Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
x ANNUAL REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF
1934
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009
¨ TRANSITION REPORT
UNDER 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
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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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110 East 59th Street
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New York, NY
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10022
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(Address of principal executive
offices)
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(Zip Code)
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Registrant’s
telephone number, including area code: 212-557-9000
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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Over-the-Counter Bulletin Board
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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¨
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes¨ No x
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¨
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 ¨ No ¨
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.¨
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 x
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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¨ No x
The
approximate aggregate market value of the voting and non-voting common equity
held by non-affiliates of the issuer as of June 30, 2009 (the last business
day of the registrant’s most recently completed second fiscal quarter), was
$2,607,465.
As of
March 24, 2010, the number of shares outstanding of the registrant's common
stock, $0.00005 par value per share, was 87,707,647.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the definitive proxy statement (the “Definitive Proxy Statement”) to be filed
with the Securities and Exchange Commission relative to the registrant’s 2010
Annual Meeting of Stockholders are incorporated by reference into Part III of
this annual report.
BRAINSTORM
CELL THERAPEUTICS, INC.
ANNUAL
REPORT ON FORM 10-K
YEAR
ENDED DECEMBER 31, 2009
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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19
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2.
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Properties
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19
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3.
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Legal
Proceedings
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19
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4.
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Removed
and Reserved
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19
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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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20
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6.
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Selected
Financial Data
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21
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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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21
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7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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25
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8.
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Financial
Statements and Supplementary Data
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25
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9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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64
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9A(T).
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Controls
and Procedures
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64
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9B.
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Other
Information
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66
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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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66
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11.
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Executive
Compensation
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66
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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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67
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13.
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Certain
Relationships and Related Transactions, and Director
Independence
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67
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14.
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Principal
Accounting Fees and Services
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67
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PART
IV
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15.
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Exhibits,
Financial Statement Schedules
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68
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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.
Company
Overview
Brainstorm
Cell Therapeutics Inc. (“Brainstorm” or the “Company”) is a leading company
developing stem cell therapeutic products based on breakthrough technologies
enabling the in-vitro
differentiation of bone marrow stem cells to neural-like cells. We aim to become
a leader in adult stem cell transplantation for neurodegenerative diseases. Our
focus is on utilizing the patient’s own bone marrow stem cells to generate
neuron-like cells that may provide an effective treatment initially for ALS, PD
and Multiple Sclerosis.
Our core
technology was developed in collaboration with prominent neurologist, Prof.
Eldad Melamed, the 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.
The
Company’s team is among the first to demonstrate creation of neurotrophic-factor
secreting cells (glial cells) from in-vitro differentiated bone
marrow cells that produce neurotrophic factors (“NTF”) including GDNF, BDNF, NGF
and IGF-1.
The team
is also among the first to have successfully demonstrated release of
neurotrophic factors from in-vitro differentiated bone
marrow cells. Moreover, in research conducted by this team, implantation of
these differentiated cells into brains of animal models that had been induced to
Parkinsonian behavior markedly improved their symptoms.
Our aim
is to provide neural stem cell transplants that maintain, preserve and restore
the damaged and remaining dopaminergic cells in the patient’s brain, protecting
them from further degeneration.
The Company holds exclusive worldwide
rights to commercialize the technology, through a licensing agreement with
Ramot, the technology transfer company of Tel Aviv
University.
We are
currently in the developmental stage of our technology and products and we
intend to begin the process of seeking regulatory approval from regulatory
agencies in the U.S and Europe.
In
Israel, we have obtained Institutional Review Board (IRB) approval for a Phase
I/II clinical study in ALS patients at the Hadassah Medical Center, and are
currently awaiting final approval of the Israeli Ministry of
Health.
In
parallel, our efforts are directed at:
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Finalizing a GMP compliant
production process;
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Demonstrating safety and efficacy
in animals and in human ALS patients;
and
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Setting up centralized facilities
to provide the therapeutic products and services for transplantation in
patients.
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As a result of limited cash resources
and the desire to take a faster path to clinical trials, in the fourth quarter
of 2008 the Company determined to focus all of its efforts on ALS, and we are
currently not allocating resources towards PD or other neurodegenerative
diseases.
Our
Approach
Our
research team led by Prof. Melamed and Dr. Offen has shown that human bone
marrow mesenchymal stem cells can be expanded and induced to differentiate into
two types of brain cells, neurons-like and astrocyte-like, each having different
therapeutic potential, as follows:
NurOwn program
1 - 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.
NurOwn
program 2 - Neurotrophic-factors (“NTF”) secreting cells - human bone marrow
derived NTF secreting cells for treatment of PD, ALS and Multiple Sclerosis.
In-vitro differentiation of the expanded human bone marrow derived mesenchymal
stem cells in a proprietary medium leads 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
already optimized the proprietary processes for induction of differentiation of
human bone marrow derived mesenchymal stem cells into differentiated cells that
produce dopamine and/or NTFs for transplantation into PD and ALS
patients. The optimization and process development will be conducted
in Good Manufacturing Practice (“GMP”). Once the optimization of the
process is completed, we intend to evaluate the safety and efficacy of our
various cell transplants in animal models. Based on the results in
animals, we intend to use the differentiated cell products for conducting
clinical trials to assess the efficacy of the cell therapies in ALS and PD
patients.
Our
technology is based on the NurOwn products - an autologous cell therapeutic
modality, comprising the extraction of the patient bone marrow, processed into
the appropriate neuronal-like cells and re-implanted into the patient’s muscles
or brain. This approach is taken in order to increase patient safety and
minimize any chance of immune reaction or cell rejection.
We
believe that 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 neuronal-like dopamine producing cells and/or
neurotrophic-factor secreting cells;
and
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Autologous transplantation into
the patient.
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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 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 opened 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
Hadassah
On
February 17, 2010, a wholly owned Israeli subsidiary of the Company entered into
a series of agreements with Hadasit Medical Research Services and Development
Ltd., a subsidiary of the Hadassah Medical Organization (“Hadassah”). Under the
agreements, Hadassah and BrainStorm personnel will conduct a clinical trial to
evaluate the safety and tolerability of BrainStorm’s treatment using mesenchymal
bone marrow stem cells secreting neurotrophic factors (MSC-NTF) in patients with
ALS, in accordance with a protocol developed jointly by BrainStorm and Hadassah.
The trial is scheduled to include 26 patients.
Intellectual
property generated through the study will be owned by
BrainStorm. Hadassah will be entitled to use the intellectual
property generated through the study for non-commercial purposes. All existing
intellectual property of Brainstorm and Hadassah shall be retained by
them.
Investment of
$1,500,000
On
February 17, 2010, the Company entered into Securities Purchase Agreements with
three individual investors (collectively, the “Investors”), pursuant to which
the Company agreed to issue to the Investors an aggregate of 6,000,000
shares of common stock and two-year warrants to purchase 3,000,000 shares of
common stock with an exercise price of $0.50 in exchange for
$1,500,000.
On March
2, 2010, the transaction involving the sale of the shares of common stock and
warrants was completed, and the 6,000,000 shares of common stock and warrants or
purchase 3,000,000 shares of common stock were issued in exchange for the
investment of $1,500,000 in the Company.
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,
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
Multiple Sclerosis (“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 help breathe)
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
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 $2.3 billion by 2010, 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.
Business
Strategy
Our
efforts are currently focused on the development of the technology to convert
the process from the lab stage to the clinical stage, with the following main
objectives:
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·
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Developing the cell
differentiation process according to health regulation
guidelines;
|
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·
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Demonstrating safety and
efficacy, first in animals and then in patients;
and
|
|
·
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Setting up centralized facilities
to provide NurOwn therapeutic products and services for transplantation in
patients.
|
We intend
to enter into strategic partnerships as we progress towards advanced clinical
development and commercialization with companies responsible for 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.
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, PD,
and other neurodegenerative diseases. Our intended procedure for the replacement
of the degenerated neurons with healthy functional cells derived by
differentiation of bone marrow, 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 the 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
assure you 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.
Our
business model calls for significant investments in research and
development. Our research and development expenditures (i) in 2009
(before Ramot reserve accrual and participation by the Israeli Office of Chief
Scientist) were $1,069,000, which included $289,000 in stock-based compensation
and (ii) in 2008 were $2,097,000, which included $219,000 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 Europe and the United States. Substantive
examinations have been initiated in the U.S. and Europe. A patent was granted in
Singapore.
WO2006/134602
ISOLATED CELLS AND POPULATIONS COMPRISING SAME FOR THE TREATMENT OF CNS
DISEASES. National phase filings in the U.S., Australia, Europe, Israel and
China. Substantive examinations have been initiated in some
jurisdictions, including Israel and Europe. A patent was granted in South
Africa.
A joint
Brainstorm-Ramot patent application as PCT:
WO2009/144718MESENCHYMAL
STEM CELLS FOR THE TREATMENT OF CNS DISEASES
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 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:
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An up-front license fee payment
of $100,000;
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An amount equal to 5% of all net
sales of products; and
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An amount equal to 30% of all
sublicense receipts.
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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. 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 amended
license 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 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
the Company from it’s obligation to fund three years of additional research
(which would have totaled $1,140,000); (ii) accept shares of common stock of the
Company in lieu of $272,000 is past-due amounts. Pursuant to the
Letter Agreement, the Company agreed, among other things, to: (i) reimburse
Ramot for outstanding patent-related expenses; (ii) abandon its rights in
certain patents of Ramot.
Government
Regulations and Supervision
Once
fully developed, we intend to market our bone marrow derived differentiated
neurothrophic-factor secreting cell products, NurOwnTM, 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
NurOwnTM cell
product, we have initiated the process of seeking regulatory approval from the
FDA and other regulatory agencies. 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 have had a pre Investigational New
Drug (“IND”) meeting with the FDA and we are planning to retain such expert
regulatory consultants to assist the Company in its approach to the EMEA in
order to get regulatory approval in Europe. We have also engaged a
regulatory consultant to assist us with the regulatory authorities in
Israel.
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 takes a number of years, is regulated by the FDA
and requires the expenditure of significant resources. 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 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 effective 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 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.
Competition
We face
significant competition in our efforts to develop our products and services,
including: (i) cell therapies competing with NurOwnTM and its
applications and (ii) other treatments or procedures to cure or slow the effects
of PD and other neurodegenerative diseases. There are a number of companies
developing cell therapies. 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, NurOwnTM 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 eight scientific and administrative employees, six of whom are
full-time. None of our employees is represented by a labor union and
we believe that we have good relations 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.stockeryale.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.
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.
Pursuant
to a subscription agreement, as amended, we have with ACCBT Corp., we expected
to issue and sell additional shares and warrants to ACCBT for aggregate
consideration of up to $5,000,000. As of December 31, 2009, ACCBT had invested
up to $4,509,000 in the Company pursuant to the subscription agreement, as
amended.
In recent
months, we have entered into subscription agreements and/or securities purchase
agreements with various investors and have raised an aggregate of
$1,750,000. However, we will still need to secure additional funds to
effect our plan of operations.
We may
not be able to raise additional funds on favorable terms, or at all. If we are
unable to obtain additional funds on favorable terms and in a timely fashion, we
will be unable to execute our business plan and we will be forced to restrict or
cease our operations.
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 for any reason, including
failure to make required payments, we would need to change our business strategy
and we may be forced to cease our operations. Agreements we have with Ramot impose
on us development and commercialization obligations, milestone and royalty
payment obligations and other obligations. Under these agreements, we
are obligated to pay certain fees to Ramot. 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.
Disruption in
financial and currency markets could have a negative effect on our
business. As has
been widely reported, financial markets in the U.S., Europe, Asia and elsewhere
have been experiencing extreme disruption in recent months, including, among
other things, extreme volatility in security prices, severely diminished
liquidity and credit availability, rating downgrades of certain investments and
declining valuations of others. Governments have taken unprecedented actions
intended to address extreme market conditions that include severely restricted
credit and declines in real estate values. While currently these conditions have
not impaired our ability to operate our business, there can be no assurance that
there will not be a further deterioration in financial markets and confidence in
major economies, which can then lead to challenges in the operation of our
business. These economic developments affect businesses such as ours in a number
of ways, including our ability to obtain the financing that is necessary to
continue operating our business. We are unable to predict the likely duration
and severity of the current disruption in financial markets and adverse economic
conditions and the effects they will have on our business and financial
condition.
Our company has a
history of losses and we expect to incur losses for the foreseeable
future. We had no revenues for the fiscal years ended December 31, 2009
or December 31, 2008. As a development stage company, we are in the early stages
of executing our business plan. Our ability to operate successfully is
materially uncertain and our operations are subject to significant risks
inherent in a developing business enterprise. Most notably, we do not expect
that any therapies resulting from our or our collaborators’ research and
development efforts will be commercially available for a significant number of
years, if at all. We also do not expect to generate revenues from strategic
partnerships or otherwise for at least the next 12 months, and likely longer.
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.
The field of stem
cell therapy is 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
and PD involve a new approach that has never been proven to work in human
testing. We are still conducting experimental testing in animals for our
treatment and are going to conduct clinical trials, which, together with other
stem cell therapies, may ultimately prove ineffective in treatment of human
diseases. If we cannot successfully implement our stem cell therapy in human
testing, we would need to change our business strategy and we may be forced to
cease our operations.
Our
ability to commercialize the products we intend to develop will depend upon our
ability to prove the efficacy and safety of these products according to
government regulations.
Our present and proposed activities are subject to extensive and rigorous
regulation by governmental authorities in the U.S. and other countries. To
clinically test, produce and market our proposed future products for human use,
we must satisfy mandatory procedural and safety and efficacy requirements
established by the FDA and comparable state and foreign regulatory agencies.
Typically, such rules require that products be approved by the government agency
as safe and effective for their intended use prior to being marketed. The
approval process is expensive, time consuming and subject to unanticipated
delays. It takes years to complete the testing of a product, and failure can occur at
any stage of testing. Our product candidates may not be approved. In addition,
our product approvals could be withdrawn for failure to comply with regulatory
standards or due to unforeseen problems after the product's marketing
approval.
We may
not be able to obtain regulatory approval of potential products, or may
experience delays in obtaining such approvals, and we may consequently never
generate revenues from product sales because of any of the following risks
inherent in the regulation of our business:
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We may not be successful in
obtaining the approval to perform clinical studies, including the approval
the Israeli Ministry of Health to conduct clinical trials on ALS patients,
an investigational new drug application, or IND, with respect to a
proposed product;
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Preclinical or clinical trials
may not demonstrate the safety and efficacy of proposed products
satisfactory to the FDA or foreign regulatory authorities;
or
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Completion of clinical trials may
be delayed, or costs of clinical trials may exceed anticipated amounts
(for example, negative or inconclusive results from a preclinical test or
clinical trial or adverse medical events during a clinical trial could
cause a preclinical study or clinical trial to be repeated, additional
tests to be conducted or a program to be terminated, even if other studies
or trials relating to the program are
successful).
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We may not be
able to succeed in our business model of seeking to enter into collaborations at
appropriate stages of development. We intend to enter into
strategic partnerships as we progress towards advanced clinical development and
commercialization with companies responsible for such activities. We intend to
provide strategic partners with services required to process the NurOwn products
for the clinical trials. It may be difficult for us to find third parties 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. If we are not able to continue to enter into acceptable collaborations,
we could fail in our strategy of generating an early inflow of up-front and
milestone payments and to enhance our capacities in regulatory and clinical
infrastructure while minimizing expenditure and risk and we could be required to
undertake and fund further development, clinical trials, manufacturing and
marketing activities solely at our own expense.
We may be
dependent upon a company with which we enter into collaborations to conduct
clinical trials and to commercialize our potential products. 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
significant competition in our efforts to develop cell therapies for ALS, PD and
other neurodegenerative diseases. We face significant competition in our
efforts to develop cell therapies and other treatment or procedures to cure or
slow the effects of ALS, PD 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. Many 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. Many also have significantly more experience in
preclinical testing, human clinical trials, product manufacturing, the
regulatory approval process and marketing and distribution than we
do.
If Ramot is
unable to obtain patents on the patent applications and technology exclusively
licensed to us 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 as filed by Ramot and the
license granted to us by Ramot under the Original Ramot Agreement. We agreed
under the Original Ramot Agreement to seek comprehensive patent protection for
all inventions licensed to us under the Original Ramot Agreement. However, we
cannot be sure that any patents will be issued to Ramot as a result of its
domestic or future foreign patent applications or that any issued patents will
withstand challenges by 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.
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.
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 offerings of our securities, upon the
conversion of outstanding convertible promissory notes into shares of common
stock and by options, warrants or shares we grant to management, employees,
directors and consultants. If we issue all of the shares and warrants to
ACCBT Corp. as provided for in the subscription agreement, it will have a
significant dilutive effect on your percentage ownership in the Company. In
addition, in order to meet our financing needs described above, 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.
In
November 2004 and February 2005, the Company’s Board of Directors adopted and
ratified the Global Plan and the U.S. Plan (the “Global Plan” and “U.S. Plan”
respectively and the “Plans” together), and further approved the reservation of
9,143,462 shares of our common stock for issuance under the Plans (the
“Shares”). Our shareholders approved the Plans and the issuance of the Shares in
a special meeting of shareholders 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 shareholders approved the amendment
and restatement of the Plans on June 5, 2008. We have made and intend
to make further option grants under the Plans or otherwise issue warrants or
shares of our common stock to individuals under the Plans. For example, as of
March 16, 2010:
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under our Global Plan we have
granted and not canceled a total of 9,546,778 options with various
exercise prices and expiration dates, to officers, directors, services
providers, consultants and
employees.
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under our U.S. Plan we have
issued an additional 830,000 shares of restricted stock and options for
grants to Scientific Advisory Board members, service providers,
consultants and directors.
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Such
issuances will, if and when made (and if options or warrants are subsequently
exercised), dilute your percentage ownership in the Company.
As of
March 16, 2010, all of our outstanding convertible notes had been converted or
repaid.
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.
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 President,
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.
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.
Since October 2000, terrorist violence in Israel increased significantly and
until they were recently revived, negotiations between Israel and Palestinian
representatives had effectively ceased. 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.
Investors may
face significant restrictions on the resale of our stock due to the way in which
stock trades are handled by broker-dealers. Brokers may be less willing
to execute transactions in securities subject to “penny stock” rules. This may
make it more difficult for investors to dispose of shares of our common stock
and cause a decline in the market value of our stock. Because of large
broker-dealer spreads, investors may be unable to sell the stock immediately
back to the broker-dealer at the same price the broker-dealer sold the stock to
the investor. In some cases, the stock may fall quickly in value. Investors may
be unable to reap any profit from any sale of the stock, if they can sell it at
all. The market among broker-dealers may not be active. Investors in penny
stocks often are unable to sell stock back to the dealer that sold them the
stock. The mark-ups or commissions charged by the broker-dealers may be greater
than any profit a seller may make.
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 Bulletin Board, 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 will 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 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 non-NASDAQ
equity security 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.
Item 1B.
|
UNRESOLVED STAFF
COMMENTS
|
None.
The
address of our principal executive offices is 110 East 59 th Street,
New York, NY 10022, where we have a license to use office space and receive
general office services. We have paid rent in the past, but are currently not
required to do so.
On
December 1, 2004, our Israeli subsidiary, Brainstorm Cell Therapeutics Ltd. (the
“Subsidiary”) 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 31,035 (approximately $8,200) per month.
We
expanded our Petach Tikva facility in 2008 to include an animal research
facility.
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 $896,667, 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. We intend to vigorously defend our actions.
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.
Market
Information
Our
common stock is currently traded on the OTC Bulletin Board operated by the NASD
(OTC BB) under the symbol “BCLI”. The following table sets forth for
the periods indicated the high and low sales prices for our common stock as
reported on the OTC BB.
Quarter Ended
|
|
High
|
|
|
Low
|
|
December
31, 2009
|
|
$ |
0.44 |
|
|
$ |
0.18 |
|
September
30, 2009
|
|
$ |
0.49 |
|
|
$ |
0.05 |
|
June
30, 2009
|
|
$ |
0.10 |
|
|
$ |
0.06 |
|
March
31, 2009
|
|
$ |
0.22 |
|
|
$ |
0.05 |
|
December
31, 2008
|
|
$ |
0.19 |
|
|
$ |
0.06 |
|
September
30, 2008
|
|
$ |
0.32 |
|
|
$ |
0.15 |
|
June
30, 2008
|
|
$ |
0.51 |
|
|
$ |
0.24 |
|
March
31, 2008
|
|
$ |
0.73 |
|
|
$ |
0.32 |
|
We
believe that a number of factors may cause the market price of our common stock
to fluctuate significantly. These factors are described in Item 7
below.
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
March 16, 2010, there were approximately 84 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
October 1, 2009, the Company issued 150,000 shares of the Company’s common stock
to ERS Associates Ltd. for public relations and investor relations work
performed by ERS Associates Ltd. for the Company.
On
January 6, 2010, the Company issued 60,000 shares of the Company’s common stock
to Landoy Risk Management Ltd. in full satisfaction of the $15,000 owed by the
Company to Landoy Risk Management Ltd. The amount payable by the
Company to Landoy Risk Management Ltd. was converted into our common stock at a
conversion price of $0.25.
On
January 27, 2010, upon conversion of a $150,000 8% Convertible Promissory Note,
dated as of March 5, 2007, issued by the Company to Eliyahu Weinstein, the
Company issued 1,016,109 shares of the Company’s common stock to Tayside Trading
Ltd. (“Tayside”), Mr. Weinstein’s assignee, upon receipt of Tayside’s written
notice of his election to convert all of the outstanding principal and interest
amount of the note into shares of the Company’s common stock. The
conversion price was $0.1875.
On
February 19, 2010, upon conversion of a $135,000 4% Convertible Promissory Note,
dated as of December 13, 2009, issued by the Company to Thomas B. Rosedale, the
Company issued 402,385 shares of the Company’s common stock to Thomas B.
Rosedale upon receipt of written notice of his election to convert all of the
outstanding principal and interest amount of the note into shares of the
Company’s common stock. The conversion price was $0.338.
On
January 5, 2010, the Company issued 50,000 shares of common stock to its public
relations advisors for six months of services performed for the
Company. The issuance of such shares was in accordance with an
agreement with the public relations advisors that entitles them to a monthly
grant of 8,333 shares of the Company’s common stock.
The
issuances of the securities described in this Item 5 were effected without
registration in reliance upon Regulation D promulgated under Securities Act of
1933, as amended. No underwriters were involved with the issuance of
such securities and no commissions were paid in connection with such
transaction.
Not
required.
Item 7.
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Company
Overview
The
Company is a leading company developing stem cell therapeutic products based on
breakthrough technologies enabling the in-vitro differentiation of
bone marrow stem cells to neural-like cells. We aim to become a leader in adult
stem cell transplantation for neurodegenerative diseases. Our technology is
based on the use of the patient’s own bone marrow stem cells to generate
astrocyte-like cells secreting Neurotrophic factors that may provide an
effective treatment initially for ALS, PD and Multiple Sclerosis.
Our core
technology was developed in collaboration with prominent neurologist, Prof.
Eldad Melamed, the 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.
The
Company’s team is among the first to demonstrate the in-vitro differentiation of
bone marrow cells into glial-like cells secreting neurotrophic-factor (“NTF”)
including GDNF, BDNF, NGF and IGF-1.
The team
is also among the first to have successfully demonstrated release of
neurotrophic factors from in-vitro differentiated bone
marrow cells. Moreover, in research conducted by this team, implantation of
these differentiated cells into the brains of animal models that had been
induced to Parkinsonian behavior markedly improved their Parkinsonian
symptoms.
Our aim
is to provide neural stem cell transplants that maintain, preserve and restore
the damaged and remaining dopaminergic cells in the patient’s brain, protecting
them from further degeneration.
The
Company holds exclusive worldwide rights to commercialize the technology,
through a licensing agreement with Ramot, the technology transfer company of Tel
Aviv University.
On
February 17, 2010, the Company entered into an agreement with Hadasit Medical
Research Services and Development Ltd., a subsidiary of the Hadassah Medical
Organization (“Hadassah”) to conduct clinical trials to evaluate the safety and
tolerability of the Company’s treatment using mesenchymal bone marrow stem cells
secreting neurotrophic factors in up to 26 ALS patients at the Hadassah Medical
Center.
Hadassah’s
Institutional Review approved the commencement of such clinical trials, pending
approval by the Israel’s Ministry of Health Review Board.
We are
going to begin the process of seeking regulatory approval from regulatory
agencies in the U.S and Europe. Our efforts are directed at the development of
the technology from the lab to the clinic with the following main
objectives:
|
·
|
Developing the cell
differentiation process according to Food and Drug Administration (“FDA”)
and the European agency for evaluation of medical product (“EMEA”)
guidelines;
|
|
·
|
Demonstrating safety and efficacy
in animals and in human patients;
and
|
|
·
|
Setting up centralized
facilities to provide the therapeutic products and services for
transplantation in patients.
|
As a
result of limited cash resources and the desire to take a faster path to
clinical trials, in the fourth quarter of 2008 the Company determined to focus
all of its efforts on ALS, and we are currently not allocating resources towards
PD or other neurodegenerative diseases.
Results
of Operations
The
Company has been a development stage company since its inception. For the period
from inception (September 22, 2000) until December 31, 2009, the Company did not
earn any revenues from operations. The Company does not expect to earn revenues
from operations until 2013. In addition, the Company incurred operating costs
and expenses of approximately $1,750,000 during the year ending December 31,
2009, and approximately $34,939,000 for the period from inception (September 22,
2000) through December 31, 2009. Operating expenses incurred since inception
were approximately $13,254,000 for general and administrative expenses and
$21,685,000 for research and development costs.
Research
and Development, net:
Research
and development expenses, net for the year ended December 31, 2009 and 2008 were
$181,000 and $1,639,000, respectively. In addition, the Company grant
from The Office of the Chief Scientist decreased by $330,000 to $128,000 for the
year ended December 31, 2009 from $458,000 for the year ended December 31,
2008.
The
decrease in research and development expenses, net for the year ended December
31, 2009 is primarily due to: (i) the Settlement Agreement with Ramot, under
which Ramot released the Company from it’s obligation to fund the extended
research period; the Company reversed an amount equal to $760,000 that
accumulated in the past years for the extended research period; (ii)
the decrease in salary expenses due to the downsizing of the employee base in
connection with the Company's financial condition; and (iii) the reduction in
development activities as the Company decided to delay development activities in
PD and other neurodegenerative diseases and focus solely on
ALS.
General
and Administrative
General
and administrative expenses for the years ended December 31, 2009 and 2008 were
$1,569,000 and $1,629,000, respectively. General and administrative expenses for
the year ended December 31, 2009 consisted of $895,000 in stock-based
compensation expenses and $674,000 in salary, legal, audit, public and investor
relations and other expenses. General and administrative expenses for the year
ended December 31, 2008 consisted of $509,000 in stock-based compensation
expenses and $1,120,000 in salary, legal, audit, public and investor relations
and other expenses.
The
decrease in general and administrative expenses, excluding stock-based
compensation expenses, for the year ended December 31, 2009 is
primarily due to a reduction in Company activities in fiscal 2009 due to the
Company’s financial condition.
Financial
Expenses
Financial
expenses decreased by $173,000 to $31,000 for the year ended December 31, 2009
from $204,000 for the year ended December 31, 2008.
The
decrease in financial expenses for the year ended December 31, 2009 is primarily
to a decrease in amortization of the discount on short-term convertible loans
that were recognized in the first half of 2008 and the exchange differentials
derived from the changes in the exchange rate between the New Israeli Shekel to
U.S. dollar.
Net
Loss
Net loss
for the year ended December 31, 2009 was $1,781,000, as compared to a net loss
of $3,472,000 for the year ended December 31, 2008. Net loss per share for the
year ended December 31, 2009 was $0.03, as compared to a net loss per share of
$0.07 for the year ended December 31, 2008.
The
decrease in the net loss for the year ended December 31, 2009 is due to a (i)
reduction in Company activities, (ii) downsizing of employees and (iii)
amortization of discount on short-term convertible loans.
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, 2009 was 61,151,011,
compared to 49,040,500 for the year ended December 31, 2008.
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,
2009 was due to (i) the issuance of shares in a private placement, (ii) the
conversion of convertible loans, (iii) the exercise of warrants and (iv) the
issuance of shares to service providers.
Liquidity
and Capital Resources
The
Company has financed its operations since inception primarily through private
sales of its common stock and warrants and the issuance of convertible
promissory notes. At December 31, 2009, we had $87,000 in total current assets
and $2,388,000 in total current liabilities.
Net cash
used in operating activities was $744,000 for the year ended December 31, 2009.
Cash used for operating activities in the year ended December 31, 2009 was
primarily for (i) payment of salaries and fees to our employees, consultants,
subcontractors and services providers, (ii) purchase of laboratory materials and
(iii) Company operations.
Net cash
used in investing activities was $39,000 for the year ended December 31, 2009.
Cash used for investing activities in the year ended December 31, 2009 was
primarily for cancellation of restricted cash.
Net cash
provided by financing activities was $704,000 for the year ended December 31,
2009 and is primarily attributable to funds received from ACCBT under the
Subscription Agreement and the amendment of the Subscription
Agreement.
Our
material cash needs for the next 12 months include the payments due under the
following:
|
1.
|
An
agreement with a lender under which we must pay approximately $120,000
over the next year; and
|
|
2.
|
An
agreement with Hadassah to conduct clinical trials in ALS patients, under
which we must pay to Hadassah an amount of (i) up to $38,190
per patient (up to $992,880 in the aggregate) and (ii) $31,250
per month for rent and operations.
|
Our other
material cash needs for the next 12 months will include payments of/to (i)
employee salaries, (ii) lease of clean room for cell differentiation for
Hadassah's clinical trials (iii) conduct clinical trials in the Hadassah Medical
Center, (iv) patents, (v) construction fees for facilities to be used in our
research and development and (vi) fees to our consultants and legal
advisors.
On July
2, 2007, we entered into a subscription agreement with ACCBT Corp., pursuant to
which we agreed to sell and issue (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.
On August
18, 2009, we entered into an amendment to the subscription agreement with ACCBT
Corp. (the “Amendment”). Pursuant to the Amendment: (i) ACCBT Corp. agreed to
invest the remaining amount (approximately $1,000,000) under the subscription
agreement at a price per share of $0.12 (instead of a price per share of
$0.1818) in monthly installments of not less than $50,000 beginning in August
2009; (ii) the exercise price of the final 10,083,334 warrants decreased from
$0.36 to $0.29; (iii) the expiration date of all warrants extended from November
5, 2011 to November 5, 2013; and (iv) the purchase price per share of all
27,500,000 shares purchased pursuant to the subscription agreement decreased
from $0.1818 to $0.12, which repricing applied retroactively to all shares
purchased by ACCBT Corp. prior to the Amendment.
On
January 25, 2010, we entered into a Subscription Agreement with Reytalon Ltd,
pursuant to which the Company issued 1,250,000 shares of common stock of the
Company to Reytalon Ltd at a purchase price of $0.20 per share for total gross
proceeds of $250,000 paid to the Company and a warrant to purchase up to an
additional 1,250,000 shares of the Company’s common stock at an exercise price
of $0.50 per share and which is exercisable until January 24, 2012.
On
February 17, 2010, we entered into Securities Purchase Agreements with three
individual investors, pursuant to which the Company agreed to issue to the
Investors an aggregate of 6,000,000 shares of common stock and two-year warrants
to purchase 3,000,000 shares of common stock with an exercise price of $0.50 in
exchange for $1,500,000. On March 2, 2010, the transaction was completed
and the Company received the $1,500,000 investment.
We will
need to raise 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;
|
|
·
|
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.
|
QUANTITATIVE AND QUALITATIVE
DISCLOSURE 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, 2009
U.S.
DOLLARS IN THOUSANDS
(Except
share data)
BRAINSTORM
CELL THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2009
U.S.
DOLLARS IN THOUSANDS
(Except
share data)
INDEX
|
|
Page
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
27
|
|
|
|
Consolidated
Balance Sheets
|
|
29
|
|
|
|
Consolidated
Statements of Operations
|
|
30
|
|
|
|
Statements
of Changes in Stockholders' Equity (Deficiency)
|
|
31 - 34
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
35
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
36 - 63
|
|
Brightman
Almagor
1
Azrieli Center
Tel
Aviv 67021
P.O.B.
16593, Tel Aviv 61164
Israel
Tel: +972
(3) 608 5555
Fax: +972
(3) 609 4022
info@deloitte.co.il
www.deloitte.com/il
|
|
|
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, 2009 and 2008, and the related consolidated statement of
income, stockholders' deficiency, and cash flows for each of the
two years in the period ended December 2009 and
for the period from September 22, 2000 (date of inception) to December 31, 2009.
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 September 22, 2000 (inception)
through December 31, 2007, were audited by other auditors. The consolidated
financial statements for the period from September 22, 2000 (inception)
through December 31, 2007 included a net loss of $32,488,000. Our opinion
on the consolidated statements of operations, changes in stockholders'
deficiency and cash flows for the period from September 22, 2000
(inception) through December 31, 2009, 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,
2009 and 2008, and the results of their operations and their cash flows for each
of the two years in the period ended December 2009 and for the period
from September 22, 2000 (date of inception) to December 31, 2009, 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 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 as discussed in Note 1 to the
financial statements. The
Company's working capital deficiency and operating losses since inception
through December 31, 2009 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
25, 2010
BRAINSTORM
CELL THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands (except share data)
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1 |
|
|
|
2 |
|
Restricted
cash (Note 10b)
|
|
|
- |
|
|
|
36 |
|
Accounts
receivable and prepaid expenses (Note 5)
|
|
|
86 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
87 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
INVESTMENTS:
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
7 |
|
|
|
11 |
|
Severance
pay fund
|
|
|
88 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
Total
long-term investments
|
|
|
95 |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET (Note 6)
|
|
|
575 |
|
|
|
743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
757 |
|
|
|
875 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Short
term Credit from bank
|
|
|
46 |
|
|
|
72 |
|
Trade
payables
|
|
|
600 |
|
|
|
744 |
|
Other
accounts payable and accrued expenses (Note 7)
|
|
|
1,418 |
|
|
|
1,672 |
|
Short-
term convertible note (Note 8 and 15g)
|
|
|
135 |
|
|
|
- |
|
Short-term
convertible loans (Note 9b and 15b)
|
|
|
189 |
|
|
|
172 |
|
Short-term
loans (Note 9h)
|
|
|
- |
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,388 |
|
|
|
2,859 |
|
|
|
|
|
|
|
|
|
|
ACCRUED
SEVERANCE PAY
|
|
|
112 |
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,500 |
|
|
|
2,951 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (Note 10)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIENCY:
|
|
|
|
|
|
|
|
|
Stock
capital: (Note 11)
|
|
|
4 |
|
|
|
3 |
|
Common
stock of $ 0.00005 par value - Authorized: 800,000,000 shares at
December 31, 2009 and 2008; Issued and outstanding: 76,309,152 and
55,241,418 shares at December 31, 2009 and 2008,
respectively
|
|
|
|
|
|
|
|
|
Additional
paid-in-capital
|
|
|
35,994 |
|
|
|
33,881 |
|
Deficit
accumulated during the development stage
|
|
|
(37,741 |
) |
|
|
(35,960 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders' deficiency
|
|
|
(1,743 |
) |
|
|
(2,076 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficiency
|
|
|
757 |
|
|
|
875 |
|
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)
|
|
|
|
|
Period
from
September
22,
2000
(inception
date)
through
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development, net (Note 12)
|
|
|
181 |
|
|
|
1,639 |
|
|
|
21,685 |
|
General
and administrative
|
|
|
1,569 |
|
|
|
1,629 |
|
|
|
13,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
costs and expenses
|
|
|
1,750 |
|
|
|
3,268 |
|
|
|
34,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
expenses, net
|
|
|
31 |
|
|
|
204 |
|
|
|
2,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,781 |
|
|
|
3,472 |
|
|
|
37,524 |
|
Taxes
on income (Note 13)
|
|
|
- |
|
|
|
- |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
1,781 |
|
|
|
3,472 |
|
|
|
37,577 |
|
Net
loss from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
1,781 |
|
|
|
3,472 |
|
|
|
37,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share from continuing operations
|
|
|
0.03 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding used in computing basic and diluted
net loss per share
|
|
|
61,151,011 |
|
|
|
49,040,500 |
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
BRAINSTORM
CELL THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
U.S.
dollars in thousands (except share data)
|
|
|
|
|
|
|
|
|
|
|
Deficit
accumulated
|
|
|
Total
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
during
the
|
|
|
stockholders'
|
|
|
|
|
|
|
paid-in
|
|
|
stock-based
|
|
|
development
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Former 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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued on June 24, 2004 for private placement at $0.01 per share, net of
$25,000 issuance expenses
|
|
|
8,510,000 |
|
|
(*) -
|
|
|
|
60 |
|
|
|
- |
|
|
|
- |
|
|
|
60 |
|
Contribution
capital
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
Stock
issued in 2004 for private placement at $0.75 per unit
|
|
|
1,894,808 |
|
|
(*) -
|
|
|
|
1,418 |
|
|
|
- |
|
|
|
- |
|
|
|
1,418 |
|
Cancellation
of shares granted to service providers
|
|
|
(1,800,000 |
) |
|
(*) -
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Deferred
stock-based compensation related to options granted to
employees
|
|
|
- |
|
|
|
- |
|
|
|
5,979 |
|
|
|
(5,979 |
) |
|
|
- |
|
|
|
- |
|
Amortization
of deferred stock-based compensation related to shares and options granted
to employees
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
584 |
|
|
|
- |
|
|
|
584 |
|
Compensation
related to shares and options granted to service providers
|
|
|
2,025,000 |
|
|
(*) -
|
|
|
|
17,506 |
|
|
|
- |
|
|
|
- |
|
|
|
17,506 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(18,840 |
) |
|
|
(18,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2005
|
|
|
20,867,808 |
|
|
$ |
1 |
|
|
$ |
25,101 |
|
|
$ |
(5,395 |
) |
|
$ |
(19,003 |
) |
|
$ |
704 |
|
(*) Represents
an amount less than $1.
The accompanying notes are an integral
part of the consolidated financial statements.
BRAINSTORM
CELL THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
U.S.
dollars in thousands (except share data)
|
|
|
|
|
|
|
|
|
|
|
Deficit
accumulated
|
|
|
Total
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
during
the
|
|
|
stockholders'
|
|
|
|
|
|
|
paid-in
|
|
|
stock-based
|
|
|
development
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2005
|
|
|
20,867,808 |
|
|
$ |
1 |
|
|
$ |
25,101 |
|
|
$ |
(5,395 |
) |
|
$ |
(19,003 |
) |
|
$ |
704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued on May 12, 2005 for private placement at $0.8 per
share
|
|
|
186,875 |
|
|
(*) -
|
|
|
|
149 |
|
|
|
- |
|
|
|
- |
|
|
|
149 |
|
Stock
issued on July 27, 2005 for private placement at $0.6 per
share
|
|
|
165,000 |
|
|
(*) -
|
|
|
|
99 |
|
|
|
- |
|
|
|
- |
|
|
|
99 |
|
Stock
issued on September 30, 2005 for private placement at $0.8 per
share
|
|
|
312,500 |
|
|
(*) -
|
|
|
|
225 |
|
|
|
- |
|
|
|
- |
|
|
|
225 |
|
Stock
issued on December 7, 2005 for private placement at $0.8 per
share
|
|
|
187,500 |
|
|
(*) -
|
|
|
|
135 |
|
|
|
- |
|
|
|
- |
|
|
|
135 |
|
Forfeiture
of options granted to employees
|
|
|
- |
|
|
|
- |
|
|
|
(3,363 |
) |
|
|
3,363 |
|
|
|
- |
|
|
|
- |
|
Deferred
stock-based compensation related to shares and options granted to
directors and employees
|
|
|
200,000 |
|
|
(*) -
|
|
|
|
486 |
|
|
|
(486 |
) |
|
|
- |
|
|
|
- |
|
Amortization
of deferred stock-based compensation related to options and shares granted
to employees and directors
|
|
|
- |
|
|
|
- |
|
|
|
51 |
|
|
|
1,123 |
|
|
|
- |
|
|
|
1,174 |
|
Stock-based
compensation related to options and shares granted to service
providers
|
|
|
934,904 |
|
|
(*) -
|
|
|
|
662 |
|
|
|
- |
|
|
|
- |
|
|
|
662 |
|
Reclassification
due to application of ASC 815-40-25 (formerly EITF 00-19)
|
|
|
- |
|
|
|
- |
|
|
|
(7,906 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,906 |
) |
Beneficial
conversion feature related to a convertible bridge loan
|
|
|
- |
|
|
|
- |
|
|
|
164 |
|
|
|
- |
|
|
|
- |
|
|
|
164 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,317 |
) |
|
|
(3,317 |
) |
Balance
as of March 31, 2006
|
|
|
22,854,587 |
|
|
|
1 |
|
|
|
15,803 |
|
|
|
(1,395 |
) |
|
|
(22,320 |
) |
|
|
(7,911 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination
of deferred stock compensation due to implementation of ASC 718-10
(formerly SFAS 123(R))
|
|
|
- |
|
|
|
- |
|
|
|
(1,395 |
) |
|
|
1,395 |
|
|
|
- |
|
|
|
- |
|
Stock-based
compensation related to shares and options granted to directors and
employees
|
|
|
200,000 |
|
|
|
- |
|
|
|
1,168 |
|
|
|
- |
|
|
|
- |
|
|
|
1,168 |
|
Reclassification
due to application of ASC 815-40-25 (formerly EITF 00-19)
|
|
|
- |
|
|
|
- |
|
|
|
7,191 |
|
|
|
- |
|
|
|
- |
|
|
|
7,191 |
|
Stock-based
compensation related to options and shares granted to service
providers
|
|
|
1,147,225 |
|
|
(*) -
|
|
|
|
453 |
|
|
|
- |
|
|
|
- |
|
|
|
453 |
|
Warrants
issued to convertible note holder
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
Warrants
issued to loan holder
|
|
|
- |
|
|
|
- |
|
|
|
110 |
|
|
|
- |
|
|
|
- |
|
|
|
110 |
|
Beneficial
conversion feature related to convertible bridge loans
|
|
|
- |
|
|
|
- |
|
|
|
1,086 |
|
|
|
- |
|
|
|
- |
|
|
|
1,086 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,924 |
) |
|
|
(3,924 |
) |
Balance
as of December 31, 2006
|
|
|
24,201,812 |
|
|
$ |
1 |
|
|
$ |
24,427 |
|
|
$ |
- |
|
|
$ |
(26,244 |
) |
|
$ |
(1,816 |
) |
(*) Represents
an amount less than $1.
The
accompanying notes are an integral part of the consolidated financial
statements.
BRAINSTORM
CELL THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
U.S.
dollars in thousands (except share data)
|
|
|
|
|
Additional
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
paid-in
|
|
|
Deferred
|
|
|
accumulated
|
|
|
Total
|
|
|
|
|
|
|
Capital
and
|
|
|
stock-
|
|
|
during
the
|
|
|
stockholders'
|
|
|
|
|
|
|
subscription
|
|
|
based
|
|
|
development
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2006
|
|
|
24,201,812 |
|
|
$ |
1 |
|
|
$ |
24,427 |
|
|
$ |
- |
|
|
$ |
(26,244 |
) |
|
$ |
(1,816 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation related to options and shares granted to service
providers
|
|
|
544,095 |
|
|
(*) -
|
|
|
|
1,446 |
|
|
|
- |
|
|
|
- |
|
|
|
1,446 |
|
Warrants
issued to convertible note holder
|
|
|
- |
|
|
|
- |
|
|
|
109 |
|
|
|
- |
|
|
|
- |
|
|
|
109 |
|
Stock-based
compensation related to shares and options granted to directors and
employees
|
|
|
200,000 |
|
|
(*) -
|
|
|
|
1,232 |
|
|
|
- |
|
|
|
- |
|
|
|
1,232 |
|
Beneficial
conversion feature related to convertible loans
|
|
|
- |
|
|
|
- |
|
|
|
407 |
|
|
|
- |
|
|
|
- |
|
|
|
407 |
|
Conversion
of convertible loans
|
|
|
725,881 |
|
|
(*) -
|
|
|
|
224 |
|
|
|
- |
|
|
|
- |
|
|
|
224 |
|
Exercise
of warrants
|
|
|
3,832,621 |
|
|
(*) -
|
|
|
|
214 |
|
|
|
- |
|
|
|
- |
|
|
|
214 |
|
Stock
issued for private placement at $0.1818 per unit, net of finder's
fee
|
|
|
11,500,000 |
|
|
|
1 |
|
|
|
1,999 |
|
|
|
- |
|
|
|
- |
|
|
|
2,000 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,244 |
) |
|
|
(6,244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2007
|
|
|
41,004,409 |
|
|
|
2 |
|
|
|
30,058 |
|
|
|
- |
|
|
|
(32,488 |
) |
|
|
(2,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation related to options and stock granted to service
providers
|
|
|
90,000 |
|
|
|
- |
|
|
|
33 |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
Stock-based
compensation related to stock and options granted to directors and
employees
|
|
|
- |
|
|
|
|
|
|
|
731 |
|
|
|
- |
|
|
|
- |
|
|
|
731 |
|
Conversion
of convertible loans
|
|
|
3,644,610 |
|
|
(*) -
|
|
|
|
1,276 |
|
|
|
- |
|
|
|
- |
|
|
|
1,276 |
|
Exercise
of warrants
|
|
|
1,860,000 |
|
|
(*) -
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise
of options
|
|
|
17,399 |
|
|
(*) -
|
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
3 |
|
Stock
issued for private placement at $0.1818 per unit, net of finder's
fee
|
|
|
8,625,000 |
|
|
|
1 |
|
|
|
1,499 |
|
|
|
- |
|
|
|
- |
|
|
|
1,500 |
|
Subscription
of shares
|
|
|
- |
|
|
|
- |
|
|
|
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)
|
|
|
|
|
Additional
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
paid-in
|
|
|
Deferred
|
|
|
accumulated
|
|
|
Total
|
|
|
|
|
|
|
Capital
and
|
|
|
stock-
|
|
|
during
the
|
|
|
stockholders'
|
|
|
|
|
|
|
subscription
|
|
|
based
|
|
|
development
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (Note
11(b)(1)(f))
|
|
|
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)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
|
|
|
|
Period from
September 22,
2000 (inception
date) through
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,781 |
) |
|
|
(3,472 |
) |
|
|
(37,741 |
) |
Less
- loss for the period from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
164 |
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
168 |
|
|
|
151 |
|
|
|
536 |
|
Amortization
of deferred charges
|
|
|
- |
|
|
|
2 |
|
|
|
150 |
|
Severance
pay, net
|
|
|
(6 |
) |
|
|
23 |
|
|
|
24 |
|
Accrued
interest on loans
|
|
|
19 |
|
|
|
113 |
|
|
|
448 |
|
Amortization
of discount on short-term loans
|
|
|
- |
|
|
|
41 |
|
|
|
1,864 |
|
Change
in fair value of options and warrants
|
|
|
- |
|
|
|
- |
|
|
|
(795 |
) |
Expenses
related to shares and options granted to service providers
|
|
|
775 |
|
|
|
33 |
|
|
|
20,941 |
|
Amortization
of deferred stock-based compensation related to option and stocks granted
to employees and directors
|
|
|
409 |
|
|
|
731 |
|
|
|
5,298 |
|
Decrease
(increase) in accounts receivable and prepaid expenses
|
|
|
(65 |
) |
|
|
116 |
|
|
|
(86 |
) |
Increase
(decrease) in trade payables and convertible note
|
|
|
(9 |
) |
|
|
(94 |
) |
|
|
735 |
|
Increase
in other accounts payable and accrued expenses
|
|
|
(254 |
) |
|
|
623 |
|
|
|
1,413 |
|
Erosion
of restricted cash
|
|
|
- |
|
|
|
(1 |
) |
|
|
(6 |
) |
Net
cash used in continuing operating activities
|
|
|
(744 |
) |
|
|
(1,734 |
) |
|
|
(7,055 |
) |
Net
cash used in discontinued operating activities
|
|
|
- |
|
|
|
- |
|
|
|
(23 |
) |
Total
net cash used in operating activities
|
|
|
(744 |
) |
|
|
(1,734 |
) |
|
|
(7,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
- |
|
|
|
(154 |
) |
|
|
(1,080 |
) |
Restricted
cash
|
|
|
35 |
|
|
|
- |
|
|
|
6
|
|
Investment
in lease deposit
|
|
|
4 |
|
|
|
(2 |
) |
|
|
(7 |
) |
Net
cash used in continuing investing activities
|
|
|
39 |
|
|
|
(156 |
) |
|
|
(1,081 |
) |
Net
cash used in discontinued investing activities
|
|
|
- |
|
|
|
- |
|
|
|
(16 |
) |
Total
net cash used in investing activities
|
|
|
39 |
|
|
|
(156 |
) |
|
|
(1,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of Common stock and warrants, net
|
|
|
730 |
|
|
|
1,781 |
|
|
|
6,599 |
|
Proceeds
from loans, notes and issuance of warrants, net
|
|
|
- |
|
|
|
- |
|
|
|
2,061 |
|
Credit
from bank
|
|
|
(26 |
) |
|
|
72 |
|
|
|
46 |
|
Proceeds
from exercise of warrants and options
|
|
|
- |
|
|
|
3 |
|
|
|
28 |
|
Repayment
of short-term loans
|
|
|