Edgar Filing: BRAINSTORM CELL THERAPEUTICS INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2013

¨ 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 000-54365

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)

(646) 666-3188

(Registrant's telephone number, including area code)

Not Applicable

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

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

As of November 12, 2013, the number of shares outstanding of the registrant’s Common Stock, $0.00005 par value per share, was 176,263,587.

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	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41

PART II

Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 5. Other Information	43
Item 6. Exhibits	43

PART I: FINANCIAL INFORMATION

SPECIAL NOTE

Unless otherwise specified in this quarterly report on Form 10-Q, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars.

Item 1. Financial Statements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2013

UNAUDITED

U.S. DOLLARS IN THOUSANDS

	3

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2013

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

	Page

Consolidated Balance Sheets	5

Consolidated Statements of Operations	6

Statements of Changes in Stockholders' Equity (Deficiency)	7-15

Consolidated Statements of Cash Flows	16-17

Notes to Consolidated Financial Statements	18 - 33

	4

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

	September 30,	December 31,
	2013	2012
	Unaudited	Audited
ASSETS

Current Assets:
Cash and cash equivalents	329	1,317
Short-term deposit	4,786	2,769
Account receivable	502	742
Prepaid expenses	55	46
Total current assets	5,672	4,874

Long-Term Assets:
Prepaid expenses	28	17
Severance payment fund	245	172
Total long-term assets	273	189

Property and Equipment, Net	267	247

Total assets	6,212	5,310

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Trade payables	446	358
Accrued expenses	710	605
Other accounts payable	230	176
Total current liabilities	1,386	1,139

Accrued Severance Pay	291	189

Total liabilities	1,677	1,328

Stockholders' Equity:
Stock capital: (Note 6)	8	7
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at September 30, 2013 and December 31, 2012; Issued and outstanding: 176,243,587 and 150,085,035 shares at September 30, 2013 and December 31, 2012 respectively.
Additional paid-in-capital	55,717	51,483
Deficit accumulated during the development stage	(51,190)	(47,508)
Total stockholders' equity	4,535	3,982

Total liabilities and stockholders' equity	6,212	5,310

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

	5

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands

(Except share data)

									Period from
									September 22,
									2000 (inception
	Nine months ended				Three months ended				date) through
	September 30,				September 30,				September 30,
	2013		2012		2013		2012		2013
	Unaudited				Unaudited				Unaudited

Operating costs and expenses:

Research and development, net	$	2,068	$	1,486	$	804	$	732	$	28,257
General and administrative		1,574		1,397		272		440		20,325

Total operating costs and expenses		3,642		2,883		1,076		1,172		48,582

Financial expenses (income), net		21		(37)		5		(22)		2,475
Other income		-		-		-		-		(132)

Operating loss		3,663		2,846		1,081		1,150		50,925

Taxes on income		19		5		1		-		101

Loss from continuing operations		3,682		2,851		1,082		1,150		51,026

Net loss from discontinued operations		-		-		-		-		164

Net loss	$	3,682	$	2,851	$	1,082	$	1,150	$	51,190
Basic and diluted net loss per share from continuing operations	$	0.02	$	0.02	$	0.01	$	0.01

Weighted average number of shares outstanding used in computing basic and diluted net loss per share		152,094,266		133,403,123		164,223,127		145,407,840

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

	6

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

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

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 (unaudited)	10,100,000		1		84		-		(17)		68

Contribution of capital	-		-		11		-		-		11
Net loss	-		-		-		-		(26)		(26)
Balance as of March 31, 2002 (unaudited)	10,100,000		1		95		-		(43)		53

Contribution of capital	-		-		15		-		-		15
Net loss	-		-		-		-		(47)		(47)
Balance as of March 31, 2003 (unaudited)	10,100,000		1		110		-		(90)		21

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

* Represents an amount less than $1.

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

	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)

					Additional		Deferred		Deficit accumulated during the		Total 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.

	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
				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.

	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
				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.

	10

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

	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.

	11

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

								Deficit
								accumulated		Total
	Common stock			Additional paid-in		Deferred Stock - based		during the development		stockholders' equity
	Number	Amount		capital		compensation		stage		(deficiency)
Balance as of December 31, 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.

	12

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

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

Stock-based compensation related to options and stock granted to service providers	474,203		-		449		-		-		449
Stock-based compensation related to stock and options granted to directors and employees	2,025,040		-		1,135		-		-		1,135
Conversion of convertible note	755,594		-		140		-		-		140
Exercise of options	1,648,728		-		243		-		-		243
Exercise of warrants	1,046,834		-		272		-		-		272
Issuance of shares for private placement	14,160,933		1		3,601		-		-		3,602
Issuance of shares on account of previously subscribed shares	10,499,999		-		24		-		-		24
Net loss	-		-		-		-		(3,918)		(3,918)

Balance as of December 31, 2011	126,444,309	$	6	$	45,560	$	-	$	(44,078)	$	1,488

* Represents an amount less than $1.

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

	13

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2011	126,444,309	$	6	$	45,560	$	-	$	(44,078)	$	1,488

Stock-based compensation related to options and stock granted to service providers	794,423		-		195		-		-		195
Stock-based compensation related to stock and options granted to directors and employees	885,000		-		560		-		-		560
Exercise of options	1,182,606	*			137		-		-		137
Exercise of warrants	959,729	*			9		-		-		9
Issuance of shares for private placement	19,818,968		1		5,022				-		5,023
Net loss	-		-		-		-		(3,430)		(3,430)

Balance as of December 31, 2012	150,085,035	$	7	$	51,483	$	-	$	(47,508)	$	3,982

* Represents an amount less than $1.

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

	14

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2012	150,085,035	$	7	$	51,483	$	-	$	(47,508)	$	3,982

Stock-based compensation related to options and stock granted to service providers	809,696				183		-		-		183
Stock-based compensation related to stock and options granted to directors and employees	760,000				439		-		-		439
Issuance of shares for public offering	23,529,411		1		3,325		-		-		3,326
Issuance of shares for private placement	833,334		-		250		-		-		250
Conversion of convertible loans	126,111		-		30		-		-		30
Exercise of options	100,000		-		7		-		-		7
Net loss	-		-		-		-		(3,682)		(3,682)

Balance as of September 30, 2013	176,243,587		8		55,717		-		(51,190)		4,535

* Represents an amount less than $1.

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

	15

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(Except share data)

Period from

September 22,

2000 (inception

Nine months ended

Three months ended

date) through