/s/
Mordechai Friedman
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March 15, 2012
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Mordechai Friedman
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Director
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/s/
Abraham Israeli
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March 15, 2012
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Abraham Israeli
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Director
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/s/
Alon Pinkas
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March 14, 2012
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Alon Pinkas
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Director
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/s/
Chen Schor
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March 14, 2012
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Chen Schor
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Director
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/s/
Robert Shorr
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March 15, 2012
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Robert Shorr
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Director
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/s/
Malcolm Taub
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March 14, 2012
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Malcolm Taub
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Director
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EXHIBIT INDEX
Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger, dated as of November 28, 2006, by and between Brainstorm Cell Therapeutics Inc., a Washington corporation, and Brainstorm Cell Therapeutics Inc., a Delaware corporation, is incorporated herein by reference to Appendix A of the Company’s Definitive Schedule 14A dated November 20, 2006 (File No. 333-61610).
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3.1
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Certificate of Incorporation of Brainstorm Cell Therapeutics Inc. is incorporated herein by reference to Appendix B of the Company’s Definitive Schedule 14A dated November 20, 2006 (File No. 333-61610).
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3.2
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ByLaws of Brainstorm Cell Therapeutics Inc. is incorporated herein by reference to Appendix C of the Company’s Definitive Schedule 14A dated November 20, 2006 (File No. 333-61610).
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3.3
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Amendment No. 1 to ByLaws of Brainstorm Cell Therapeutics Inc., dated as of March 21, 2007, is incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated March 27, 2007 (File No. 333-61610).
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10.1
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Research and License Agreement, dated as of July 8, 2004, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated July 8, 2004 (File No. 333-61610).
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10.2
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Research and License Agreement, dated as of March 30, 2006, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated March 30, 2006 (File No. 333-61610).
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10.3
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Amendment Agreement, dated as of May 23, 2006, to Research and License Agreement, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K/A dated March 30, 2006 (File No. 333-61610).
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10.4
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Form of Common Stock Purchase Warrant, dated as of November 4, 2004, issued pursuant to Research and License Agreement with Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 4.07 of the Company’s Current Report on Form 8-K/A dated November 4, 2004 (File No. 333-61610).
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10.5
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Amendment Agreement, dated as of March 31, 2006, among the Company, Ramot at Tel Aviv University Ltd. and certain warrantholders is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated March 30, 2006 (File No. 333-61610).
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10.6
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Form of Common Stock Purchase Warrant, dated as of November 4, 2004, issued as a replacement warrant under the Amendment Agreement to Ramot at Tel Aviv University Ltd., is incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K dated March 30, 2006 (File No. 333-61610).
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10.7
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Second Amended and Restated Research and License Agreement, dated July 31, 2007, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-QSB dated June 30, 2007 (File No. 333-61610).
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10.8
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Second Amended and Restated Registration Rights Agreement, dated August 1, 2007, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-QSB dated June 30, 2007 (File No. 333-61610).
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10.9
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Waiver and Release, dated August 1, 2007, executed by Ramot at Tel Aviv University Ltd. in favor of the Company is incorporated herein by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-QSB dated June 30, 2007 (File No. 333-61610).
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10.10
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Letter Agreement, dated December 24, 2009, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 31, 2009 (File No. 333-61610).
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10.11
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Amendment No. 1 to Second Amended and Restated Research and License Agreement, by and between the Company and Ramot at Tel Aviv University Ltd. is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed Decembed 31, 2009 (File No. 333-61610).
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10.12
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Assignment Agreement, dated December 20, 2011, by and between the Company and Brainstorm Cell Therapeutics Ltd. is incorporated herein by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.13
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Consulting Agreement, dated as of July 8, 2004, by and between the Company and Prof. Eldad Melamed is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated July 8, 2004 (File No. 333-61610).
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10.14
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Consulting Agreement, dated as of July 8, 2004, by and between the Company and Dr. Daniel Offen is incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated July 8, 2004 (File No. 333-61610).
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10.15*
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Employment Agreement, dated as of October 7, 2007, by and among Brainstorm Cell Therapeutics Ltd., the Company and Abraham Efrati is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K/A dated October 15, 2007 (File No. 333-61610).
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10.16
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Lease Agreement, dated as of December 1, 2004, among the Company, Petah Tikvah Science and Technology District ‘A’ Ltd., Petah Tikvah Science and Technology District ‘B’ Ltd. and Atzma and Partners Maccabim Investments Ltd. is incorporated herein by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-QSB dated December 31, 2004 (File No. 333-61610).
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10.17*
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Brainstorm Cell Therapeutics Inc. Amended and Restated 2004 Global Share Option Plan is incorporated herein by reference to Exhibit A to the Company’s Definitive Schedule 14A filed April 29, 2011 (File No. 000-54365).
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10.18*
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Brainstorm Cell Therapeutics Inc. Amended and Restated 2005 U.S. Stock Option and Incentive Plan is incorporated herein by reference to Exhibit B to the Company’s Definitive Schedule 14A filed April 29, 2011 (File No. 000-54365).
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10.19*
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Form of Stock Option Agreement for usage under the Registrant’s Amended and Restated 2004 Global Share Option Plan is incorporated herein by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011 (File No. 000-54365).
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10.20*
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Form of Restricted Stock Agreement for usage under the Registrant’s Amended and Restated 2005 U.S. Stock Option and Incentive Plan is incorporated herein by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-Q filed on August 15, 2011 (File No. 000-54365).
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10.21*
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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).
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10.22*
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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).
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10.23
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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).
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10.24
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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).
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10.25
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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).
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10.26
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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).
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10.27
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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).
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10.28
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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).
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10.29
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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).
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10.30
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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).
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10.31
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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).
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10.32
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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).
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10.33
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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).
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10.34
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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).
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10.35
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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).
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10.36*
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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).
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10.37*
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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. is incorporated herein by reference to Exhibit 10.37 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.38
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Common Stock Purchase Warrant, dated as of April 13, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.38 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.39
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Common Stock Purchase Warrant, dated as of April 13, 2011, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.39 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.40
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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).
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10.41*
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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).
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10.42*
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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).
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10.43
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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).
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10.44
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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).
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10.45
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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).
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10.46
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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).
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10.47
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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).
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10.48
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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).
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10.49*
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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).
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10.50
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Common Stock Purchase Warrant, dated as of February 17, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.50 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.51
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Common Stock Purchase Warrant, dated as of February 17, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.51 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.52
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Common Stock Purchase Warrant, dated as of February 17, 2010, issued by BrainStorm Cell Therapeutics Inc. to Hadasit Medical Research Services and Development Ltd. is incorporated herein by reference to Exhibit 10.52 of the Company’s Registration Statement on Form S-1, as filed with the SEC on February 3, 2012 (File No. 333-179331).
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10.53
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Settlement and Waiver Agreement, dated July 25, 2011, by and among BrainStorm Cell Therapeutics Inc., BrainStorm Cell Therapeutics Ltd., Abraham Efrati and Pro Int Ltd. is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 28, 2011 (File No. 000-54365).
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10.54*
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Amended and Restated Executive Director Agreement, dated November 11, 2011, by and between the Company and Chen Schor is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed November 16, 2011 (File No. 333-61610).
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21
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Subsidiaries of the Company is incorporated herein by reference to Exhibit 21 of the Company’s Transition Report on Form 10-KSB filed on March 30, 2007 (File No. 333-61610).
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23.1
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Consent of Brightman Almagor & Co., a member of Deloitte Touche Tohmatsu.
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23.2
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Consent of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global.
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31.1
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Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2
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Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS**
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XBRL Instance Document
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101.SCH**
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XBRL Taxonomy Extension Schema
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101.CAL**
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XBRL Taxonomy Extension Calculation Linkbase
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101.DEF**
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XBRL Taxonomy Extension Definition Linkbase
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101.LAB**
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XBRL Taxonomy Extension Label Linkbase
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101.PRE**
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XBRL Taxonomy Extension Presentation Linkbase
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*
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Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of Form 10-K.
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**
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In accordance with Rule 406T of Regulation S-T, the XBRL
related information in Exhibit 101 to this Annual Report on Form 10-K is furnished and shall not be deemed to be “filed”
for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part
of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly
set forth by specific reference in such filing.
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