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

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

For the Quarterly Period Ended June 30, 2010

o  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
20-8133057
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
110 East 59th Street
New York, NY 10022
(Address of principal executive offices)

(212) 557-9000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨       No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   ¨          Accelerated filer   ¨  
     
Non-accelerated filer   ¨ (Do not check if a smaller reporting company)     Smaller reporting company   x
                                                                                                          
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No x

As of August 16, 2010, the number of shares outstanding of the registrant’s common stock, $0.00005 par value per share, was 91,236,463.

TABLE OF CONTENTS
   
Page Number
PART I
   
     
Item 1. Financial Statements
 
1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
31
Item 4. Controls and Procedures
 
31
     
PART II
   
     
Item 1. Legal Proceedings
 
33
Item 1A. Risk Factors
 
33
Item 5. Other Information
 
33
Item 6. Exhibits
 
33
PART I: FINANCIAL INFORMATION

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

CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2010

UNAUDITED

U.S. DOLLARS IN THOUSANDS
1
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2010
UNAUDITED
U.S. DOLLARS IN THOUSANDS

INDEX
   
Page
     
Consolidated Balance Sheets
 
3
     
Consolidated Statements of Operations
 
4
     
Statements of Changes in Stockholders' Equity (Deficiency)
 
5 - 10
     
Consolidated Statements of Cash Flows
 
11
     
Notes to Consolidated Financial Statements
 
12 - 25
2
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED BALANCE SHEETS  
U.S. dollars in thousands (except share data)

   
June 30
   
December 31,
 
    
2010
   
2009
 
   
Unaudited
   
Audited
 
             
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 725     $ 1  
Accounts receivable and prepaid expenses
    177       86  
Liability from shareholder
    25       -  
Total current assets
    927       87  
LONG-TERM INVESTMENTS:
               
Prepaid expenses
    -       7  
Severance pay fund
    56       88  
Total long-term investments
    56       95  
PROPERTY AND EQUIPMENT, NET
    492       575  
Total assets
  $ 1,475     $ 757  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
               
                 
CURRENT LIABILITIES:
               
Short term Credit from bank
  $ 1     $ 46  
Trade payables
    566       600  
Other accounts payable and accrued expenses
    1,296       1,418  
Short-term convertible note
    -       135  
Short-term convertible loans
    -       189  
Total current liabilities
    1,863       2,388  
ACCRUED SEVERANCE PAY
    82       112  
Total liabilities
    1,945       2,500  
STOCKHOLDERS' EQUITY (DEFICIENCY):
               
Stock capital: (Note 7)
    5       4  
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at June 30, 2010 and December 31,2009; Issued and outstanding: 91,236,463 and 76,309,152 shares at June 30, 2010 and December 31, 2009, respectively.
               
Additional paid-in-capital
    38,495       35,994  
Deficit accumulated during the development stage
    (38,970 )     (37,741 )
Total stockholders' equity (deficiency)
    (470 )     (1,743 )
Total liabilities and stockholders' equity (deficiency)
  $ 1,475     $ 757  

The accompanying notes are an integral part of the consolidated financial statements.
3
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS  
U.S. dollars in thousands (except share data)

   
Six months
ended June 30
   
Three months
ended June 30
   
Period from
September 22,
2000 (inception
date) through
June 30,
 
   
2010
   
2009
   
2010
   
2009
   
2010
 
   
Unaudited
   
Unaudited
   
Unaudited
 
                               
Operating costs and expenses:
                             
                               
Research and development, net
  $ 587     $ 499     $ 348     $ 210     $ 22,272  
General and administrative
    638       565       268       314       13,892  
                                         
Total operating costs and expenses
    1,225       1,064       616       524       36,164  
                                         
Financial (income) expenses, net
    4       (7 )     (2 )     19       2,589  
                                         
Operating loss
    1,229       1,057       614       543       38,753  
                                         
Taxes on income
    -       -       -       -       53  
                                         
Loss from continuing operations
    1,229       1,057       614       543       38,806  
                                         
Net loss from discontinued operations
    -       -       -       -       164  
                                         
Net loss
    1,229       1,057       614       543       38,970  
                                         
Basic and diluted net loss per share from
                                       
continuing operations
    0.01       0.02       0.01       0.01          
                                         
Weighted average number of shares outstanding used in computing basic and diluted net loss per share
    85,552,899       57,278,987       88,609,663       59,294,165          

The accompanying notes are an integral part of the consolidated financial statements
4
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  
U.S. dollars in thousands (except share data)

                           
Deficit
       
                            
accumulated
   
Total
 
                
Additional
   
Deferred
   
during the
   
stockholders'
 
    
Common stock
   
paid-in
   
Stock - based
   
development
   
equity
 
    
Number
   
Amount
   
capital
   
compensation
   
stage
   
(deficiency)
 
                                     
Balance as of September 22, 2000 (date of inception)
    -     $ -     $ -     $ -     $ -     $ -  
                                                 
Stock issued on September 22, 2000 for cash at $0.00188 per share
    8,500,000       1       16       -       -       17  
Stock issued on March 31, 2001 for cash at $0.0375 per share
    1,600,000       * -       60       -       -       60  
Contribution of capital
    -       -       8       -       -       8  
Net loss
    -       -       -       -       (17 )     (17 )
                                                 
Balance as of March 31, 2001
    10,100,000       1       84       -       (17 )     68  
                                                 
Contribution of capital
    -       -       11       -       -       11  
                                                 
Net loss
    -       -       -       -       (26 )     (26 )
Balance as of March 31, 2002
    10,100,000       1       95       -       (43 )     53  
                                                 
Contribution of capital
    -       -       15       -       -       15  
Net loss
    -       -       -       -       (47 )     (47 )
Balance as of March 31, 2003
    10,100,000       1       110       -       (90 )     21  
                                                 
2-for-1 stock split
    10,100,000       * -       -       -       -       -  
Stock issued on August 31, 2003 to purchase mineral option at $0.065 per share
    100,000       * -       6       -       -       6  
Cancellation of shares granted to Company's President
    (10,062,000 )     * -       * -       -       -       -  
Contribution of capital
    -       * -       15       -       -       15  
Net loss
    -       -       -       -       (73 )     (73 )
Balance as of March 31, 2004
    10,238,000     $ 1     $ 131     $ -     $ (163 )   $ (31 )
5
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  
U.S. dollars in thousands (except share data)

                           
Deficit
       
                            
accumulated
   
Total
 
                
Additional
   
Deferred
   
during the
   
stockholders'
 
    
Common stock
   
paid-in
   
Stock - based
   
development
   
equity
 
    
Number
   
Amount
   
capital
   
compensation
   
stage
   
(deficiency)
 
                                     
Balance as of March 31, 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.
6
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  
U.S. dollars in thousands (except share data)

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

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

* Represents an amount less than $1.
8
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  
U.S. dollars in thousands (except share data)

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

* Represents an amount less than $1.
9
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company )
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  
U.S. dollars in thousands (except share data)

                           
Deficit
       
                            
accumulated
   
Total
 
                      
Deferred
   
during the
   
stockholders'
 
    
Common stock
   
Additional paid-in
   
stock - based
   
development
   
equity
 
    
Number
   
Amount
   
capital
   
compensation
   
stage
   
(deficiency)
 
                                     
Balance as of December 31, 2009
    76,309,152     $ 4     $ 35,994     $ -     $ (37,741 )   $ (1,743 )
Stock-based compensation related to options and stock granted to service providers
    443,333               101       -       -       101  
Stock-based compensation related to stock and options granted to directors and employees
    466,667               183       -       -       183  
Stock issued for amendment of private placement
    7,250,000       1       1,750       -       -       1,751  
Conversion of convertible note
    402,385               135       -       -       135  
Conversion of convertible loans
    1,016,109               189       -       -       189  
Exercise of options
    443,670               67       -       -       67  
Exercise of warrants
    2,905,145               26       -       -       26  
Subscription of shares for private placement at $0.12 per unit
                    50       -       -       50  
Issuance of shares on account of previously subscribed shares (See also Note 7B.1.f)
    2,000,001               -       -       -       -  
Net loss
                    -       -       (1,229 )     (1,229 )
                                                 
Balance as of June 30, 2010
    91,236,463       5       38,495       -       (38,970 )     (470 )

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements.
10
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands

               
Period from
 
                
September 22,
 
                
2000 (inception
 
    
Six months ended
   
date) through
 
    
June 30,
   
June 30,
 
    
2010
   
2009
   
2010
 
    
Unaudited
   
Unaudited
 
Cash flows from operating activities:
                 
Net loss
  $ (1,229 )   $ (1,057 )   $ (38,970 )
Less - loss for the period from discontinued operations
    -       -       164  
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation and amortization of deferred charges
    84       79       770  
Severance pay, net
    2       (2 )     26  
Accrued interest on loans
    -       7       448  
Amortization of discount on short-term loans
    -       -       1,864  
Change in fair value of options and warrants
    -       -       (795 )
Expenses related to shares and options granted to service providers
    101       183       21,042  
Amortization of deferred stock-based compensation related to options granted to employees
    183       199       5,481  
Decrease (increase) in accounts receivable and prepaid expenses
    (84 )     (32 )     (170 )
Increase (decrease) in trade payables
    (33 )     65       702  
Increase (decrease) in other accounts payable and accrued expenses
    (122 )     337       1,291  
Liability from shareholders
    (25 )     -       (25 )
Erosion of restricted cash
    -       1       (6 )
Net cash used in continuing operating activities
    (1,123 )     (220 )     (8,178 )
Net cash used in discontinued operating activities
    -       -       (23 )
Total net cash used in operating activities
  $ (1,123 )   $ (220 )   $ (8,201 )
                         
Cash flows from investing activities:
                       
Purchase of property and equipment
  $ -     $ -     $ (1,080 )
Restricted cash
    -       -       6  
Investment in lease deposit
    -       5       (7 )
Net cash used in continuing investing activities
    -       5       (1,081 )
Net cash used in discontinued investing activities
    -       -       (16 )
Total net cash used in investing activities
  $ -     $ 5     $ (1,097 )
                         
Cash flows from financing activities:
                       
Proceeds from issuance of Common stock, net
  $ 1,800     $ 259     $ 8,399  
Proceeds from loans, notes and issuance of warrants, net