Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____________ to ___________________

Commission File Number 333-61610

BRAINSTORM CELL THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
20-8133057
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

605 Third Avenue, 34th Floor
New York, NY 10158
(Address of principal executive offices)

(212) 557-7200
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 past 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 ¨

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 ¨

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.
Large accelerated filer  ¨
Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 9, 2011, the number of shares outstanding of the registrant’s common stock, $0.00005 par value per share, was 125,719,309.

 
 
 
 
TABLE OF CONTENTS
 
 
Page
Number
PART I
 3
   
Item 1. Financial Statements
 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 40
Item 4. Controls and Procedures
 40
   
PART II
 41
   
Item 1. Legal Proceedings
 41
Item 1A. Risk Factors
 41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 41
Item 6. Exhibits
 41
  
 
 
 
 
PART I: FINANCIAL INFORMATION

SPECIAL NOTE
 
Unless otherwise specified in this quarterly report on Form 10-Q, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars.
 
Item 1. Financial Statements.
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2011

UNAUDITED

U.S. DOLLARS IN THOUSANDS
 
 
 
3
 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2011


UNAUDITED

U.S. DOLLARS IN THOUSANDS



INDEX


 
Page
   
   
Consolidated Balance Sheets
5
   
Consolidated Statements of Operations
6
   
Statements of Changes in Stockholders' Equity (Deficiency)
7 – 15
   
Consolidated Statements of Cash Flows
16
   
Notes to Consolidated Financial Statements
17 - 34
 
 
4
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
(Except share data)

   
September 30,
    
December 31,
  
   
2 0 11
    
2 0 10
  
   
Unaudited
    
Audited
  
ASSETS
            
             
Current Assets:
            
Cash and cash equivalents
   $ 2,390     $ 93  
Accounts receivable
     369       427  
Prepaid expenses
     38       59  
Total current assets
     2,797       579  
                 
Long-Term Investments:
                
Prepaid expenses
     9       1  
Severance pay fund
     98       90  
Total long-term investments
     107       91  
                 
Property And Equipment, Net
     341       419  
                 
                 
Total assets
   $ 3,245     $ 1,089  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                
                 
Current Liabilities:
                
Trade payables
   $ 159     $ 307  
Accrued expenses
     555       508  
Other accounts payable
     94       471  
Short-term convertible note
       -     137  
Total current liabilities
     808       1,423  
                 
Accrued Severance Pay
     101       125  
                 
Total liabilities
     909       1,548  
                 
Stockholders' Equity (Deficiency):
                
Stock capital: (Note 8)
     6       5  
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at September 30, 2011 and December 31, 2010; Issued and outstanding: 125,619,309  and 95,832,978 shares at September 30, 2011 and December 31,2010 respectively.
                
Additional paid-in-capital
     44,986       39,696  
Deficit accumulated during the development stage
     (42,656 )     (40,160 )
Total stockholders' equity (deficiency)
     2,336       (459 )
                 
                 
Total liabilities and stockholders' equity (deficiency)
   $ 3,245     $ 1,089  
                 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
5
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS
  U.S. dollars in thousands
  (Except share data)
   
Nine months
ended September 30
    
Three months
ended September 30
    
Period from September 22, 2000 (inception date) through September 30,
  
   
2 0 11
    
2 0 10
    
2 0 1 1
    
2 0 10
    
2 0 1 1
  
   
Unaudited
    
Unaudited
    
Unaudited
  
                               
Operating costs and expenses:
                              
                               
Research and development, net
   $ 1,032     $ 958     $ 176     $ 371     $ 23,762  
General and administrative
     1,459       902       564       264       16,257  
                                         
Total operating costs and expenses
     2,491       1,860       740       635       40,019  
                                         
Financial expenses (income), net
     132       49       (46 )     45       2,528  
Other income
     132       -       -       -       132  
                                         
Operating loss
     2,491       1,909       694       680       42,415  
                                         
Taxes on income
     5       24       -       24       77  
                                         
Loss from continuing operations
     2,496       1,933       694       704       42,492  
                                         
Net loss from discontinued operations
     -       -       -       -       164  
                                         
Net loss
   $ 2,496     $ 1,933     $ 694     $ 704       42,656  
                                         
Basic and diluted net loss per share from continuing operations
   $ 0.02     $ 0.02     $ 0.01     $ 0.01          
                                         
Weighted average number of shares outstanding used in computing basic and diluted net loss per share
     118,106,658       87,592,831       124,596,807       91,606,177          
                                         
 
The accompanying notes are an integral part of the consolidated financial statements
 
 
6
 

 
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)
     -     $ -     $ -     $ -     $ -     $ -  
                                                 
Stock issued on September 22, 2000 for cash at $0.00188 per share
     8,500,000       1       16       -       -       17  
Stock issued on March 31, 2001 for cash at $0.0375 per share
     1,600,000       * -       60       -       -       60  
Contribution of capital
     -       -       8       -       -       8  
Net loss
     -       -       -       -       (17 )     (17 )
                                                 
Balance as of March 31, 2001
     10,100,000       1       84       -       (17 )     68  
                                                 
Contribution of capital
     -       -       11       -       -       11  
Net loss
     -       -       -       -       (26 )     (26 )
                                                 
Balance as of March 31, 2002
     10,100,000       1       95       -       (43 )     53  
                                                 
Contribution of capital
     -       -       15       -       -       15  
Net loss
     -       -       -       -       (47 )     (47 )
                                                 
Balance as of March 31, 2003
     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
     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
 
 
7
 
 
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
 
 
 
8
 

 
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 $0.8 per share
     186,875       * -       149       -       -       149  
Stock issued on July 27, 2005 for private placement at $0.6 per share
     165,000       * -       99       -       -       99  
Stock issued on September 30, 2005 for private placement at $0.8 per share
     312,500       * -       225       -       -       225  
Stock issued on December 7, 2005 for private placement at $0.8 per share
     187,500       * -       135       -       -       135  
Forfeiture of options granted to employees
     -       -       (3,363 )     3,363       -       -  
Deferred stock-based compensation related to shares and options granted to directors and employees
     200,000       * -       486       (486 )     -       -  
Amortization of deferred stock-based compensation related to options and shares granted to employees and directors
     -       -       51       1,123       -       1,174  
Stock-based compensation related to options and shares granted to service providers
     934,904       * -       662       -       -       662  
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)
     -       -       (7,906 )                     (7,906 )
Beneficial conversion feature related to a convertible bridge loan
     -       -       164       -       -       164  
Net loss
     -       -       -       -       (3,317 )     (3,317 )
                                                 
Balance as of March 31, 2006
     22,854,587     $ 1     $ 15,803     $ (1,395 )   $ (22,320 )   $ (7,911 )

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements
 
 
9
 
 
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
 
 
10
 
 
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
 
 
11
 
 
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
 
 
12
 
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
 
 
13
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
  U.S. dollars in thousands
  (except share data)
 
    Common stock     Additional paid-in    
Deferred
Stock-based
     Deficit accumulated during the development     Total stockholders' equity  
   
Number
    
Amount
    
capital
    
compensation
    
stage
    
(deficiency)
  
                                     
Balance as of December 31, 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
     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.

 
14
 

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
     590,870       -       246       -       -       246  
Stock-based compensation related to stock and options granted to directors and employees
     1,400,040       -       786       -       -       786  
Conversion of convertible note
     755,594       -       140       -       -       140  
Exercise of options
     1,432,061       -       228       -       -       228  
Exercise of warrants
     946,834       -       265       -       -       265  
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 8B.1.f)
     10,499,999       -       24       -       -       24  
Net loss
     -       -       -       -       (2,496 )     (2,496 )
                                                 
Balance as of September 30, 2011
     125,619,309     $ 6     $ 44,986     $ -     $ (42,656 )   $ 2,336  
                                                 
* Represents an amount less than $1.
 
The accompanying notes are an integral part of the consolidated financial statement

 
15
 

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
  U.S. dollars in thousands
(except share data)
 
 
 

 
   
Nine months
ended September 30
    
Period from
September 22, 2000
(inception date) through September 30,
  
   
2 0 1 1
    
2 0 1 0
    
2 0 1 1
  
   
Unaudited
    
Unaudited
  
Cash flows from operating activities:
                  
Net loss
   $ (2,496 )   $ (1,933 )   $ (42,656 )
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
     116       126       964  
Severance pay, net
     (32 )     11       3  
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
     246       111       21,283  
Stock-based compensation related to options granted to employees
     786       254       6,472  
Decrease (increase) in accounts receivable and prepaid expensed
     79       (26 )     (407 ) 
Increase (decrease) in trade payables
     (148 )     (70 )     632  
Increase (decrease)  in accrued expenses and other accounts payable
     (306 )     4       1,155  
Erosion of restricted cash
     -       -       (6 )
Net cash used in continuing operating activities
     (1,752 )     (1,523 )     (10,876 )
Net cash used in discontinued operating activities
     -       -       (23 )
Total net cash used in operating activities
     (1,752 )     (1,523 )   $ (10,899 )
Cash flows from investing activities:
                        
Purchase of property and equipment
     (38 )     (2 )     (1,123 )
Restricted cash
     -       -       6  
Investment in lease deposit
     (8 )     -       (9 )
Net cash used in continuing investing activities
     (46 )     (2 )     (1,126 )
Net cash used in discontinued investing activities
     -       -       (16 )
Total net cash used in investing activities
     (46 )     (2 )     (1,142 )
                         
Cash flows from financing activities:
                        
Proceeds from issuance of Common stock, net
     3,602       2,175       12,319  
Proceeds from loans, notes and issuance of warrants, net
     -       -       2,061  
Credit from bank
     -       (5 )     -  
Proceeds from exercise of warrants and options
     493       103       609  
Repayment of short-term loans
     -       -       (601 )
Net cash provided by continuing financing activities
     4,095       2,273       14,388  
Net cash provided by discontinued financing activities
     -       -       43   
Total net cash provided by financing activities
     4,095       2,273       14,431   
Increase in cash and cash equivalents
     2,297       748       2,390  
Cash and cash equivalents at the beginning of the period
     93       1       -  
Cash and cash equivalents at end of the period
   $ 2,390     $ 749     $ 2,390  
                         
Non-cash financing activities:
                        
Conversion of convertible loan and convertible note to shares Conversion of trade payable to Common Stock $ 84    
140
       324          
Conversion of other accounts payable to Common Stock     24                  

 
16
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

Notes to the financial statements
NOTE 1
-
GENERAL
 
 
A.
Brainstorm Cell Therapeutics Inc. (formerly: Golden Hand Resources Inc.) (The "Company") was incorporated in the State of Washington on September 22, 2000.

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

 
C.
On July 8, 2004, the Company entered into a licensing agreement with Ramot of Tel Aviv University Ltd. ("Ramot"), an Israeli corporation, to acquire certain stem cell technology (see Note 4). Subsequent to this agreement, the Company decided to focus on the development of novel cell therapies for neurodegenerative diseases, particularly Parkinson's disease, 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 owns all operational property and equipment.

 
F.
On September 17, 2006, the Company's Board determined to change the Company's fiscal year-end from March 31 to December 31.
 
 
G.
On December 2006, the Company changed its state of incorporation from Washington to Delaware.
 
 
H.
Since its inception, the Company has devoted substantially most 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" 7).
 
 
I.
In October 2010, the Israeli Ministry of Health granted clearance for a Phase I/II clinical trial using the Company’s autologous NurOwn™ stem cell therapy in patients with 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 Israel Ministry of Health (MOH), a Phase I/II clinical study for ALS patients using the Company’s autologous NurOwn™ stem cell therapy was initiated in June 2011.
 
 
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 amyotrophic lateral sclerosis (ALS).
 
 
17
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

Notes to the financial statements

NOTE 1
-
GENERAL (Cont.)

 
GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the nine months ended on September 30, 2011, resulted in a net loss of $2,496. The Company’s balance sheet reflects accumulated deficit of $42,656. 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 in ALS amyotrophic lateral sclerosis (ALS) in 2011.

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

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

NOTE 2
-
SIGNIFICANT ACCOUNTING POLICIES
 
The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2010, are applied consistently in these financial statements.

NOTE 3
-
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited interim financial statements have been prepared in a condensed format and include the consolidated financial operations of the Company and its fully owned subsidiary as of September 30, 2011 and for the nine months then ended, in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2011, are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.
 
NOTE 4
-
RESEARCH AND LICENSE AGREEMENT

The Company has a Research and License Agreement, as amended and restated, with Ramot. The Company obtained a waiver and release from Ramot pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations under the Research and License Agreement and waived all claims against the Company resulting from the Company's previous defaults and non-payment under the Research and License Agreement. The waiver and release amended and restated the original payment schedule under the original agreement providing for payments during the initial research period and additional payments for any extended research period.
 
 
18
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

Notes to the financial statements
 
NOTE 4
-
RESEARCH AND LICENSE AGREEMENT (Cont.)
 
As of December 24, 2009, the Company had paid to Ramot $400 but did not make payments totaling $240 for the initial research period and payments totaling $380 for the extended research period.

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

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

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

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

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

During the first quarter of 2010, the Company entered into an agreement with Hadassah Medical Centre to conduct clinical trials in up to 26 ALS patients in 2011.

On June 27, 2011, the Company entered into the Amendment (the “Amendment”) to the Clinical Trial Agreement. According to the Amendment the total payment due to Hadassah decreased from $992,880 to $773,400 and the termination provisions were changed so that only the Company may terminate the agreement upon 60 days’ notice.
 
NOTE 5
-
CONSULTING AGREEMENTS
 
 
A.
On July 8, 2004, the Company entered into consulting agreements with each of Prof. Eldad Melamed and Dr. Daniel Offen (together, the "Consultants"), under which the Consultants provide the Company scientific and medical consulting services in consideration for a monthly payment of $6 each. In addition, the Company granted each of the Consultants, a fully vested warrant to purchase 1,097,215 shares of Common Stock at an exercise price of $0.01 per share. The warrants issued pursuant to the agreements were issued to the Consultants effective as of November 4, 2004. Each of the warrants was exercisable for a seven-year period beginning on November 4, 2005. As of September 2011, all the above warrants had been exercised.
 
 
B.
On December 16, 2010, the Company granted to the Consultants 1,100,000 shares of the Company's Common Stock for services rendered through December 31, 2010. Related compensation in the amount of $220 is recorded as research and development expense.
 
 
19
 
 
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)

Notes to the financial statements
NOTE 5
-
CONSULTING AGREEMENTS (Cont.)

 
C.
On June 27, 2011, the Company granted to one of the Consultants 400,000 shares of Common Stock of the Company for services rendered through December 31, 2009 in the amount of $192.
 
 
D.
As of September 30, 2011, the Company had a total liability of $81 for services rendered by the Consultants under the abovementioned agreements.
 
NOTE 6
-
SHORT-TERM CONVERTIBLE NOTE
 
On December 13, 2009, the Company issued a $135 Convertible Promissory Note to its legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the Note accrued at the rate of 4%. The legal advisor had 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 difference 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. Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 and ASC 450-20 Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.

On February 19, 2010, the Company's legal advisor converted the entire accrued principal and interest of a $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 certain legal fees accrued through December 31, 2010. Interest on the Note was at the rate of 4%. The legal advisor had the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

On February 18, 2011, the legal advisor converted the entire accrued principal and interest into 445,617 shares of Common Stock.
 
NOTE 7
-
SHORT-TERM LOANS
 
In March 2007, the Company issued a $150 convertible note to a lender, with an annual interest rate of 8% for the first year, with an increase up to 10% after the first year. On January 27, 2010, the lender converted the entire accrued principal and interest of $189 into 1,016,109 shares of Common Stock of the Company.

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

Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 and ASC 450-20 Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.
 
NOTE 8
-
STOCK CAPITAL
 
A.       
The rights of Common Stock are as follows: