Edgar Filing: BRAINSTORM CELL THERAPEUTICS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

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

EXCHANGE ACT OF 1934

For the transition period from _____________ to ___________________

Commission File Number 333-61610

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-8133057
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

605 Third Avenue, 34th Floor

New York, NY 10158

(Address of principal executive offices)

(212) 557-7200

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ 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 10, 2011, the number of shares outstanding of the registrant’s common stock, $0.00005 par value per share, was 123,116,510.

TABLE OF CONTENTS

		Page Number
PART I

Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3. Quantitative and Qualitative Disclosures About Market Risk		38
Item 4. Controls and Procedures		38

PART II

Item 1. Legal Proceedings		39
Item 1A. Risk Factors		39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 5. Other Information		39
Item 6. Exhibits		40

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, 2011

UNAUDITED

U.S. DOLLARS IN THOUSANDS

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2011

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

		Page

Consolidated Balance Sheets		5

Consolidated Statements of Operations		6

Statements of Changes in Stockholders' Equity (Deficiency)		7 – 13

Consolidated Statements of Cash Flows		14 - 15

Notes to Consolidated Financial Statements		16 - 32

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,
	2 0 1 1			2 0 1 0
	Unaudited			Audited
ASSETS

Current Assets:
Cash and cash equivalents	$	2,899		$	93
Prepaid expenses		49			59
Other receivable		186			427
Total current assets		3,134			579

Long-Term Investments:
Prepaid expenses		9			1
Severance pay fund		94			90
Total long-term investments		103			91

Property and Equipment, Net		380			419

Total assets	$	3,617		$	1,089

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
Trade payables	$	296		$	307
Accrued expenses		595			508
Other accounts payable		385			471
Short-term convertible note		-			137
Total current liabilities		1,276			1,423

Accrued Severance Pay		94			125

Total liabilities		1,370			1,548

Stockholders' Equity (Deficiency):
Stock capital: (Note 8)		6			5
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at June 30, 2011 and December 31, 2010; Issued and outstanding: 122,573,928 and 95,832,978 shares at June 30, 2011 and December 31, 2010, respectively.
Additional paid-in-capital		44,203			39,696
Deficit accumulated during the development stage		(41,962	)		(40,160	)
Total stockholders' equity (deficiency)		2,247			(459	)

Total liabilities and stockholders' equity	$	3,617		$	1,089

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands

(Except share data)

	Six months					Three months						Period from September 22, 2000 (inception date) through
	ended June 30,					ended June 30,						June 30,
	2 0 1 1			2 0 1 0		2 0 1 1			2 0 1 0			2 0 1 1
	Unaudited					Unaudited						Unaudited

Operating costs and expenses:

Research and development, net	$	856		$	587	$	586		$	348		$	23,586
General and administrative		1,087			638		829			268			15,885

Total operating costs and expenses		1,943			1,225		1,415			616			39,471

Financial (income) expenses, net		(14	)		4		(191	)		(2	)		2,382
Other income		132			-		132			-			132

Total loss before income taxes		1,797			1,229		1,092			614			41,721

Taxes on income		5			-		5			-			77

Loss from continuing operations		1,802			1,229		1,097			614			41,798

Net loss from discontinued operations		-			-		-			-			164

Net loss		1,802			1,229		1,097			614			41,962

Basic and diluted net loss per share from continuing operations		0.02			0.01		0.01			0.01

Weighted average number of shares outstanding used in computing basic and diluted net loss per share		115,108,731			85,552,899		121,253,983			88,609,663

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

										Deficit
										accumulated			Total
						Additional		Deferred		during the			stockholders'
	Common stock					paid-in		Stock - based		development			equity
	Number			Amount		capital		compensation		stage			(deficiency)

Balance as of September 22, 2000 (date of inception)		-		$	-	$	-	$	-	$	-		$	-

Stock issued on September 22, 2000 for cash at $0.00188 per share		8,500,000			1		16		-		-			17
Stock issued on March 31, 2001 for cash at $0.0375 per share		1,600,000			* -		60		-		-			60
Contribution of capital		-			-		8		-		-			8
Net loss		-			-		-		-		(17	)		(17	)

Balance as of March 31, 2001		10,100,000			1		84		-		(17	)		68

Contribution of capital		-			-		11		-		-			11
Net loss		-			-		-		-		(26	)		(26	)

Balance as of March 31, 2002		10,100,000			1		95		-		(43	)		53

Contribution of capital		-			-		15		-		-			15
Net loss		-			-		-		-		(47	)		(47	)

Balance as of March 31, 2003		10,100,000			1		110		-		(90	)		21

2-for-1 stock split		10,100,000			* -		-		-		-			-
Stock issued on August 31, 2003 to purchase mineral option at $0.065 per share		100,000			* -		6		-		-			6
Cancellation of shares granted to Company's President		(10,062,000	)		* -		* -		-		-			-
Contribution of capital		-			* -		15		-		-			15
Net loss		-			-		-		-		(73	)		(73	)
Balance as of March 31, 2004		10,238,000		$	1	$	131	$	-	$	(163	)	$	(31	)

* Represents an amount less than $1.

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

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.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

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

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

									Deficit accumulated			Total
					Additional		Deferred		during the			stockholders'
	Common stock				paid-in		Stock - based		development			equity
	Number		Capital		compensation		stage		stage			(deficiency)

Balance as of December 31, 2006		24,201,812	$	1	$	24,427	$	-	$	(26,244	)	$	(1,816	)

Stock-based compensation related to options and shares granted to service providers		544,095				1,446		-		-			1,446
Warrants issued to convertible note holder		-		-		109		-		-			109
Stock-based compensation related to shares and options granted to directors and employees		200,000		* -		1,232		-		-			1,232
Beneficial conversion feature related to convertible loans		-		-		407		-		-			407
Conversion of convertible loans		725,881		* -		224		-		-			224
Exercise of warrants		3,832,621		* -		214		-		-			214
Stock issued for private placement at $0.1818 per unit, net of finder's fee		11,500,000		1		1,999		-		-			2,000
Net loss		-		-		-		-		(6,244	)		(6,244	)

Balance as of December 31, 2007		41,004,409	$	2	$	30,058	$	-	$	(32,488	)	$	(2,428	)

Stock-based compensation related to options and stock granted to service providers		90,000		-		33		-		-			33
Stock-based compensation related to stock and options granted to directors and employees		-		-		731		-		-			731
Conversion of convertible loans		3,644,610		* -		1,276		-		-			1,276
Exercise of warrants		1,860,000		* -		-		-		-			-
Exercise of options		17,399		* -		3		-		-			3
Stock issued for private placement at $0.1818 per unit, net of finder's fee		8,625,000		1		1,499		-		-			1,500
Subscription of shares for private placement at $0.1818 per unit		-		-		281		-		-			281
Net loss		-		-		-		-		(3,472	)		(3,472	)
Balance as of December 31, 2008		55,241,418	$	3	$	33,881	$	-	$	(35,960	)	$	(2,076	)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

	Common stock					Additional paid-in		Deferred stock - based		Deficit accumulated during the development			Total stockholders' equity
	Number		Amount			capital		compensation		stage			(deficiency)

Balance as of December 31, 2008		55,241,418	$	3		$	33,881	$	-	$	(35,960	)	$	(2,076	)

Stock-based compensation related to options and stock granted to service providers		5,284,284		(	*)		775		-		-			775
Stock-based compensation related to stock and options granted to directors and employees		-		-			409		-		-			409
Conversion of convertible loans		2,500,000		(	*)		200		-		-			200
Exercise of warrants		3,366,783		(	*)		-		-		-			-
Stock issued for amendment of private placement		9,916,667		1			-		-		-			1
Subscription of shares		-		-			729		-		-			729
Net loss		-		-			-		-	$	(1,781	)		(1,781	)
Balance as of December 31, 2009		76,309,152	$	4		$	35,994	$	-	$	(37,741	)	$	(1,743	)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2010		95,832,978	$	5	$	39,696	$	-	$	(40,160	)	$	(459	)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

									Deficit
									accumulated			Total
					Additional		Deferred		during the			stockholders'
	Common stock				paid-in		Stock - based		development			equity
	Number		Amount		capital		compensation		stage			(deficiency)

Balance as of December 31, 2010		95,832,978	$	5	$	39,696	$	-	$	(40,160	)	$	(459	)

Stock-based compensation related to options and stock granted to service providers		490,000		-		222		-		-			222
Stock-based compensation related to stock and options granted to directors and employees		238,333		-		443		-		-			443
Conversion of convertible note		445,617		-		137		-		-			137
Exercise of options , net		906,068		-		80		-		-			80
Stock issued for private placement		14,160,933		1		3,601		-		-			3,602
Issuance of shares on account of previously
subscribed shares		10,499,999		-		24		-		-			24
Net loss		-		-		-		-		(1,802	)		(1,802	)

Balance as of June 30, 2011		122,573,928	$	6		44,203	$	-	$	(41,962	)	$	2,247

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(except share data)

	Six months						Period from September 22, 2000 (inception date) through
	ended June 30,						June 30,
	2 0 1 1			2 0 1 0			2 0 1 1
	Unaudited						Unaudited

Cash flows from operating activities:
Net loss	$	(1,802	)	$	(1,229	)	$	(41,962	)
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		76			84			924
Severance pay, net		35	))		2			-
Accrued interest on loans		-			-			448
Stock-based compensation related to options granted to employees		443			183			6,129
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		222			101			21,259
Increase (decrease) in trade payables and convertible loans		(11	)		(33	)		769
Increase (decrease) in other accounts payable and accrued expenses		1			(122	)		1,462
Decrease (increase) in other receivable and prepaid expenses		251			(84	)		(235	)
Liability from shareholders		-			(25	)		-
Erosion of restricted cash		-			-			(6	)
Net cash used in continuing operating activities		(855	)		(1,123	)		(9,979	)
Net cash used in discontinued operating activities		-			-			(23	)
Total net cash used in operating activities	$	(855	)	$	(1,123	)		(10,002	)

Cash flows from investing activities:
Purchase of property and equipment		(37	)		-			(1,122	)
Restricted cash		-			-			6
Investment in lease deposit		(8	)					(9	)
Net cash used in continuing investing activities		(45	)		-			(1,125	)
Net cash used in discontinued investing activities		-			-			(16	)
Total net cash used in investing activities		(45	)		-			(1,141	)

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(except share data)

(Cont.)

	Six months					Period from September 22, 2000 (inception date) through
	ended June 30,					June 30,
	2 0 1 1		2 0 1 0			2 0 1 1
	Unaudited					Unaudited

Cash flows from financing activities:
Proceeds from issuance of Common stock, net	$	3,626	$	1,800		$	12,343
Proceeds from loans, notes and issuance of warrants, net		-		-			2,061
Credit from bank		-		(45	)		-
Proceeds from exercise of warrants and options		80		92			196
Repayment of short-term loans		-		-			(601	)
Net cash provided by continuing financing activities		3,706		1,847			13,999
Net cash provided by discontinued financing activities		-		-			43
Total net cash provided by financing activities		3,706		1,847			14,042

Increase in cash and cash equivalents		2,806		724			2,899
Cash and cash equivalents at the beginning of the period		93		1			-
Cash and cash equivalents at end of the period	$	2,899	$	725		$	2,899

Non-cash financing activities:
Conversion of trade payable to Common Stock		137		324
Conversion of other accounts payable to Common Stock		24		-

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 1 -

GENERAL

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

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

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

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

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

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

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

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

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

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

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 1 -

GENERAL (Cont.)

GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the six months ended on June 30, 2011, resulted in a net loss of $1,802. The Company’s balance sheet reflects accumulated deficit of $41,962. These conditions, together with the fact that the Company is a development stage Company and has no revenues nor are revenues expected in the near future, raise substantial doubt about the Company's ability to continue to operate as a going concern. The Company’s ability to continue operating as a “going concern” is dependent on several factors, among them is its ability to raise sufficient additional working capital.

In 2009 the Company decided to focus on the effort to commence clinical trials in ALS amyotrophic lateral sclerosis (ALS) in 2011.

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

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

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2010 are applied consistently in these financial statements.

NOTE 3 -

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4 -

RESEARCH AND LICENSE AGREEMENT

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 4

RESEARCH AND LICENSE AGREEMENT (Cont.)

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

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

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

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

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

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

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

NOTE 5

CONSULTING AGREEMENTS

On July 8, 2004, the Company entered into consulting agreements with each of Prof. Eldad Melamed and Dr. Daniel Offen (together, the "Consultants"), under which the Consultants provide the Company scientific and medical consulting services in consideration for a monthly payment of $6 each. In addition, the Company granted each of the Consultants, a fully vested warrant to purchase 1,097,215 shares of Common Stock at an exercise price of $0.01 per share. The warrants issued pursuant to the agreements were issued to the Consultants effective as of November 4, 2004. Each of the warrants was exercisable for a seven-year period beginning on November 4, 2005. As of June 2011, all the above warrants had been exercised.

On December 16, 2010, the Company granted to the Consultants 1,100,000 shares of the Company's Common Stock for services rendered through December 31, 2010. Related compensation in the amount of $220 is recorded as research and development expense.

On June 27, 2011, the Company granted to one of the Consultants 400,000 shares of Common Stock of the Company for services rendered through December 31, 2009 in the amount of $192.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 5

CONSULTING AGREEMENTS (Cont.)

As of June 30, 2011, the Company had a total liability of $57 for services rendered by the Consultants under the abovementioned agreements.

NOTE 6

SHORT-TERM CONVERTIBLE NOTE

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

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

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

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

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

NOTE 7

SHORT-TERM LOANS

In March 2007, the Company issued a $150 convertible note to a lender, with an annual interest rate of 8% for the first year, with an increase up to 10% after the first year. On January 27, 2010, the lender converted the entire accrued principal and interest of $189 into 1,016,109 shares of Common Stock of the Company. After the balance sheet date, the Company issued an additional 309,977 shares of Common Stock of the Company with regard to the above conversion (see Note 9 C).

Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 and ASC 450-20 Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.

NOTE 8

STOCK CAPITAL

The rights of Common Stock are as follows:

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

The Common Stock is registered and publicly traded on the Over-the-Counter Bulletin Board service of the FINRA, under the symbol BCLI.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8

STOCK CAPITAL (Cont.)

Issuance of shares warrants and options:

Private placements:

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

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

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

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

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

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

Purchase date	Purchase price		Number of subscription shares		Number of warrant shares

August 30, 2007	$1,250 (includes $250 paid as a convertible loan)			6,875,000		7,562,500
November 15, 2007	$	750		4,125,000		4,537,500
February 15, 2008	$	750		4,125,000		4,537,500
May 15, 2008	$	750		4,125,000		4,537,500
July 30, 2008	$	750		4,125,000		4,537,500
November 15, 2008	$	750		4,125,000		4,537,500

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

(a)

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8

STOCK CAPITAL (Cont.)

Issuance of shares warrants and options: (Cont.)

Private placements: (Cont.)

(Cont.)

(b)

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

(c)

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

(d)

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

(e)

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

On January 18, 2011, the Company and the investor signed an agreement to offset amounts due to the investor, totaling $20, against the remaining balance of the investment. The Company issued to the investor 10,499,999 shares of Common Stock and a warrant to purchase 4,537,500 shares of the Company's Common Stock at an exercise price of $0.20 per share

As of June 30, 2011, the Company issued to the investor and its designees an aggregate of 41,666,667 shares of common stock and a warrant to purchase 10,083,333 shares of the Company's common stock at an exercise price of $0.20 per share and a warrant to purchase 20,166,667 shares of common stock at an exercise price of $0.29 per share. The warrants may be exercised at any time and expire on November 5, 2013.

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

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

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

In February 2010, the Company issued 6,000,000 shares of Common Stock to three investors (2,000,000 to each investor) and warrants to purchase an aggregate of 3,000,000 shares of Common Stock (1,000,000 to each investor) with an exercise price of $0.5 for aggregate proceeds of $1,500 ($500 each) through February 17, 2012.

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